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Equal Employment Opportunity Commission.
Final rule.
The Equal Employment Opportunity Commission (“EEOC” or “Commission”) is issuing a final rule revising its Freedom of Information Act (FOIA) regulations in order to implement the Openness Promotes Effectiveness in our National Government Act of 2007 (“OPEN Government Act”) and the Electronic FOIA Act of 1996 (“E–FOIA Act”); to reflect the reassignment of FOIA responsibilities in the Commission's field offices from the Regional Attorneys to the District Directors; and to consolidate Commission public reading areas in offices where there are adequate FOIA personnel to provide satisfactory service.
Effective June 19, 2013.
Stephanie D. Garner, Assistant Legal Counsel, FOIA Programs, Gary J. Hozempa, Senior Attorney, or Draga G. Anthony, Attorney Advisor, Office of Legal Counsel, U.S. Equal Employment Opportunity Commission, at (202) 663–4640 (voice) or (202) 663–7026 (TTY). These are not toll-free telephone numbers. This final rule also is available in the following formats: large print, Braille, audiotape, and electronic file on computer disk. Requests for this final rule in an alternative format should be made to EEOC's Publications Center at 1–800–669–3362 (voice) or 1–800–800–3302 (TTY).
On September 4, 2012, EEOC published in the
EEOC received six comments in response to the NPRM. Three comments were submitted by individuals, and the remaining three were submitted by OMB Watch, the National Council of EEOC Locals No. 216 (hereinafter the “Union), and the National Archives and Records Administration, Office of Government Information Services (hereinafter “OGIS”).
One individual commenter suggested that EEOC consider whether FOIA's statutory exemptions remain “viable.” This comment pertains to the FOIA statute itself, is outside the scope of the NPRM, and will not be addressed further. A second individual commented that the Department of Defense and the Environmental Protection Agency should release certain medical records pertaining to the activities of the “Hanford Atomic Works” during the 1940's and 1950's. This comment also is outside the scope of the NPRM and will not be addressed further.
The Commission has considered carefully the remaining comments and has made some changes to the final rule in response to the comments. The comments EEOC received, the changes made to the final rule, and EEOC's reasons for not making other changes are discussed in more detail below.
In the NPRM, EEOC proposed adding definitions for three terms: “agency record,” “news,” and “representative of the news media.” In its comments, OGIS recommends that EEOC define three additional terms: “FOIA Public Liaison,” “fee category,” and “fee waiver.” An individual also commented that EEOC's proposed definition of “representative of the news media” is vague and ambiguous.
EEOC agrees with OGIS that adding its suggested definitions will be helpful, and the definitions have been added to the final rule. As for the proposed definition of “representative of the news media,” EEOC's definition is taken verbatim from the FOIA statute, as amended. EEOC does not regard the definition as either vague or ambiguous. Moreover, the concern of the commenter appears to be that the definition will exclude requesters who work for, and contribute to, “electronic media outlets.” As the definition makes clear, however, what constitutes “news media” is a constantly evolving concept, and includes, but is not limited to, various “electronic . . . alternative media.”
The current rule at 29 CFR 1610.2 states that, among other things, FOIA exempts “specified classes of records” from public disclosure. While the NPRM did not propose any changes to this section, OGIS suggests that EEOC provide examples “of the type of documents that fall into these categories” (that is, that EEOC delineate the various classes of records exempt from disclosure by FOIA).
Given that EEOC did not propose amending § 1610.2, any comments regarding this section fall outside the scope of the NPRM and therefore do not require a response. Nevertheless, we note that EEOC's FOIA regulation at 29 CFR 1610.17 (Exemptions) gives examples of the type of documents that are exempt from disclosure under FOIA. Further, the FOIA section on EEOC's public Web site contains a “Freedom of Information Act Reference Guide” (
In this section, EEOC proposed, among other things, to eliminate the current FOIA reading rooms in its Field, Local, and Area Offices. As proposed, reading rooms will be located only in Headquarters and District Offices. In its comments, the Union opposes this proposal and suggests either retaining all reading rooms or installing in the smaller offices dedicated computers which the public can use to access reading room materials.
The proposal to reduce EEOC's reading rooms from 51 to 16 is resource based. Only Headquarters and the District Offices have sufficient personnel to service those members of the public wanting access to EEOC's public reading rooms and materials. The Union believes that reducing the number of reading rooms will reduce service to the public. However, if an office lacking available and knowledgeable personnel is unable to properly support, maintain, and administer a public reading room, the public will not be well served either. Furthermore, if smaller offices must assign personnel to manage reading rooms, this will adversely impact their ability to provide necessary services to individuals seeking to file charges of employment discrimination.
Individuals who cannot visit reading rooms in District Offices or Headquarters still can access many reading room materials through other means. For example, all reading room materials created on or after November 1, 1996, as well as some materials created before November 1, 1996, are accessible through EEOC's public Web site. Members of the public also can contact the Headquarters Library or a District Office by mail, telephone, or email to obtain reading room materials.
Equipping EEOC's smaller field offices with dedicated computers presents problems similar to those of housing reading rooms. Personnel will be needed to maintain the computers, as well as to demonstrate to members of the public how to use them to access the information they seek. The smaller offices lack the personnel necessary to do these tasks without adversely affecting their ability to service the needs of charging parties.
Therefore, for all of the above reasons, the Commission believes it is in the best interests of the public and EEOC to eliminate its reading rooms in its smaller field offices.
This section, among others things, requires a person who files a FOIA request to “clearly and prominently identify[y]” the request as a “request for information under the `Freedom of Information Act.'” OGIS states that FOIA does not require a requester to identify a request as one filed pursuant to FOIA. OGIS suggests instead that the final rule state that a requester “should” identify the request as a FOIA request. In addition, while not referencing a particular revision proposed by EEOC pertaining to this section, OGIS suggests that EEOC add language “clarifying the intersection between FOIA and the Privacy Act, which some requesters find confusing.”
While OGIS is correct that FOIA does not require that a request be labeled as a FOIA request, clear labeling is an important issue for the EEOC. Approximately 95 percent of the FOIA requests received by EEOC are requests for the charge files that are created when an employee or applicant files with EEOC an administrative charge of employment discrimination. In accordance with EEOC procedures, a request for a charge file can be made under Section 83 of Volume I of EEOC's Compliance Manual, or pursuant to FOIA. A “Section 83” request provides EEOC with a more efficient way to disclose a charge file to the parties to the charge because, unlike a FOIA request, a Section 83 request does not have to be logged and tracked for reporting purposes, does not require EEOC to identify the site or amount of withheld information, and does not require EEOC to explain the FOIA exemption applicable to any information that is withheld. Because there are two methods by which a requester can request a charge file, and because EEOC is able to process Section 83 requests more efficiently than FOIA requests, EEOC deems any request for a charge file that falls within Section 83's parameters to be a Section 83 request unless the requester specifically mentions FOIA. Requiring a requester to designate his or her request for a charge file as a FOIA request therefore will ensure that EEOC processes the request under the procedure desired by the requester.
As to OGIS's suggestion that EEOC add language discussing the interaction between FOIA and the Privacy Act, we do not agree with the basis for the suggestion. Most agencies usually process first-party requests under both FOIA and the Privacy Act. EEOC charge files, however, are exempt from disclosure under the Privacy Act (
The NPRM revised this section to state that a request for a record originating in another agency that is in the custody of EEOC will be referred to the other agency and EEOC will honor the other agency's decision under FOIA. OGIS suggests that EEOC include in its final rule a provision that states that EEOC will provide the requester with contact information for the other agency when a referral is made.
EEOC currently provides the contact information recommended by OGIS and refers the request to the other agency's FOIA contact person at the address provided on the Department of Justice FOIA Web site. EEOC does not believe it is necessary to revise the final rule to reflect this practice.
In the NPRM, EEOC proposed using a three-track system for responding to FOIA requests: a simple track, a complex track, and an expedited track. Simple requests would be processed in 10 business days or less. Complex requests would be processed between 11 and 20 business days. Expedited requests would be processed appropriately. EEOC also proposed assigning an individualized tracking number to each FOIA request and notifying the requester of this tracking number.
The Union comments that the proposed three-track system is ill-advised because EEOC will not be able to process simple requests in 10 business days or less (thereby disappointing the expectations of the public), and that staff time would be better utilized sanitizing files. The Union also states that no study exists which demonstrates a need for a three-track system, or establishes that implementing such a system will result in improved processing times or reduce EEOC's FOIA backlog. The Union also believes that too many requests will meet the criteria for simple track processing, resulting in more missed deadlines. In this regard, the Union believes that the three-track process fails to account for the time required to categorize a request. The Union also is concerned that the proposed multitrack process ignores the possibility that the
In another comment, an individual states that it would be helpful if additional information was provided about how EEOC will assess each request for purposes of placing it in the appropriate track. OGIS suggests that EEOC's acknowledgement letter, in addition to notifying a requester of his or her unique FOIA tracking number, also include “a brief description of the subject of the request.”
The Commission does not believe that implementing a three-track process will jeopardize public expectations or cause internal processing difficulties. Currently, EEOC uses a two-track system: one for requests seeking expedited processing under 5 U.S.C. § 552(a)(6)(E); and one for all other requests. Generally speaking, a requester must demonstrate a “compelling need” for expedited processing.
In this regard, the E–FOIA Act amendments to FOIA expressly permit an agency to “promulgate regulations . . . providing for multitrack processing of requests for records based on the amount of work or time (or both) involved in processing requests.” 5 U.S.C. 552(a)(6)(D)(i). Additionally, the Department of Justice (DOJ) has encouraged agencies to adopt multitrack processing systems so that they may process simple requests more quickly.
As noted earlier, ninety-five percent of the FOIA requests received by EEOC are requests for EEOC's administrative charge files. Because these requests can be analyzed quickly, they are ideal candidates for a multitrack processing system. For example, the confidentiality provisions of Title VII of the Civil Rights Act of 1964, as amended (hereinafter “Title VII”), prohibit EEOC from disclosing a charge file to a person not a party to the charge. Title VII also prohibits EEOC from disclosing a charge file if the charging party's right-to-sue has expired and no civil action has been filed. Further, under exemption 7(A) of FOIA, open charge files are exempt from disclosure. When a FOIA request for a charge file is received, FOIA personnel can reference EEOC's charge file database and easily determine whether the request is being made by a third party, whether the requested charge file is still open and, if it is closed, whether the 90-day period for filing suit has expired. Requests which EEOC can quickly determine cannot be granted are the types of requests that can be placed on the simple track under the three-track system. The three-track system will allow EEOC to process these requests out of order and therefore process them more quickly than under the current “first-in, first-out” system.
The Commission also agrees with the Union, however, that the proposed time frame of 10 working days to process simple track requests should not be made a part of the regulation because it is not essential to ensure the success of the multitrack system. Thus, the final rule retains the three-track system but eliminates any shortened time limit for processing simple track requests. While the statutory 20-day time limit will apply to all requests, including those placed on the simple track, FOIA personnel will now be able to process the simple requests out of order. The Commission is confident that, with the proposed 10-day time limit eliminated, the three-track system will not cause additional missed deadlines or greater backlogs, and will not place an undue burden on FOIA staff. (As to the Union's comments about grade and staff levels, these comments fall outside the scope of the NPRM and will not be addressed further).
With respect to the suggestion that EEOC provide additional information as to how it will implement the three-track assessment process, such information properly belongs in an internal instruction manual, rather than as part of the final rule.
Regarding OGIS's suggestion that EEOC's FOIA acknowledgement letters include a brief description of the requests, the Commission does not believe this is a sound idea. With respect to requests for charge files, EEOC's acknowledgement letter currently references the applicable charge file caption and number (
The proposed revision to this section states that, among other things, when responding to a FOIA request, the person signing the decision will include his or her name and title. This section also states that, when a request is denied, EEOC “shall provide to the requester a written statement identifying the estimated volume of denied material . . . .” OGIS suggests that EEOC include in its final rule “complete contact information” for the person signing the decision, including a phone number and email address. OGIS objects to EEOC providing an estimated volume of denied material and recommends that the final rule state that EEOC will provide a “precise” volume.
With respect to contact information, EEOC has decided to adopt the recommendation of OGIS. As a result, the final rule states that the person signing the decision will provide “his or her name and title, telephone number and email address.”
Regarding OGIS's comment about providing requesters with precise information as to the volume of information that is withheld, EEOC already provides this information with respect to requests that are partially granted and partially denied. When only some information is withheld, a requester is informed of the exact number of pages that is being withheld.
Among other things, this proposed section states that an appeal of an initial FOIA determination “must be in writing addressed to the Legal Counsel, or the Assistant Legal Counsel, FOIA Programs, as appropriate, Equal Employment Opportunity Commission, 131 M Street NE., Suite 5NW02E, Washington, DC 20507 . . . .”
OMB Watch interprets the above-quoted language as requiring that appeals be filed only by mail. It points out that, under § 1610.7, EEOC accepts initial FOIA requests by mail, email, fax, or via EEOC's Web site. Therefore, OMB Watch suggests that EEOC's final rule allow electronic appeals. OMB Watch also recommends that EEOC enable requesters to communicate with EEOC electronically “throughout the FOIA process.”
Although the NPRM does not address the issue, OMB Watch recommends that EEOC's appeal determinations include information about the mediation services offered by OGIS. OGIS, in its comments, recommends that EEOC's final rule include a subsection discussing OGIS's role in mediating disputes between FOIA requesters and federal agencies. OMB Watch likewise suggests that EEOC's final rule include information about OGIS.
In drafting the language in § 1610.11, it was never EEOC's intention to establish a requirement that FOIA appeals be filed only by mail. Currently, EEOC accepts appeals by mail, facsimile, email, and through its public Web site. While EEOC's regulations require that a requester attach a copy of the District Director's initial FOIA determination to his or her appeal, individuals who file electronic appeals can simultaneously mail, fax, or attach as a scanned document the District Director's initial decision. To clarify EEOC's intent that appeals can be filed by mail, fax, or electronically, EEOC has added to the final rule the applicable fax number, and email and Web site addresses.
As to requesters being able to communicate with EEOC electronically, requesters currently can and do communicate with EEOC via EEOC's FOIA email address, District Office email addresses, and the public Web site. In its appeal acknowledgement letter, EEOC currently informs the requester of the name and telephone number of the staff member assigned to process the appeal and, with the publication of this final rule, also will inform the requester of the staff member's email address. As a result, requesters will be able to communicate electronically with EEOC during the pendency of their initial requests and appeals, as recommended by OMB Watch.
EEOC also believes that the suggestions of OGIS and OMB Watch regarding adding information in the final rule about OGIS, have merit. Therefore, the final rule includes a new paragraph (g) to § 1610.11, which contains pertinent information about OGIS. EEOC currently includes in its appeal decisions information about OGIS's mediation role. EEOC also includes OGIS's address, telephone numbers, and email address should a requester wish to take advantage of OGIS's services.
Section 1610.13(a) currently states that field offices and the Office of Legal Counsel will maintain files of their FOIA decisions. Current § 1610.13(b) states that the Legal Counsel will maintain a file of “copies of all grants or denial of appeals” that is “open to the public.” Proposed § 1610.13 eliminates paragraph (b). OGIS recommends that EEOC retain § 1610.13(b) in its final rule.
EEOC's Legal Counsel does not, and never has, made his or her FOIA appeal files available to the public. Thus, the NPRM proposes to eliminate paragraph (b) to conform to EEOC's longstanding practice. The near impossibility of implementing paragraph (b) was not understood until after that provision was enacted. As previously noted, 95 percent of FOIA requests filed with EEOC seek the disclosure of charge files. An even greater percentage of appeals involve decisions not to disclose charge files. As discussed earlier, the confidentially provisions applicable to charge files prohibit EEOC from making public charge file information. These confidentiality provisions equally apply when charge file information is contained in a FOIA appeal file. Therefore, eliminating § 1610.13(b) is necessary in order to ensure the confidentiality of EEOC's charge files.
The proposed rule states that the Legal Counsel and District Directors have the authority to reduce or waive search, review, and duplication fees “if disclosure of the information is in the public interest . . . and is not primarily in the commercial interest of the requester.” OGIS recommends that EEOC's final rule allow the Legal Counsel and District Directors to reduce or waive applicable fees “at their discretion,” without regard to whether disclosure is in the public interest. OGIS believes that such authority will reduce fee disputes and reduce delays in the release of information.
The types of requests EEOC receives rarely lead to fee disputes. As noted, most requests are for charge files and the field offices are adept at calculating fees based on the volume of documents in each file (when a request for a charge file is granted, field offices do an exact count of the pages in a file in order to calculate duplication fees). Rarely is a charge file fee contested. As to requests for other information, EEOC has not had difficulty calculating fees, and requesters rarely object to the fees that are charged. When a requester does make a fee waiver request, EEOC waives fees when statutorily required to do so.
Moreover, FOIA does not require that an agency give its FOIA professionals the type of discretionary fee-waiver authority advocated by OGIS. Rather, FOIA is clear that fees must be waived only when the requester demonstrates that disclosure of the information is in the public interest “because it is likely to contribute significantly to public understanding of the operations or activities of the government,” and the information will not be used for a commercial purpose. Further, it is not practical to give EEOC's FOIA personnel discretionary authority to waive fees in circumstances not required by FOIA. Doing so would require EEOC to develop guidelines to ensure that discretionary fee waivers conform to certain standards. This, in turn, would
The proposed rule states that EEOC will not charge search and duplication fees “if the Commission issues an untimely determination and the untimeliness is not due to unusual or exceptional circumstances.” The Union is concerned that, by implementing a three-track system in which simple requests will be processed within 10 business days, the potential exists that EEOC will be barred from charging fees in such cases, which in turn will place additional pressure on staff to timely process requests. OGIS suggests that EEOC add a paragraph to § 1610.15 stating that, when EEOC estimates FOIA processing fees, it will provide the requester with “a breakdown of fees assessed for search, review and/or duplication.”
The Union misconstrues the interplay regarding the timeframes applicable to the three-track process and the timeframes applicable to the waiver of fees. Under FOIA, a request generally must be processed within 20 business days (absent any applicable extensions). This 20 business day time limit, therefore, usually will constitute the benchmark for determining whether a request has been timely processed. In any event, given the Commission's decision to eliminate from proposed § 1610.9(a) a processing period less than the statutory deadline, the Union's concerns are now moot.
In estimating FOIA processing fees, EEOC currently provides the requester with a breakdown in costs as suggested by OGIS in its comments. EEOC informs the requester of the number of hours it anticipates will be necessary to search for the files requested, the number of hours it anticipates will be necessary to review (and redact, if applicable) the information requested, the personnel classification of the person performing the search or review, and the number of pages that will be duplicated and the cost of duplicating each page. EEOC does not believe it is necessary or desirable to incorporate this practice into the final rule.
Current § 1610.18 sets forth a list of information that EEOC will provide to the public (
OMB Watch states that the proposed section fails to indicate whether EEOC will make the information contained in the list available “upon request” or “proactively.” It urges that EEOC place on its public Web site all information which EEOC intends to make available to the public. OMB Watch also points out that FOIA requires an agency to post online information that has been released in response to a FOIA request and is “likely to become the subject of subsequent requests.” OMB Watch suggests that EEOC's final rule add this type of information to the list in § 1610.18. OMB Watch further recommends that EEOC post online all its responses to FOIA requests, post other information in advance of any public request, and establish a policy to determine categories of records and information of interest to the public that can be disclosed regularly online and added to the list in § 1610.18.
EEOC receives FOIA requests seeking the travel records of Commissioners, the General Counsel, and SES employees on an infrequent basis. When it does, EEOC routinely grants the request (but may redact third party information when privacy issues prevail). EEOC rarely, if ever, receives requests for the calendars of its upper management officials. EEOC therefore does not believe that there is a significant public interest in such travel and calendar records. Additionally, gathering such records on a regular basis for proactive electronic posting will require resources which the Commission lacks. Therefore, the final rule does not include travel records and calendars to the list contained in § 1610.18.
Regarding the comments of OMB Watch, at present EEOC makes available electronically some of the information listed in § 1610.18. The intent of § 1610.18 is to provide the public with a list of information that EEOC routinely will provide to the public upon receipt of a FOIA request. In this regard, some of the listed information can be made available only when we receive a specific request (
FOIA requires an agency to make available for public inspection and copying records which have been released to a person “and which, because of the nature of their subject matter, the agency determines have become or are likely to become the subject of subsequent requests for substantially the same records * * * .” 5 U.S.C. 552(a)(2)(D). As noted previously, 95 percent of EEOC's FOIA requests are for charge files. EEOC is prohibited from making public specific charge file information. Thus, EEOC cannot post online our responses to these requests without running afoul of the statutory confidentiality provisions. It also can be argued that EEOC charge files do not fall within the types of information contemplated by § 552(a)(2)(D) because, while EEOC receives many requests for charge files and thus can anticipate additional charge file requests, the information requested is not “for substantially the same records,” but is, rather, for very different records unique to each requester.
Additionally, EEOC already makes available on its public Web site information released under FOIA which is or is likely to become the subject of subsequent requests for substantially the same information. For example, EEOC posts on its public Web site its informal discussion letters, policy guidance documents, question and answer documents, press releases, and regulations. As suggested by OMB Watch, EEOC has established and will continue to establish categories of records and information of interest to the public that it will disclose regularly online. However, EEOC does not believe, as suggested by OMB Watch, that EEOC should specifically list in § 1610.18 the “likely to become the
This section proposes that, on or before February 1 of each year, the Legal Counsel will submit to the U.S. Attorney General required FOIA reports. OGIS recommends that the final rule also state that EEOC will file Chief FOIA Officer reports.
Pursuant to the OPEN Government Act, each agency must designate “a Chief FOIA Officer * * * .” An agency's Chief FOIA Officer must “review and report to the Attorney General, through the head of the agency, at such times and in such formats as the Attorney General may direct, on the agency's performance in implementing [its responsibilities under FOIA].” In order to implement OGIS's recommendation, § 1610.21 of the final rule has been divided into two paragraphs. Paragraph (a) contains the proposed language applicable to the annual FOIA report and paragraph (b) refers to the report of the Chief FOIA Officer.
This final rule has been drafted and reviewed in accordance with Executive Order 12866, 58 FR 51735 (Sept. 30, 2003), section 1(b), Principles of Regulation, and Executive Order 13563, 76 FR 3821 (January 1, 2011), Improving Regulation and Regulatory Review. The rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866.
This final rule contains no new information collection requirements subject to review by the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. Chapter 35).
The Commission certifies under 5 U.S.C. 605(b) that this final rule will not have a significant economic impact on a substantial number of small entities because the changes to the rule do not impose any burdens upon FOIA requesters, including those that might be small entities. Therefore, a regulatory flexibility analysis is not required by the Regulatory Flexibility Act.
This final rule will not result in the expenditure by State, local, or tribal governments in the aggregate, or by the private sector, of $100 million or more in any one year, and it will not significantly or uniquely affect small governments. Therefore, no actions are deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.
Freedom of Information.
For the Commission,
Accordingly, for the reasons set forth in the preamble, the Equal Employment Opportunity Commission hereby amends chapter X of title 29 of the Code of Federal Regulations as follows:
42 U.S.C. 2000e-12(a), 5 U.S.C. 552 as amended by Pub. L. 93–502, Pub. L. 99–570, and Pub. L. 105–231; for § 1610.15, non-search or copy portions are issued under 31 U.S.C. 9701.
(j)
(k)
(l)
(m)
(n)
(o)
(a) The Commission will maintain in a public reading area located in the Commission's library at 131 M Street, NE., Washington, DC 20507, the materials which are required by 5 U.S.C. 552(a)(2) and 552(a)(5) to be made available for public inspection and copying. Any such materials created on or after November 1, 1996 may also be accessed through the Internet at
(b) The Commission offices designated in § 1610.4(c) shall maintain and make available for public inspection and copying a copy of:
(1) The Commission's notices and regulatory amendments which are not yet published in the Code of Federal Regulations;
(2) The Commission's annual reports;
(3) The Commission's Compliance Manual;
(4) Blank forms relating to the Commission's procedures as they affect the public;
(5) The Commission's Orders (agency directives);
(6) “CCH Equal Employment Opportunity Commission Decisions” (1973 and 1983); and
(7) Commission awarded contracts.
(c) The Commission's District Offices with public reading areas are:
(a) A written request for inspection or copying of a record of the Commission may be presented in person, or by mail, or by fax, or by email, or through
(b) A request must be clearly and prominently identified as a request for information under the “Freedom of Information Act.” If submitted by mail, or otherwise submitted under any cover, the envelope or other cover must be similarly identified.
(c) A respondent must always provide a copy of the “Filed” stamped court complaint when requesting a copy of a charge file. The charging party must provide a copy of the “Filed” stamped court complaint when requesting a copy of the charge file if the Notice of Right to Sue has expired.
Requests for records that originated in another Agency and are in the custody of the Commission will be referred to that Agency and the person submitting the request shall be so notified. The decision made by that Agency with respect to such records will be honored by the Commission.
The revisions read as follows:
(a) Requests for the following types of records shall be submitted to the District Director for the pertinent district, field, area, or local office, at the district office address listed in § 1610.4(c) or, in the case of the Washington Field Office, shall be submitted to the Field Office Director at 131 M Street, NE., Fourth Floor, Washington, DC 20507.
(b) A request for any record which does not fall within the ambit of paragraph (a) of this section, or a request for any record the location of which is unknown to the person making the request, shall be submitted in writing to the Assistant Legal Counsel, FOIA Programs, U.S. Equal Employment Opportunity Commission, by mail to 131 M Street, NE., Suite 5NW02E, Washington, DC 20507, or by fax to (202) 663–4679, or by email to
(c) Any Commission officer or employee who receives a written Freedom of Information Act request shall promptly forward it to the appropriate official specified in paragraph (a) or (b) of this section. Any Commission officer or employee who receives an oral request under the Freedom of Information Act shall inform the person making the request that it must be in writing and also inform such person of the provisions of this subpart.
The Assistant Legal Counsel, FOIA Programs, the District Director, or the District Director's designee, when receiving a request pursuant to these regulations, shall grant or deny such request. That decision shall be final, subject only to administrative review as provided in § 1610.11 of this subpart.
(a) The EEOC utilizes a multitrack system for responding to FOIA requests. After review, a FOIA request is placed on one of three tracks: the simple track, the complex track, or the expedited track. EEOC distinguishes between simple and complex track requests based on the amount of work and time needed to process the request.
(b) The Assistant Legal Counsel, FOIA Programs, the District Director, or the
(c) If a FOIA request is submitted to the incorrect EEOC–FOIA office, that office shall forward the misdirected request to the appropriate EEOC–FOIA office within 10 business days. If a misdirected request is forwarded to the correct EEOC–FOIA office more than 10 business days after its receipt by the EEOC, then, pursuant to 5 U.S.C. 552(a)(6)(A), the statutory 20 business days to respond to the request is reduced by the number of days in excess of 10 that it took the EEOC to forward the request to the correct EEOC–FOIA office.
(d) Within 20 business days after receipt of the request, the Assistant Legal Counsel, FOIA Programs, the District Director, or the District Director's designee shall either grant or deny the request for agency records, unless additional time is required for one of the following reasons:
(1) It is necessary to search for and collect the requested records from field facilities or other establishments that are separate from the office processing the request;
(2) It is necessary to search for, collect, and appropriately examine a voluminous number of separate and distinct records which are demanded in a single request; or
(3) It is necessary to consult with another agency having a substantial interest in the determination of the request or among two or more components of the agency having substantial interest therein.
(e) When additional time is required for one of the reasons stated in paragraph (d) of this Section, the Assistant Legal Counsel, FOIA Programs, District Director, or the District Director's designee shall, within the statutory 20 business day period, issue to the requester a brief written statement of the reason for the delay and an indication of the date on which it is expected that a determination as to disclosure will be forthcoming. If more than 10 additional business days are needed, the requester shall be notified and provided an opportunity to limit the scope of the request or to arrange for an alternate time frame for processing the request.
(f)(1) A request for records may be eligible for expedited processing if the requester demonstrates a compelling need. For the purposes of this section, compelling need means:
(i) That the failure to obtain the records on an expedited basis could reasonably be expected to pose an imminent threat to the life or physical safety of an individual; or
(ii) That the requester is a representative of the news media as described in § 1610.1(o) and there is an urgency to inform the public concerning actual or alleged Federal government activity.
(2) A requester who seeks expedited processing must submit a statement, certified to be true and correct to the best of that person's knowledge and belief, explaining in detail the basis for requesting expedited processing. A determination on the request for expedited processing will be made and the requester notified within 10 calendar days. The Legal Counsel or designee, or the Assistant Legal Counsel, FOIA Programs, as appropriate, shall promptly respond to any appeal of the denial of a request for expedited processing.
(g) The Commission may toll the statutory time period to issue its determination on a FOIA request one time during the processing of the request to obtain clarification from the requester. The statutory time period to issue the determination on disclosure is tolled until EEOC receives the information reasonably requested from the requester. The agency may also toll the statutory time period to issue the determination to clarify with the requester issues regarding fees. There is no limit on the number of times the agency may request clarifying fee information from the requester.
(b) A reply either granting or denying a written request for a record shall be in writing, signed by the Assistant Legal Counsel, FOIA Programs, the District Director, or the District Director's designee, and shall include:
(1) His or her name and title, telephone number, and email address;
(2) A reference to the specific exemption under the Freedom of Information Act authorizing the withholding of the record and a brief explanation of how the exemption applies to the record withheld, or a statement that, after diligent effort, the requested records have not been found or have not been adequately examined during the time allowed under § 1610.9 (d), and that the denial will be reconsidered as soon as the search or examination is complete; and
(3) A written statement that the denial may be appealed to the Legal Counsel, or Assistant Legal Counsel, FOIA Programs, as appropriate, within 30 calendar days of receipt of the denial or partial denial.
(c) When a request for records is denied, the Commission shall provide to the requester a written statement identifying the estimated volume of denied material unless providing such estimate would harm an interest protected by the exemptions in 5 U.S.C. 522(b). When a reasonably segregable portion of a record is provided, the amount of information deleted from the released portion and, to the extent technically feasible, the place in the record where such deletion was made, and the exemption upon which the deletion was based, shall be indicated on the record provided to the requester.
(a) When the Assistant Legal Counsel, FOIA Programs, the District Director, or the District Director's designee has denied a request for records in whole or in part, the requester may appeal within 30 calendar days of receipt of the determination letter. The appeal must be in writing, addressed to the Legal Counsel, or the Assistant Legal Counsel, FOIA Programs, as appropriate, and submitted by mail to the Equal Employment Opportunity Commission, 131 M Street, NE., Suite 5NW02E, Washington, DC 20507, by fax to (202) 663–4679, by email to
(b) The Legal Counsel or designee, or the Assistant Legal Counsel, FOIA Programs, as appropriate, shall act upon the appeal within 20 business days of its receipt, and more rapidly if practicable. If the decision is in favor of the person making the request, the decision shall order that records be promptly made available to the person making the
(c) The decision on appeal shall be in writing and signed by the Legal Counsel or designee, or the Assistant Legal Counsel, FOIA Programs, as appropriate. A denial in whole or in part of a request on appeal shall set forth the exemption relied on, a brief explanation of how the exemption applies to the records withheld, and the reasons for asserting it, if different from those described by the Assistant Legal Counsel, FOIA Programs, the District Director, or the District Director's designee under § 1610.9. The decision on appeal shall indicate that the person making the request may, if dissatisfied with the decision, file a civil action in the United States District Court for the district in which the person resides or has his principal place of business, for the district where the records reside, or for the District of Columbia.
(d) No personal appearance, oral argument or hearing will ordinarily be permitted in connection with an appeal to the Legal Counsel or the Assistant Legal Counsel, FOIA Programs.
(e) On appeal, the Legal Counsel or designee, or the Assistant Legal Counsel, FOIA Programs, as appropriate, may reduce any fees previously assessed.
(f) In the event that the Commission terminates its proceedings on a charge after the District Director or the District Director's designee denies a request, in whole or in part, for the charge file but during consideration of the requester's appeal from that denial, the request may be remanded for redetermination. The requester retains a right to appeal to the Assistant Legal Counsel, FOIA Programs, from the decision on remand.
(g) A response to an appeal will advise the requester that the 2007 amendments to FOIA created the Office of Government Information Services (OGIS) to offer mediation services to resolve disputes between FOIA requesters and Federal agencies as a non-exclusive alternative to litigation. A requester may contact OGIS in any of the following ways: Office of Government Information Services, National Archives and Records Administration, 8601 Adelphi Road—OGIS, College Park, MD 20740;
The Legal Counsel or designee, the Assistant Legal Counsel, FOIA Programs, and the District Directors or designees shall maintain files containing all material required to be retained by or furnished to them under this subpart. The material shall be filed by individual request.
(a) Except as provided in paragraph (b) of this section, the Legal Counsel or designee, the Assistant Legal Counsel, FOIA Programs, and the District Directors or designees shall assess fees where applicable in accordance with § 1610.15 for search, review, and duplication of records requested. They shall also have authority to furnish documents without any charge or at a reduced charge if disclosure of the information is in the public interest because it is likely to contribute significantly to public understanding of the operations or activities of the government and is not primarily in the commercial interest of the requester.
(g) A search fee will not be charged to requesters specified in paragraphs (a)(1) and (a)(3) of this section, and a duplication fee will not be charged to requesters specified in paragraph (a)(2) of this section, if the Commission issues an untimely determination and the untimeliness is not due to unusual or exceptional circumstances.
The Commission will provide the following information to the public. This information will also be made available electronically:
(h) Underlying annual FOIA report data.
(a) The Legal Counsel shall, on or before February 1, submit individual Freedom of Information Act reports for each principal agency FOIA component and one for the entire agency covering the preceding fiscal year to the Attorney General of the United States. The reports shall include those matters required by 5 U.S.C. 552(e), and shall be made available electronically on the agency Web site.
(b) When and as directed by the Attorney General, the Chief FOIA Officer, through the Office of the Chair, shall review and report to the Attorney General on the agency's performance in implementing its responsibilities under FOIA.
Coast Guard, DHS.
Notice of deviation from drawbridge regulation.
The Coast Guard has issued a temporary deviation from the regulation governing the operation of the Meridian Bigbee Railroad (MBRR) vertical lift bridge across the Tombigbee River, mile 128.6, near Naheola, between Choctaw and Morengo Counties, Alabama. The deviation is necessary for emergency replacement of the uphaul and downhaul ropes. This deviation allows the bridge to remain closed to navigation for two 10-hour closures on two consecutive weekends.
This deviation is effective from 7 a.m. July 13, 2013 through 5 p.m. July 21, 2013.
The docket for this deviation, [USCG–2013–0441] is available at
If you have questions on this temporary deviation, call or email Jim Wetherington, Bridge Branch Office, Coast Guard; telephone 504–671–2128, email
The MBRR has requested a temporary deviation from the operating schedule for the Meridian Bigbee vertical lift bridge across the Tombigbee River, mile 128.6, near Naheola, between Choctaw and Morengo Counties, Alabama. The bridge has a vertical clearance of 12 feet above ordinary high water at an elevation of 58 ft (NGVD 29) in the closed-to-navigation position. Vessels requiring a clearance of less than 12 feet above ordinary high water may transit beneath the bridge during maintenance operations.
In accordance with Title 33 CFR 117.5, the bridge must open promptly and fully for the passage of vessels when requested or signaled to open. This deviation will allow the bridge to remain closed to marine traffic on July 13–14, 2013 from 7 a.m. through 5 p.m. each day and July 20–21 from 7 a.m. through 5 p.m. each day. At all other times, the bridge will operate in accordance with Title 33 CFR 117.5.
The closure is necessary for the replacement of the uphaul and downhaul ropes. Problems were discovered after an incident in which a cable ceased to function. An inspection of the other ropes revealed issues that must be quickly addressed. Notices will be published in the Eighth Coast Guard District Local Notice to Mariners and will be broadcast via the Coast Guard Broadcast Notice to Mariners System.
Navigation on the waterway consists of tugs with and without tows, commercial vessels, and recreational craft. Coordination between the Coast Guard and the waterway users determined that there should not be any significant effects on these vessels. The bridge will be unable to open during these repairs and no alternate route is available. Vessels that do not require an opening may pass with extreme caution.
In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Coast Guard, DHS.
Notice of deviation from drawbridge regulation.
The Coast Guard has issued a temporary deviation from the operating schedule that governs the Kansas City Southern vertical lift span bridge across the Neches River, mile 19.5, at Beaumont, Texas. The deviation is necessary to replace the north vertical lift joints on the bridge. This deviation allows the bridge to remain closed to navigation for twelve consecutive hours.
This deviation is effective from 6 a.m. through 6 p.m. on Thursday, July 11, 2013.
The docket for this deviation, [USCG–2013–0475] is available at
If you have questions on this temporary deviation, call or email Kay Wade, Bridge Administration Branch, Coast Guard; telephone 504–671–2128, email
The Kansas City Southern Railroad has requested a temporary deviation from the operating schedule of the vertical lift span bridge across the Neches River at mile 19.5 in Beaumont, Texas. The vertical clearance of the bridge in the closed-to-navigation position is 13 feet above Mean High Water and 140 feet above Mean High Water in the open-to-navigation position.
In accordance with 33 CFR 117.971, the vertical lift span of the bridge is automated and normally not manned but will open on signal for the passage of vessels. This deviation allows the vertical lift span of the bridge to remain closed to navigation from 6 a.m. to 6 p.m. on Thursday, July 11, 2013.
The closure is necessary in order to replace the north vertical lift joints on the bridge, which allow the bridge to be raised. This maintenance is essential for the continued operation of the bridge. Notices will be published in the Eighth Coast Guard District Local Notice to Mariners and will be broadcast via the Coast Guard Broadcast Notice to Mariners System.
Navigation on the waterway consists of commercial and recreational fishing vessels, small to medium crew boats, and small tugs with and without tows. No alternate routes are available for the passage of vessels; however, the closure was coordinated with waterway interests who have indicated that they will be able to adjust their operations around the proposed work schedule. Small vessels may pass under the bridge while in the closed-to-navigation position provided caution is exercised.
The bridge will be able to open manually in the event of an emergency, but it will take about one hour to do so.
Due to prior experience and coordination with waterway users, it has been determined that this closure will not have a significant effect on vessels that use the waterway.
In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Coast Guard, DHS.
Notice of deviation from drawbridge regulation.
The Coast Guard has issued a temporary deviation from the regulation governing the operation of the Norfolk Southern (NS) Railroad vertical lift drawbridge across the Tombigbee River, mile 44.9, near Jackson, between Washington and Clarke Counties, Alabama. The deviation is necessary for emergency replacement of the counter weights and operation cables. This deviation allows the bridge to remain closed to navigation for two 72-hour closures and an additional 12-hour closure all over a 12-day period.
This deviation is effective from 7 a.m. on Monday July 8, 2013 through 7 p.m. Friday July 19, 2013.
The docket for this deviation, [USCG–2013–0450] is available at
If you have questions on this temporary deviation, call or email Jim Wetherington, Bridge Branch Office, Coast Guard; telephone 504–671–2128, email
The NS Railroad has requested a temporary deviation from the operating schedule for the vertical lift drawbridge across the Tombigbee River, mile 44.9, near Jackson, between Washington and Clarke Counties, Alabama. The bridge has a vertical clearance of 8 feet above ordinary high water at an elevation 24.9 ft (NGVD 29) in the closed-to-navigation position. Vessels requiring a clearance of less than 8 feet above ordinary high water may transit beneath the bridge during maintenance operations.
In accordance with Title 33 CFR 117.5, the bridge must open promptly and fully for the passage of vessels when requested or signaled to open. This deviation will allow the bridge to remain closed to marine traffic from 7 a.m. on Monday July 8, 2013 through 7 a.m. on Thursday July 11, 2013. A second 72 hour closure is scheduled from 7 a.m. on Monday July 15, 2013 through 7 a.m. on Thursday July 18, 2013. Finally, an additional 12 hour closure is scheduled from 7 a.m. through 7 p.m. on Friday July 19, 2013. At all other times, the bridge will operate in accordance with Title 33 CFR 117.5.
The closure is necessary for the replacement of worn counter weights and operation cables. They were discovered after a general maintenance inspection. This maintenance was then scheduled. Notices will be published in the Eighth Coast Guard District Local Notice to Mariners and will be broadcast via the Coast Guard Broadcast Notice to Mariners System.
Navigation on the waterway consists of tugs with and without tows, commercial vessels, and recreational craft. Coordination between the Coast Guard and the waterway users determined that there should not be any significant effects on these vessels. The bridge will be unable to open during these repairs and no alternate route is available. If vessels can pass without an opening they may proceed with extreme caution.
In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Coast Guard, DHS.
Notice of deviation from drawbridge regulation.
The Coast Guard has issued a temporary deviation from the operating schedule that governs the Union Pacific Railroad Drawbridge across the Carquinez Strait, mile 7.0 at Martinez, CA. The deviation is necessary to perform a cable replacement at the bridge. This deviation allows the bridge to remain the closed-to-navigation position during the repairs.
This deviation is effective from 7 a.m. on June 22, 2013 to 5 p.m. on June 30, 2013.
The docket for this deviation, [USCG–2013–0428], is available at
If you have questions on this temporary deviation, call or email David H. Sulouff, Chief, Bridge Section, Eleventh Coast Guard District; telephone 510–437–3516, email
Union Pacific Railroad Company has requested a temporary change to the operation of the Union Pacific Railroad Drawbridge, mile 7.0, over Carquinez Strait, at Martinez, CA. The drawbridge navigation span provides 135 feet vertical clearance above Mean High Water in the full open-to-navigation position, and 70 feet vertical clearance when closed. The draw opens on signal from approaching vessels, as required by 33 CFR 117.5. Navigation on the waterway is commercial and recreational.
The drawspan will be secured in the closed-to-navigation position to replace bridge lifting cables, from 7 a.m. to 5 p.m., on June 22, June 23, June 29, and June 30, 2013. The drawspan will be operational each night between 5 p.m. and 7 a.m.
This temporary deviation has been coordinated with commercial operators and San Francisco Bar Pilots Association. No objections to the proposed temporary deviation were
In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Coast Guard, DHS.
Temporary Final Rule.
The Coast Guard is establishing a temporary safety zone upon the navigable waters of Glorietta Bay for the Coronado Fourth of July Fireworks on July 4, 2013. This temporary safety zone is a modification of an existing permanent safety zone, made due to a change in location of the fireworks barge. The safety zone is necessary to provide for the safety of the crew, spectators, and other users and vessels of the waterway and is the direct result of ongoing event planning with the Coast Guard and event stakeholders.
This rule is effective from 8:45 p.m. to 10:00 p.m. on July 4, 2013.
Documents mentioned in this preamble are part of docket USCG–2013–0301. To view documents mentioned in this preamble as being available in the docket, go to
If you have questions on this rule, call or email Lieutenant John Bannon, Chief of Waterways, U.S. Coast Guard Sector San Diego, Coast Guard; telephone 619–278–7261, email
The Coast Guard published a Notice of Proposed Rulemaking (NPRM) on May 17, 2013 (78 FR 29094), that highlighted the movement of the fireworks barge and intention to notify the public of the change from the existing permanent annual one-day safety zone listed in 33 CFR 165.1123. We received no comments on this proposed rule. In addition, the Coast Guard has not received a request for a public meeting.
Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the
The Ports and Waterways Safety Act gives the Coast Guard authority to create and enforce safety zones. The Coast Guard is establishing a temporary safety zone modification to a recurring safety zone listed in 33 CFR § 165.1123 for this annual event on the navigable waters of Glorietta Bay in support of a fireworks show sponsored by the City of Coronado. This event will occur between 8:45 p.m. and 10 p.m. on July 4, 2013. The safety zone will include all navigable waters within 800 feet of the fireworks barge located in approximate position: 32°40′41.0″ N, 117°10′7.4″ W. This temporary safety zone is necessary to provide for the safety of the crew, spectators, and participants of the event, participating vessels, and other vessels and users of the waterway.
The Coast Guard has previously established a permanent safety zone in 33 CFR 165.1123 table for this annual event. A NPRM was made to notify the public that the regulated area has been moved 100-yards to the north from location noted in 33 CFR 165.1123. This change was made in consultation with event stakeholders to help mitigate environmental concerns. No concerns for this event were made on the docket.
We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on 13 of these statutes or executive orders.
This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, as supplemented by Executive Order 13563, Improving Regulation and Regulatory Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of Executive Order 12866 or under section 1 of Executive Order 13563. The Office of Management and Budget has not reviewed it under those Orders. This determination is based on the small size, and limited duration of the safety zone.
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601–612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.
(1) This rule will affect the following entities, some of which may be small entities: The owners or operators of vessels intending to transit or anchor in specified portions of Glorietta Bay from 8:45 p.m. to 10 p.m. on July 4, 2013.
(2) This safety zone will not have a significant economic impact on a substantial number of small entities for the following reasons: This one day safety zone will only be in effect for one hour and fifteen minutes late in the evening when vessel traffic is low. Vessel traffic can transit safely around
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104–121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the
Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1–888–REG–FAIR (1–888–734–3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.
This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and determined that this rule does not have implications for federalism.
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531–1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.
This rule will not cause a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.
This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.
We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.
This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
This action is not a “significant energy action” under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use.
This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.
We have analyzed this rule under Department of Homeland Security Management Directive 023–01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA)(42 U.S.C. 4321–4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves establishment of a temporary safety zone. This rule is categorically excluded from further review under paragraph 34(g) of Figure 2–1 of the Commandant Instruction. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under
Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security Measures, Waterways.
For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:
33 U.S.C. 1226, 1231; 46 U.S.C. Chapter 701, 3306, 3703; 50 U.S.C. 191, 195; 33 CFR 1.05–1, 6.04–1, 6.04–6, and 160.5; Pub. L. 107–295, 116 Stat. 2064; Department of Homeland Security Delegation No. 0170.1.
(a)
(b)
(c)
(d)
(2) All persons and vessels shall comply with the instructions of the Coast Guard Captain of the Port or his designated representative.
(3) Upon being hailed by U.S. Coast Guard patrol personnel by siren, radio, flashing light, or other means, the operator of a vessel shall proceed as directed.
(4) The Coast Guard may be assisted by other federal, state, or local agencies.
Coast Guard, DHS.
Temporary final rule.
The Coast Guard is establishing a temporary safety zone on the Delaware River in Camden, NJ. The safety zone will restrict vessel traffic on a portion of the Delaware River from operating while a fireworks event is taking place. This temporary safety zone is necessary to protect the surrounding public and vessels from the hazards associated with a fireworks display.
This rule is effective on June 19, 2013, from 9 p.m. until 10:10 p.m.
Documents mentioned in this preamble are part of docket [USCG–2013–0496]. To view documents mentioned in this preamble as being available in the docket, go to
If you have questions on this rule, call or email Lieutenant Veronica Smith, Chief Waterways Management, Sector Delaware Bay, U.S. Coast Guard; telephone (215) 271–4851, email
The Coast Guard is issuing this temporary final rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) because it is impracticable. Publishing an NPRM is impracticable given that the final details for this event were not received by the Coast Guard with sufficient time for a notice and comment period to run before the start of the event. Immediate action is necessary to provide for the safety of life and property in the navigable water, thus, delaying this rule to wait for a notice and comment period to run would be impracticable and would inhibit the Coast Guard's ability to protect the public from the hazards associated with maritime fireworks displays.
Under 5 U.S.C. 553(d)(3), for the same reasons discussed earlier, the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the
On the evening of June 19, 2013, fireworks will be launched from a barge with a fall out zone that covers part of the Delaware River. Delaware River Waterfront Corp. has contracted with Pyrotecnico Fireworks to arrange for this display. The Captain of the Port, Sector Delaware Bay, has determined that the Delaware River Waterfront Corp. Fireworks Display will pose significant risks to the public. The purpose of the rule is to promote public and maritime safety during a fireworks display, and to protect mariners transiting the area from the potential hazards associated with a fireworks display, such as accidental discharge of fireworks, dangerous projectiles, and falling hot embers or other debris. This rule is needed to ensure safety on the waterway during the event.
The legal basis and authorities for this rule are found in 33 U.S.C. 1231, 46 U.S.C. Chapter 701, 3306, 3703; 50 U.S.C. 191, 195; 33 CFR 1.05–1, 6.04–1, 6.04–6, and 160.5; Pub. L. 107–295, 116 Stat. 2064; and Department of Homeland Security Delegation No. 0170.1, which collectively authorize the Coast Guard to establish and define regulatory safety zones.
To mitigate the risks associated with the Delaware River Waterfront Corp. Fireworks Display, the Captain of the Port, Sector Delaware Bay will enforce a temporary safety zone in the vicinity of the launch site. The safety zone will encompass all waters of the Delaware River within a 350 yard radius of the fireworks launch platform in approximate position 39°57′00.67″ N, 075°07′57.77″ W in Camden, NJ. The safety zone will be effective and enforced from 9 p.m. to 10:10 p.m. on June 19, 2013. Entry into, transiting, or anchoring within the safety zone is prohibited unless authorized by the Captain of the Port, Sector Delaware Bay, or her on-scene representative. The Captain of the Port, Sector Delaware Bay, or her on-scene representative may be contacted via VHF channel 16.
We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on these statutes and executive orders.
This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, as supplemented by Executive Order 13563, Improving Regulation and Regulatory Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of Executive Order 12866
Although this regulation will restrict vessel traffic from operating within the safety zone on the navigable waters of the Delaware River, Camden, NJ, the effect of this regulation will not be significant due to the limited duration that the safety zone will be in effect. The enforcement window lasts for 1 hour and 10 minutes in an open area that does conflict with transiting commercial or recreational traffic. For the above reasons, the Coast Guard does not anticipate any significant economic impact.
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601–612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.
The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities:
(1) This rule will affect the following entities, some of which might be small entities: the owners or operators of vessels intending to operate, transit, or anchor in a portion of the Delaware River between 9 p.m. and 10:10 p.m. on June 19, 2013.
(2) This safety zone will not have a significant economic impact on a substantial number of small entities for the following reasons: this rule will only be enforced for a short period of time. In the event that this temporary safety zone affects shipping, commercial vessels may request permission from the Captain of the Port, Sector Delaware Bay, to transit through the safety zone. Before activation of the zone, we will give notice to the public via a Broadcast to Mariners that the regulation is in effect.
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104–121), we offer to assist small entities in understanding the rule so that they can better evaluate its effects on them and participate in the rulemaking process.
Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1–888–REG–FAIR (1–888–734–3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.
This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this rule under that Order and have determined that it does not have implications for federalism.
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531–1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.
This rule will not cause a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.
This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.
We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.
This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
This action is not a “significant energy action” under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use.
This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.
We have analyzed this rule under Department of Homeland Security Management Directive 023–01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321–4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule is categorically excluded under 34(g) of Figure 2–1 of the Commandant Instruction. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under
Harbors, Marine Safety, Navigation (water), Reporting and recordkeeping
For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:
33 U.S.C. 1231; 46 U.S.C. Chapter 701, 3306, 3703; 50 U.S.C. 191, 195; 33 CFR 1.05–1, 6.04–1, 6.04–6, and 160.5; Pub. L. 107–295, 116 Stat. 2064; Department of Homeland Security Delegation No. 0170.1.
(a)
(b)
(1) All persons and vessels are prohibited from entering this zone, except as authorized by the Coast Guard Captain of the Port or her designated representative.
(2) All persons or vessels wishing to transit through the Safety Zone must request authorization to do so from the Captain of the Port or her designated representative one hour prior to the intended time of transit.
(3) Vessels granted permission to transit through the Safety Zone must do so in accordance with the directions provided by the Captain of the Port or her designated representative to the vessel.
(4) To seek permission to transit this safety zone, the Captain of the Port or her designated representative can be contacted via Sector Delaware Bay Command Center (215) 271–4940.
(5) This section applies to all vessels wishing to transit through the safety zone except vessels that are engaged in the following operations:
(i) Enforcing laws;
(ii) Servicing aids to navigation; and
(iii) Emergency response vessels.
(6) No person or vessel may enter or remain in a safety zone without the permission of the Captain of the Port;
(7) Each person and vessel in a safety zone shall obey any direction or order of the Captain of the Port;
(8) The Captain of the Port may take possession and control of any vessel in the safety zone;
(9) The Captain of the Port may remove any person, vessel, article, or thing from a safety zone;
(10) No person may board, or take or place any article or thing on board, any vessel in a safety zone without the permission of the Captain of the Port; and
(11) No person may take or place any article or thing upon any waterfront facility in a safety zone without the permission of the Captain of the Port.
(c)
(1)
(2)
(d)
(e)
Coast Guard, DHS.
Temporary final rule.
The Coast Guard is establishing a temporary safety zone for all waters of the Lower Mississippi River from mile 95.5 to mile 96.5. This safety zone is necessary to protect persons and vessels from potential safety hazards associated with a fireworks display in the Lower Mississippi River at mile 96. Entry into this zone is prohibited unless specifically authorized by the Captain of the Port New Orleans or a designated representative.
This rule is effective from 9:45 p.m. to 10:25 p.m. on June 26, 2013.
Documents mentioned in this preamble are part of docket [USCG–2013–0188] to view documents mentioned in this preamble as being available in the docket, go to
If you have questions on this rule, call or email Lieutenant Commander (LCDR) Brandon Sullivan, Sector New Orleans, U.S. Coast Guard; telephone (504) 365–2280, email
The Coast Guard is issuing this temporary final rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because it is impracticable. The Coast Guard did not receive event information from the event sponsor until there was insufficient time remaining to undertake an NPRM. This safety zone is needed to protect vessels and mariners from the safety hazards associated with an aerial fireworks display taking place over the waterway. Providing notice and comment for this rule establishing the
Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the
The Oracle C/O J&M Displays is sponsoring a fireworks display from a barge located at mile 96 on the Lower Mississippi River. This event will take place from 9:45 p.m. to 10:25 p.m. on June 26, 2013. The Coast Guard has determined that a safety zone is needed to protect the public, mariners, and vessels from the hazards associated with these aerial fireworks displays over the waterway.
The legal basis and authorities for this rule are found in 33 U.S.C. 1231, 46 U.S.C. Chapter 701, 3306, 3703; 50 U.S.C. 191, 195; 33 CFR 1.05–1, 6.04–1, 6.04–6, and 160.5; Public Law 107–295, 116 Stat. 2064; and Department of Homeland Security Delegation No. 0170.1, which collectively authorize the Coast Guard to establish and define regulatory safety zones.
The Coast Guard is establishing a temporary safety zone on the Lower Mississippi River from 9:45 p.m. to 10:25 p.m. on June 26, 2013. The safety zone area will include the entire width of the Lower Mississippi River in New Orleans, LA, from mile 95.5 to mile 96.5. Entry into this zone is prohibited unless permission has been granted by the Captain of the Port New Orleans, or a designated representative.
Notice to the public of this safety zone will be provided via Broadcast Notice to Mariners. Mariners and other members of the public may also contact Coast Guard Sector New Orleans to inquire about the status of the safety zone, at (504) 365–2200.
We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on these statutes or executive orders.
This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, as supplemented by Executive Order 13563, Improving Regulation and Regulatory Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of Executive Order 12866 or under section 1 of Executive Order 13563. The Office of Management and Budget has not reviewed it under those Orders. This safety zone will restrict navigation on the Lower Mississippi River from mile 95.5 to mile 96.5, for approximately 40 minutes on June 26, 2013. Due to the short duration of the event, it does not impose a significant regulatory impact.
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601–612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. This rule would affect the following entities, some of which may be small entities: the owners or operators of vessels intending to transit between miles 95.5 to mile 96.5, between 9:45 p.m. and 10:25 p.m. on June 26, 2013. This safety zone would not have a significant economic impact on a substantial number of small entities for the following reasons because the safety zone will only be subject to enforcement for approximately 40 minutes on June 26, 2013. Before the activation of the zone, the Coast Guard will issue maritime advisories widely available to users of the river.
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104–121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the
Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1–888–REG–FAIR (1–888–734–3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.
This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and determined that this rule does not have implications for federalism.
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531–1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or
This rule will not cause a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.
This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.
We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.
This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
This action is not a “significant energy action” under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use.
This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.
We have analyzed this rule under Department of Homeland Security Management Directive 023–01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321–4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves establishing a temporary safety zone for all waters of the Lower Mississippi River from mile 95.5 to mile 96.5. This rule is categorically excluded from further review under paragraph 34(g) of Figure 2–1 of the Commandant Instruction. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under
Harbors, Marine safety, Navigation (water), Reporting and record-keeping requirements, Security measures, Waterways.
For the reasons discussed in the preamble, the Coast Guard amends 33 CFR Part 165 as follows:
33 U.S.C. 1231; 46 U.S.C. Chapter 701, 3306, 3703; 50 U.S.C. 191, 195; 33 CFR 1.05–1, 6.04–1, 6.04–6, and 160.5; Pub. L. 107–295, 116 Stat. 2064; Department of Homeland Security Delegation No. 0170.1.
(a)
(b)
(c)
(2) Persons or vessels requiring deviations from this rule must request permission from the Captain of the Port New Orleans. The Captain of the Port New Orleans may be contacted at telephone (504) 365–2200.
(3) All persons and vessels permitted to enter the safety zone shall comply with the instructions of the Captain of the Port New Orleans and designated personnel.
Coast Guard, DHS.
Temporary final rule.
The Coast Guard is establishing a temporary safety zone on Lake Erie, Fairport Harbor, OH. This safety zone is intended to restrict vessels from a portion of Lake Erie during the Fairport Harbor Mardi Gras Fireworks display. This temporary safety zone is necessary to protect spectators and vessels from the hazards associated with a fireworks display.
This rule is effective from 9 p.m. until 10:20 p.m. on July 5, 2013.
Documents mentioned in this preamble are part of docket [USCG–2013–0417]. To view documents mentioned in this preamble as being available in the docket, go to
If you have questions on this rule, call or
The Coast Guard is issuing this temporary final rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because doing so would be impracticable. The final details for this event were not known to the Coast Guard until there was insufficient time remaining before the event to publish an NPRM. Thus, delaying the effective date of this rule to wait for a comment period to run would be impracticable because it would inhibit the Coast Guard's ability to protect spectators and vessels from the hazards associated with a maritime fireworks display, which are discussed further below.
Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this temporary rule effective less than 30 days after publication in the
Between 9:30 p.m. and 9:50 p.m. on July 5, 2013, a fireworks display will be held on Lake Erie near Fairport Harbor Lake Front Park, Fairport Harbor, OH. The Captain of the Port Buffalo has determined that fireworks launched proximate to a gathering of watercraft pose a significant risk to public safety and property. Such hazards include premature and accidental detonations, dangerous projectiles, and falling or burning debris.
With the aforementioned hazards in mind, the Captain of the Port Buffalo has determined that this temporary safety zone is necessary to ensure the safety of spectators and vessels during the Fairport Harbor Mardi Gras. This zone will be effective and enforced from 9 p.m. until 10:20 p.m. on July 5, 2013. This zone will encompass all waters of Lake Erie, Fairport Harbor, OH within a 350 foot radius of position 41°45′30″ N and 81°16′18″ W (NAD 83).
Entry into, transiting, or anchoring within the safety zone is prohibited unless authorized by the Captain of the Port Buffalo or his designated on-scene representative. The Captain of the Port or his designated on-scene representative may be contacted via VHF Channel 16.
We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on these statutes and executive orders.
This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, as supplemented by Executive Order 13563, Improving Regulation and Regulatory Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of Executive Order 12866 or under section 1 of Executive Order 13563. The Office of Management and Budget has not reviewed it under those Orders. It is not “significant” under the regulatory policies and procedures of the Department of Homeland Security (DHS).
We conclude that this rule is not a significant regulatory action because we anticipate that it will have minimal impact on the economy, will not interfere with other agencies, will not adversely alter the budget of any grant or loan recipients, and will not raise any novel legal or policy issues. The safety zone created by this rule will be relatively small and enforced for relatively short time. Also, the safety zone is designed to minimize its impact on navigable waters. Furthermore, the safety zone has been designed to allow vessels to transit around it. Thus, restrictions on vessel movement within that particular area are expected to be minimal. Under certain conditions, moreover, vessels may still transit through the safety zone when permitted by the Captain of the Port.
Under the Regulatory Flexibility Act (5 U.S.C. 601–612), we have considered the impact of this rule on small entities. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. This rule will affect the following entities, some of which might be small entities: The owners or operators of vessels intending to transit or anchor in a portion of Lake Erie on the evening of July 5, 2013.
This safety zone will not have a significant economic impact on a substantial number of small entities for the following reasons: This safety zone would be activated, and thus subject to enforcement, for only 80 minutes late in the day. Traffic may be allowed to pass through the zone with the permission of the Captain of the Port. The Captain of the Port can be reached via VHF channel 16. Before the activation of the zone, we would issue local Broadcast Notice to Mariners.
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104–121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the
Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1–888–REG–FAIR (1–888–734–3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.
This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and determined that this rule does not have implications for federalism.
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531–1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.
This rule will not cause a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.
This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.
We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.
This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
This action is not a “significant energy action” under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use.
This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.
We have analyzed this rule under Department of Homeland Security Management Directive 023–01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321–4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves the establishment of a safety zone and, therefore it is categorically excluded from further review under paragraph 34(g) of Figure 2–1 of the Commandant Instruction. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under
Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways.
For the reasons discussed in the preamble, the Coast Guard amends 33 CFR parts 165 as follows:
33 U.S.C. 1231; 46 U.S.C. Chapters 701, 3306, 3703; 50 U.S.C. 191, 195; 33 CFR 1.05–1, 6.04–1, 6.04–6, and 160.5; Pub. L. 107–295, 116 Stat. 2064; Department of Homeland Security Delegation No. 0170.1.
(a)
(b)
(c)
(2) This safety zone is closed to all vessel traffic, except as may be permitted by the Captain of the Port Buffalo or his designated on-scene representative.
(3) The “on-scene representative” of the Captain of the Port Buffalo is any Coast Guard commissioned, warrant or petty officer who has been designated by the Captain of the Port Buffalo to act on his behalf.
(4) Vessel operators desiring to enter or operate within the safety zone shall contact the Captain of the Port Buffalo or his on-scene representative to obtain permission to do so. The Captain of the Port Buffalo or his on-scene representative may be contacted via VHF Channel 16. Vessel operators given permission to enter or operate in the safety zone must comply with all directions given to them by the Captain of the Port Buffalo, or his on-scene representative.
Coast Guard, DHS.
Temporary final rule.
The Coast Guard is temporarily changing the location of a safety zone for one recurring fireworks display in the Fifth Coast Guard District. This regulation applies to only one recurring fireworks event, held adjacent to the Currituck Sound, Corolla, North Carolina. The fireworks display previously originated from a barge but will this year originate from a location on land. The safety zone is necessary to provide for the safety of life on navigable waters during the event. This
This rule will be effective from July 4, 2013 until July 5, 2013.
Documents mentioned in this preamble are part of docket [USCG–2013–0421]. To view documents mentioned in this preamble as being available in the docket, go to
If you have questions on this rule, call or email BOSN4 Joseph M. Edge, Coast Guard Sector North Carolina, Coast Guard; telephone (252) 247–4525, email
The Coast Guard is issuing this temporary final rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because it would be impracticable to issue an NPRM and final rule before the scheduled event.
For similar reasons, under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the
Recurring fireworks displays are frequently held on or adjacent to the navigable waters within the boundary of the Fifth Coast Guard District. For a description of the geographical area of each Coast Guard Sector—Captain of the Port Zone, please see 33 CFR 3.25.
The regulation listing annual fireworks displays within the Fifth Coast Guard District and safety zones locations is 33 CFR 165.506. The Table to § 165.506 identifies fireworks displays by COTP zone, with the COTP North Carolina zone listed in section “(d.)” of the Table.
The township of Corolla, North Carolina, sponsors an annual fireworks display held on July 4th over the waters of Currituck Sound at Corolla, North Carolina. The Table to § 165.506, at section (d.) event Number “5”, describes the enforcement date and regulated location for this fireworks event.
The location listed in the Table has the fireworks display originating from a fireworks barge on Currituck Sound. However, this proposed rule changes the fireworks launch location on July 4, 2013, to a position on shore at latitude 36°22′23.8″ N longitude 075°49′56.3″ W.
A fleet of spectator vessels is anticipated to gather nearby to view the fireworks display. Due to the need for vessel control during the fireworks display vessel traffic will be temporarily restricted to provide for the safety of participants, spectators and transiting vessels. Under provisions of 33 CFR 165.506, during the enforcement period, vessels may not enter the regulated area unless they receive permission from the Coast Guard Patrol Commander.
The Coast Guard will temporarily suspend the regulation listed in Table to § 165.506, section (d.) event Number 5, and insert this temporary regulation at Table to § 165.506, at section (d.) as event Number “16”, in order to reflect that the fireworks display will originate from a point on shore and therefore the regulated area is changed. This change is needed to accommodate the sponsor's event plan. No other portion of the Table to § 165.506 or other provisions in § 165.506 shall be affected by this regulation.
The regulated area of this safety zone includes all water of the Currituck Sound within a 300 yards radius of latitude 36°22′23.8″ N longitude 075°49′56.3″ W.
This safety zone will restrict general navigation in the regulated area during the fireworks event. Except for persons or vessels authorized by the Coast Guard Patrol Commander, no person or vessel may enter or remain in the regulated area during the effective period. The regulated area is needed to control vessel traffic during the event for the safety of participants and transiting vessels.
The enforcement period for this safety zone does not change from that enforcement period listed in § 165.506(d)(5) which is 5:30 p.m. on July 4, 2013 through 1 a.m. on July 5, 2013.
In addition to notice in the
We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on these statutes and executive orders.
This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, as supplemented by Executive Order 13563, Improving Regulation and Regulatory Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of Executive Order 12866 or under section 1 of Executive Order 13563. The Office of Management and Budget has not reviewed it under those Orders. Although this regulation restricts access to a small segment of Currituck Sound, the effect of this rule will not be significant because: (i) the safety zone will be in effect for a limited duration; (ii) the zone is of limited size; and (iii) the Coast Guard will make notifications via maritime advisories so mariners can adjust their plans accordingly. Additionally, this rulemaking changes the regulated area for the Currituck Sound fireworks demonstration for July 4, 2013 only and does not change the permanent regulated area that has been published in 33 CFR 165.506, Table to § 165.506 at portion “d” event Number “5”. In some cases vessel traffic may be able to transit the regulated area when the Coast Guard Patrol Commander deems it is safe to do so.
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601–612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. This rule would affect the following entities, some of which might be small entities: the owners or operators of vessels intending to transit or anchor in the Currituck Sound where fireworks events are being held. This regulation will not have a significant impact on a substantial number of small entities because it will be enforced only during the fireworks display event permitted by Coast Guard Captain of the Port North Carolina. The Captain of the Port will ensure that small entities are able to operate in the regulated area when it is safe to do so. In some cases, vessels will be able to safely transit around the regulated area at various times, and, with the permission of the Patrol Commander, vessels may transit through the regulated area. Before the enforcement period, the Coast Guard will issue maritime advisories so mariners can adjust their plans accordingly.
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104–121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the
Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1–888–REG–FAIR (1–888–734–3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.
This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and determined that this rule does not have implications for federalism.
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531–1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.
This rule will not cause a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.
This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.
We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.
This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
This action is not a “significant energy action” under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use.
This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.
We have analyzed this rule under Department of Homeland Security Management Directive 023–01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321–4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves establishing a safety zone for a fireworks display launch site and fallout area and is expected to have no impact on the water or environment. This zone is designed to protect mariners and spectators from the hazards associated with aerial fireworks displays. This rule is categorically excluded from further review under paragraph 34(g) of Figure 2–1 of the Commandant Instruction. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under
Harbors, Marine safety, Navigation (water), Reporting and recordkeeping
For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:
33 U.S.C. 1231; 46 U.S.C. Chapter 701, 3306, 3703; 50 U.S.C. 191, 195; 33 CFR 1.05–1, 6.04–1, 6.04–6, 160.5; Pub. L. 107–295, 116 Stat. 2064; Department of Homeland Security Delegation No. 0170.1.
Office of Special Education and Rehabilitative Services, Department of Education.
Final priority.
The Assistant Secretary for Special Education and Rehabilitative Services announces a priority for a Rehabilitation Engineering Research Center (RERC) on Technologies to Support Successful Aging with Disability under the Disability and Rehabilitation Research Projects and Centers Program administered by the National Institute on Disability and Rehabilitation Research (NIDRR). The Assistant Secretary may use this priority for a competition in fiscal year (FY) 2013 and later years. We take this action to focus research attention on areas of national need. We intend to use this priority to improve outcomes for individuals with disabilities.
Marlene Spencer, U.S. Department of Education, 400 Maryland Avenue SW., room 5133, Potomac Center Plaza (PCP), Washington, DC 20202–2700. Telephone: (202) 245–7532 or by email:
If you use a telecommunications device for the deaf (TDD) or a text telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1–800–877–8339.
The purpose of NIDRR's RERCs program, which is funded through the Disability and Rehabilitation Research Projects and Centers Program, is to improve the effectiveness of services authorized under the Rehabilitation Act. It does so by conducting advanced engineering research, developing and evaluating innovative technologies, facilitating service delivery system changes, stimulating the production and distribution of new technologies and equipment in the private sector, and providing training opportunities. RERCs seek to solve rehabilitation problems and remove environmental barriers to improvements in employment, community living and participation, and health and function outcomes of individuals with disabilities.
The general requirements for RERCs are set out in subpart D of 34 CFR part 350 (What Rehabilitation Engineering Research Centers Does the Secretary Assist?).
Additional information on the RERCs program can be found at:
29 U.S.C. 762(g) and 764(b)(3).
We published a proposed priority for this program in the
Nothing in the priority precludes applicants from proposing to engage with older service providers to help address any lack of familiarity with technology, as suggested by the commenter. However, we do not have a sufficient basis for requiring all applicants to do so. In response to the requirements related to stakeholder involvement, applicants must propose appropriate collaborations with the goal of contributing to the intended outcomes of the RERC. The peer review process will determine the merits of each application.
This final priority is in concert with NIDRR's Long-Range Plan (Plan) for Fiscal Years 2013–2017. The Plan, which was published in the
Through the implementation of the Plan, NIDRR seeks to improve the health and functioning, employment, and community living and participation of individuals with disabilities through comprehensive programs of research, engineering, training, technical assistance, and knowledge translation and dissemination. The Plan reflects NIDRR's commitment to quality, relevance, and balance in its programs to ensure appropriate attention to all aspects of well-being of individuals with disabilities and to all types and degrees of disability, including low-incidence and severe disabilities.
Priority—RERC on
The Assistant Secretary for Special Education and Rehabilitative Services proposes the following priority for the establishment of a Rehabilitation Engineering Research Center (RERC) on Technologies to Support Successful Aging With Disability. Within its designated priority research area, this RERC will focus on innovative technological solutions, new knowledge, and new concepts that will improve the lives of individuals with disabilities.
Under this priority, the RERC must research, develop or identify, and evaluate innovative technologies and strategies that maximize the physical and cognitive functioning of individuals with long-term disabilities as they age. This RERC must engage in research and development activities to build a base of evidence for the usability of, and cost-effectiveness of home- and community-based interactive technologies that are intended to improve physical and cognitive functioning of individuals with disabilities as they age. This RERC may develop and evaluate new technologies, or identify and evaluate existing or commercially available technologies, or both, that are designed to improve the physical and cognitive outcomes of this population. In addition, the RERC must facilitate access to, and use of the low-cost, home- and community-based interactive technologies that improve the physical and cognitive outcomes of individuals with disabilities, through such means as collaborating and communicating with relevant stakeholders, providing technical assistance, and promoting technology transfer.
Under this priority, the RERC must be designed to contribute to the following outcomes:
(1) Increased technical and scientific knowledge relevant to its designated priority research area. The RERC must contribute to this outcome by conducting high-quality, rigorous research and development projects.
(2) Increased innovation in technologies, products, environments, performance guidelines, and monitoring and assessment tools applicable to its designated priority research area. The RERC must contribute to this outcome through the development and testing of these innovations.
(3) Improved research capacity in its designated priority research area. The RERC must contribute to this outcome by collaborating with the relevant industry, professional associations, institutions of higher education, health care providers, or educators, as appropriate.
(4) Improved usability and accessibility of products and environments in the RERC's designated priority research area. The RERC must contribute to this outcome by emphasizing the principles of universal design in its product research and development. For purposes of this section, the term “universal design” refers to the design of products and environments to be usable by all people, to the greatest extent possible, without the need for adaptation or specialized design.
(5) Improved awareness and understanding of cutting-edge developments in technologies within its designated priority research area. The RERC must contribute to this outcome by identifying and communicating with relevant stakeholders, including NIDRR; individuals with disabilities and their representatives; disability organizations; service providers; professional journals; manufacturers; and other interested parties regarding trends and evolving product concepts related to its designated priority research area.
(6) Increased impact of research in the designated priority research area. The RERC must contribute to this outcome by providing technical assistance to relevant public and private organizations, individuals with disabilities, employers, and schools on policies, guidelines, and standards related to its designated priority research area.
(7) Increased transfer of RERC-developed technologies to the marketplace. The RERC must contribute to this outcome by developing and implementing a plan for ensuring that all technologies developed by the RERC are made available to the public. The technology transfer plan must be developed in the first year of the project period in consultation with the NIDRR-funded Disability Rehabilitation Research Project, Center on Knowledge Translation for Technology Transfer.
In addition, the RERC must—
• Have the capability to design, build, and test prototype devices and assist in the technology transfer and knowledge translation of successful solutions to relevant production and service delivery settings;
• Evaluate the efficacy and safety of its new products, instrumentation, or assistive devices;
• Provide as part of its proposal, and then implement, a plan that describes how it will include, as appropriate, individuals with disabilities or their representatives in all phases of its activities, including research, development, training, dissemination, and evaluation;
• Provide as part of its proposal, and then implement, a plan to disseminate its research results to individuals with disabilities and their representatives; disability organizations; service providers; professional journals; manufacturers; and other interested parties. In meeting this requirement, each RERC may use a variety of mechanisms to disseminate information, including state-of-the-science conferences, webinars, Web sites, and other dissemination methods; and
• Coordinate with relevant NIDRR-funded projects, as identified through consultation with the NIDRR project officer.
When inviting applications for a competition using one or more priorities, we designate the type of each priority as absolute, competitive preference, or invitational through a notice in the
This notice does not preclude us from proposing additional priorities, requirements, definitions, or selection criteria, subject to meeting applicable rulemaking requirements.
This notice does
Under Executive Order 12866, the Secretary must determine whether this regulatory action is “significant” and, therefore, subject to the requirements of the Executive order and subject to review by the Office of Management and Budget (OMB). Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as an action likely to result in a rule that may—
(1) Have an annual effect on the economy of $100 million or more, or adversely affect a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities in a material way (also referred to as an “economically significant” rule);
(2) Create serious inconsistency or otherwise interfere with an action taken or planned by another agency;
(3) Materially alter the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or
(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles stated in the Executive order.
This final regulatory action is not a significant regulatory action subject to review by OMB under section 3(f) of Executive Order 12866.
We have also reviewed this final regulatory action under Executive Order 13563, which supplements and explicitly reaffirms the principles, structures, and definitions governing regulatory review established in Executive Order 12866. To the extent permitted by law, Executive Order 13563 requires that an agency—
(1) Propose or adopt regulations only upon a reasoned determination that their benefits justify their costs (recognizing that some benefits and costs are difficult to quantify);
(2) Tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives and taking into account—among other things and to the extent practicable—the costs of cumulative regulations;
(3) In choosing among alternative regulatory approaches, select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity);
(4) To the extent feasible, specify performance objectives, rather than the behavior or manner of compliance a regulated entity must adopt; and
(5) Identify and assess available alternatives to direct regulation, including economic incentives—such as user fees or marketable permits—to encourage the desired behavior, or provide information that enables the public to make choices.
Executive Order 13563 also requires an agency “to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” The Office of Information and Regulatory Affairs of OMB has emphasized that these techniques may include “identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes.”
We are issuing this final priority only upon a reasoned determination that its benefits justify its costs. In choosing among alternative regulatory approaches, we selected those approaches that maximize net benefits. Based on the analysis that follows, the Department believes that this regulatory action is consistent with the principles in Executive Order 13563.
We also have determined that this regulatory action does not unduly interfere with State, local, and tribal governments in the exercise of their governmental functions.
In accordance with both Executive orders, the Department has assessed the potential costs and benefits, both quantitative and qualitative, of this regulatory action. The potential costs are those resulting from statutory requirements and those we have determined as necessary for administering the Department's programs and activities.
The benefits of the Disability and Rehabilitation Research Projects and Centers Program have been well established over the years, as projects similar to the one envisioned by the final priority have been completed successfully. Establishing a new RERC based on the final priority will generate new knowledge through research and development and improve the lives of individuals with disabilities. The new RERC will generate, disseminate, and promote the use of new information that will improve the options for individuals with disabilities to fully participate in their communities.
You may also access documents of the Department published in the
Environmental Protection Agency (EPA).
Final rule.
This regulation establishes tolerances and modifies existing tolerances for residues of acetamiprid in or on multiple commodities which are identified and discussed later in this document. Interregional Research Project Number 4 (IR–4) requested these tolerances under the Federal Food, Drug, and Cosmetic Act (FFDCA).
This regulation is effective June 19, 2013. Objections and requests for hearings must be received on or before August 19, 2013, and must be filed in accordance with the instructions provided in 40 CFR part 178 (see also Unit I.C. of the
The docket for this action, identified by docket identification (ID) number EPA–HQ–OPP–2012–0626, is available at
Andrew Ertman, Registration Division (7505P), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460–0001; telephone number: (703) 308–9367; email address:
You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:
• Crop production (NAICS code 111).
• Animal production (NAICS code 112).
• Food manufacturing (NAICS code 311).
• Pesticide manufacturing (NAICS code 32532).
You may access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Government Printing Office's e-CFR site at
Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA–HQ–OPP–2012–0626 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before August 19, 2013. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).
In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA–HQ–OPP–2012–0626, by one of the following methods:
•
•
•
Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at
In the
In the
There were no comments received in response to either notice of filing.
Based upon review of the data supporting the petition, EPA has determined that the existing tolerance for dried citrus pulp does not need to be increased. The reason for these changes is explained in Unit IV.C.
Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue. . . .”
Consistent with FFDCA section 408(b)(2)(D), and the factors specified in FFDCA section 408(b)(2)(D), EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for acetamiprid including exposure resulting from the tolerances established by this action. EPA's assessment of exposures and risks associated with acetamiprid follows.
EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children.
Acetamiprid is moderately toxic in acute lethality studies via the oral route of exposure and is minimally toxic via the dermal and inhalation routes of exposure. It is not an eye or skin irritant, nor is it a dermal sensitizer. Acetamiprid does not appear to have specific target organ toxicity. Generalized toxicity was observed as decreases in body weight, body weight gain, food consumption and food efficiency in all species tested. Generalized liver effects were also observed in mice and rats (hepatocellular vacuolation in rats and hepatocellular hypertrophy in mice and rats); the effects were considered to be adaptive. Other effects observed in the oral studies include amyloidosis of multiple organs in the mouse oncogenicity study, tremors in high dose females in the mouse subchronic study, and microconcretions in the kidney papilla and mammary hyperplasia in the rat chronic/oncogenicity study. No effects were observed in a dermal toxicity study in rabbits.
In the rat developmental study, fetal shortening of the 13th rib was observed in fetuses at the same dose level that produced maternal effects (reduced body weight and body weight gain and increased liver weights). In the developmental rabbit study, no developmental effects were observed in fetuses at doses that reduced maternal body weight and food consumption. In the reproduction study, decreased body weight, body weight gain, and food consumption were observed in parental animals while significant reductions in pup weights were seen in the offspring in both generations. Also observed were reduction in litter size, and viability and weaning indices among F
In the acute neurotoxicity study, male and female rats displayed decreased motor activity, tremors, walking and posture abnormalities, dilated pupils, coldness to the touch and decreased grip strength and foot splay at the highest dose tested (HDT). There was a decrease in the auditory startle response in male rats at the HDT in the developmental neurotoxicity study; additionally, tremors were noted in female mice at the HDT in the subchronic feeding study.
In four week immunotoxicity studies performed in both sexes of rats and mice, no effects on the immune system were observed up to the highest dose, although significant reductions in body weight and body weight gain were noted at that dose.
Based on acceptable carcinogenicity studies in rats and mice, EPA has determined that acetamiprid is “not likely to be carcinogenic to humans.” The classification is based on (1) the absence of an increase in the incidence of tumors in a mouse carcinogenicity study; and (2) in a rat chronic/carcinogenicity study, the absence of a dose-response and the lack of a statistically significant increase in the mammary adenocarcinoma incidence by pair-wise comparison of the mid- and high- dose groups with the controls (although the incidence exceeded the historical control data from the same laboratory, it was within the range of values from the supplier). There was no clear evidence of a mutagenic effect. Acetamiprid tested positive as a clastogen in an
Specific information on the studies received and the nature of the adverse effects caused by acetamiprid as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies can be found at
Once a pesticide's toxicological profile is determined, EPA identifies toxicological points of departure (POD) and levels of concern to use in evaluating the risk posed by human exposure to the pesticide. For hazards that have a threshold below which there is no appreciable risk, the toxicological POD is used as the basis for derivation of reference values for risk assessment. PODs are developed based on a careful analysis of the doses in each toxicological study to determine the dose at which no adverse effects are observed (the NOAEL) and the lowest dose at which adverse effects of concern are identified (the LOAEL). Uncertainty/safety factors are used in conjunction with the POD to calculate a safe exposure level—generally referred to as a population-adjusted dose (PAD) or a reference dose (RfD)—and a safe margin
A summary of the toxicological endpoints for acetamiprid used for human risk assessment is shown in Table 1 of this unit.
1.
i.
ii.
iii.
iv.
2.
Based on the First Index Reservoir Screening Tool (FIRST) and Screening Concentration in Ground Water (SCI–GROW) models, the estimated drinking water concentrations (EDWCs) of acetamiprid for acute exposures are estimated to be 95.2 parts per billion (ppb) for surface water and 0.035 ppb for ground water and for chronic exposures are estimated to be 26.6 ppb for surface water and 0.035 ppb for ground water.
Modeled estimates of drinking water concentrations were directly entered into the dietary exposure model. For acute dietary risk assessment, the water concentration value of 95.2 ppb was used to assess the contribution to drinking water. For chronic dietary risk assessment, the water concentration of value 26.6 ppb was used to assess the contribution to drinking water.
3.
Acetamiprid is currently registered for the following uses that could result in residential exposures: Indoor and outdoor residential settings, including crack and crevice and mattress treatments. EPA assessed residential exposure using the following assumptions: Exposure for adults (from short-term dermal and inhalation exposure) applying crack and crevice and mattress treatments; and post-application exposure for adults (from short- and intermediate-term dermal and inhalation exposure) and for children 3–6 years old (from short- and intermediate-term dermal, inhalation and hand-to-mouth exposure) following crack and crevice and mattress treatments.
In the previous risk assessment for acetamiprid, EPA had concluded that a subchronic inhalation study was required, and an additional 10X FQPA factor was retained as a database uncertainty factor, which raised the LOC to 1,000 for inhalation scenarios. Because the LOC values were different (i.e. dermal and oral LOC = 100, while inhalation LOC = 1,000) the respective risk estimates were combined using the aggregate risk index (ARI) approach. Since then, however, this conclusion was reevaluated based on a request from the registrant, and EPA has now concluded that this study is not required. Please refer to section D.3.i for further details on this inhalation study requirement conclusion. Therefore, the risk estimates utilize the combined MOE approach, as opposed to the ARI approach.
Further information regarding EPA standard assumptions and generic inputs for residential exposures may be found at
4.
EPA has not found acetamiprid to share a common mechanism of toxicity with any other substances, and acetamiprid does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has assumed that acetamiprid does not have a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see EPA's Web site at
1.
2.
3.
i. The toxicology data base is complete and acceptable guideline studies for developmental, reproductive toxicity, neurotoxicity (including DNT) and immunotoxicity are available.
In determining the need for a subchronic inhalation study, EPA's weight of evidence decision process included both hazard and exposure considerations as well as incorporation of a presumed 10X Database Uncertainty Factor (UFdb) for the lack of this study. Thus, the Agency's Level of Concern in the weight of the evidence evaluation for inhalation exposure risk assessment is a Margin of Exposure (MOE) of 1,000, which includes the 10X inter-species extrapolation factor, 10X intra-species variation factor, and the 10X UFdb. The Agency had previously determined that the required 21/28-day inhalation study in rats was needed to address data uncertainties related to potential inhalation risk primarily associated with occupational exposure, which presented the scenarios with the highest potential inhalation exposure. After reconsideration, EPA has determined that the inhalation study is no longer required, primarily because exposure levels are expected to be lower than
ii. Acetamiprid produced signs of neurotoxicity in the high dose groups in the acute and developmental neurotoxicity studies in rats and the subchronic toxicity study in mice. However, no neurotoxic findings were reported in the subchronic neurotoxicity study in rats. Additionally, there are clear NOAELs identified for the effects observed in the toxicity studies. The doses and endpoints selected for risk assessment are protective and account for all toxicological effects observed in the database.
iii. No quantitative or qualitative evidence of increased susceptibility of fetuses to
iv. The exposure databases (dietary food, drinking water, and residential) are complete and the risk assessment for each potential exposure scenario includes all metabolites and/or degradates of concern and does not underestimate the potential risk to infants or children. The dietary exposure assessments were based on tolerance level residues and assumed 100 PCT. Empirical processing factors were used for processed commodities unless such data were not available, in which case the Dietary Exposure Evaluation Model (DEEM) default processing factors were used. EPA made conservative (protective) assumptions in the ground water and surface water modeling used to assess exposure to acetamiprid in drinking water. EPA used similarly conservative assumptions to assess postapplication exposure of children as well as incidental oral exposure of toddlers. These assessments will not underestimate the exposure and risks posed by acetamiprid.
EPA determines whether acute and chronic dietary pesticide exposures are safe by comparing aggregate exposure estimates to the aPAD and cPAD. For linear cancer risks, EPA calculates the lifetime probability of acquiring cancer given the estimated aggregate exposure. Short-, intermediate-, and chronic-term risks are evaluated by comparing the estimated aggregate food, water, and residential exposure to the appropriate PODs to ensure that an adequate MOE exists.
1.
2.
3.
Using the exposure assumptions described in this unit for short- and intermediate-term exposures, EPA has concluded the combined short- and intermediate-term food, water, and residential exposures result in aggregate MOEs of 330 for adults and 120 for children. Because EPA's level of concern for acetamiprid is an MOE of 100 or below, these MOEs are not of concern.
4.
5.
Adequate enforcement methodology Liquid chromotagraphy with tandem mass spectrometry (LC–MS/MS), Method #KP–216R0 and its variant #KP–216R1 is available to enforce the tolerance expression. The method may be requested from: Chief, Analytical Chemistry Branch, Environmental Science Center, 701 Mapes Rd., Ft. Meade, MD 20755–5350; telephone number: (410) 305–2905; email address:
In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4). The Codex Alimentarius is a joint United Nations Food and Agriculture Organization/World Health Organization food standards program, and it is recognized as an international food safety standards-setting organization in trade agreements to which the United States is a party. EPA may establish a tolerance that is different from a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain the reasons for departing from the Codex level.
There are currently no established Codex MRLs for acetamiprid on sweet corn. There are Codex MRLs on livestock commodities, with the revised livestock tolerances for the U.S. being higher than the Codex values. Given the
For citrus, dried pulp, based on a review of the residue data, the Agency has determined that a revised citrus pulp tolerance is not needed and that the existing tolerance of 1.2 ppm is adequate.
Therefore, tolerances are established for residues of acetamiprid, (1
This final rule establishes tolerances under FFDCA section 408(d) in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993). Because this final rule has been exempted from review under Executive Order 12866, this final rule is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997). This final rule does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501
Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
This final rule directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000) do not apply to this final rule. In addition, this final rule does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1501
This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA) (15 U.S.C. 272 note).
Pursuant to the Congressional Review Act (5 U.S.C. 801
Environmental protection, Administrative practice and procedure, Agricultural commodities, Pesticides and pests, Reporting and recordkeeping requirements.
Therefore, 40 CFR part 180 is amended as follows:
21 U.S.C. 321(q), 346a and 371.
The additions and revisions read as follows:
(a)(1) * * *
(a)(2) * * *
Environmental Protection Agency (EPA).
Correcting amendments.
EPA issued a final rule in the
This final rule correction is effective June 19, 2013.
The docket for this action, identified by docket identification (ID) number EPA–HQ–OPP–2011–0780, is available at
Heather Garvie, Registration Division, (7505P), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington DC 20460–0001; telephone number: (703) 308–0034; email address:
The Agency included in the final rule a list of those who may be potentially affected by this action.
EPA is correcting the CFR section number assigned to the pesticide tolerance for triforine, which was published in the
Section 553 of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)(3)(B)) provides that, when an agency for good cause finds that notice and public procedure are impracticable, unnecessary, or contrary to the public interest, the agency may issue a final rule without providing notice and an opportunity for public comment. EPA has determined that there is good cause for making this technical correction final without prior proposal and opportunity for comment, because this is merely a change in section number and is not a substantive change. EPA finds that this constitutes good cause under 5 U.S.C. 553(b)(3)(B).
A discussion of statutory and Executive Order Review was included in the original document published on May 29, 2013.
Pursuant to the Congressional Review Act (5 U.S.C. 801
Environmental protection, Administrative practice and procedure, Agricultural commodities, Pesticides and pests, Reporting and recordkeeping requirements.
Therefore, 40 CFR part 180 is corrected as follows:
21 U.S.C. 321(q), 346a and 371.
Federal Communications Commission.
Final rule.
In this document the Commission modifies on its own motion the rules adopted in this proceeding regarding transfer and assignment of experimental licenses of its rules. Upon reflection, the Commission found it in the public interest to specifically prohibit the transfer of program, medical testing, and compliance testing experimental radio licenses, while continuing to permit conventional experimental authorizations to be transferred with the written approval of the Commission. There is an inconsistency between the adopted rule and this prohibition, which is resolved by clearly prohibiting such transfers. In making this rule modification, it is noted that the rules provide options for entities to obtain an experimental license to ensure continuation of all experiments without lapse including those being conducted under a program, medical testing, and compliance testing license. Thus, this action will result in no harm to any qualified license applicant or licensee.
This rule requires approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA), and will become effective after the Commission publishes a notice in the
Rodney Small, Office of Engineering and Technology, 202–418–2452,
This is a summary of the Commission's
1. In this
2. In the
3. In the
4. Upon reflection, the Commission finds it in the public interest to modify § 5.79 to specifically prohibit the transfer of program, medical testing, and compliance testing experimental radio licenses, while continuing to permit conventional experimental authorizations to be transferred with the written approval of the Commission. As an initial matter, the Commission observes that the text of the
5. The Commission concluded that, based on the nature of the program, medical testing, and compliance licenses, transfer of these licenses should not be permitted. These new ERS licenses, which afford some important advantages relative to the conventional ERS license—including significantly more flexibility to undertake a broad range of experiments under a single authorization—also impose additional requirements on applicants of these new licenses, requirements that reflect that these licenses are more tailored to the unique characteristics of the particular licensed entity than is the case with conventional experimental licenses. For example, unlike the eligibility requirements for conventional licenses, which require only that licensees be “qualified to conduct the types of operations permitted in § 5.3 of this part . . . , ” these new ERS licenses are limited to specialized organizations and institutions. Specifically, program experimental licenses are available only to “colleges, universities, research laboratories, manufacturers of radio frequency equipment, manufacturers that integrate radio frequency equipment into their end products, and medical research institutions;” medical testing licenses are available only to “hospitals and health care institutions that demonstrate expertise in testing and operation of experimental medical devices that use wireless telecommunications technology or communications functions in clinical trials for diagnosis, treatment, or patient monitoring;” and compliance testing licenses are available only to “laboratories recognized by the FCC under subpart J of this chapter to perform (i) product testing of radio frequency equipment, and (ii) testing of radio frequency equipment in an Open Area Test Site.” Program and medical testing licensees must also meet additional requirements concerning responsible party, public notification, and safety of the public to ensure that harmful interference to other licensed radio services is not caused by program and medical testing experiments. These factors necessitate a greater level of review of the specific attributes of the applicant and the details of the experimentation plans than the Commission undertakes when evaluating applications pertaining to a conventional license, and much of this additional information is not normally provided on a transfer application. Thus, it would be difficult for the Commission to ascertain if the transferee has the necessary knowledge, expertise, and internal controls required by the rules without introducing significant complexity to our existing transfer process (comparable to that required for initial licensing).
6. In addition, unlike a conventional ERS license, which conveys a narrowly defined right to operate a single experiment in a specific frequency band at specific locations, program and medical testing licenses will convey broad rights to operate multiple experiments in a variety of frequency bands at a single location under the licensee's control. It is only after the license grant that the exact characteristics of the experiment are revealed via a publicly accessible web-based registration system. In addition, the rules require a minimum period of 10 days between the registration and the commencement of the experiment for public comment. Because a program and medical testing license authorizes ongoing experimentation only at specified locations that the licensee controls, a transfer of these licenses to another party who would likely be at another location is problematic and could deprive interested parties who are concerned about potential interference of the ability to raise such concerns prior to experimentation. Moreover, compliance testing licenses convey additional flexibility beyond that provided for program and medical testing licenses. Specifically, the Commission notes that compliance testing licenses may operate on any frequency (including in restricted bands) and are not subject to the web-based prior notification requirement. Therefore, it does not find that there would be the same kind of significant public benefit in allowing any of these new licenses to be transferred as there is under some circumstances for conventional experimental licensees.
7. Finally, the Commission notes that there are practical options to ensure the continuation of an experiment being conducted under a program, medical testing, or compliance testing license in the event of a change in ownership or control of the licensee. First, an experimenter may obtain a conventional license for the particular experiment. Or, with advance planning, the new owner, assuming it is duly qualified, may apply for and obtain one of the new licenses and complete the advance registration requirement prior to taking over the experimentation (either before or after the change in ownership or control of the licensee). And, as indicated, if the Commission were to allow assignments or transfers of these new forms of experimental license, the detail of the submissions and level of scrutiny that would be required—due to the nature of the operations conducted under such licenses—would not differ significantly from that which is required for obtaining an initial license. Thus, the Commission believes that modifying the rule to explicitly prohibit transfer of program, medical testing, and compliance testing licenses will result in no harm to any qualified license applicant or licensee.
8. The Regulatory Flexibility Act (RFA)
9. Indeed, no party provided any comments indicating either that a bar on such transactions would have any adverse effects or that permitting such transfers would provide any benefits. The Commission will send a copy of this Order, including this certification, to the Chief Counsel for Advocacy of the Small Business Administration.
10. The Commission will send a copy of this Order on Reconsideration in a report to Congress and the Government Accountability Office pursuant to the Congressional Review Act,
11. Pursuant to sections 4(i), 301, and 303 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 301, and 303, and §§ 1.1 and 1.108 of the Commission's rules, 47 CFR 1.1 and 1.108, this Order on Reconsideration
12. Section 5.79 of the Commission's rules, 47 CFR
Radio, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble the Federal Communications Commission amends 47 CFR part 5 as follows:
Secs. 4, 302, 303, 307, 336 48 Stat. 1066, 1082, as amended; 47 U.S.C. 154, 302, 303, 307, 336. Interpret or apply sec. 301, 48 Stat. 1081, as amended; 47 U.S.C. 301.
(a) A station authorization for a conventional experimental radio license, the frequencies authorized to be used by the grantee of such authorization, and the rights therein granted by such authorization shall not be transferred, assigned, or in any manner either voluntarily or involuntarily disposed of, unless the Commission decides that such a transfer is in the public interest and gives its consent in writing.
(b) A station authorization for a program, medical testing, or compliance testing experimental radio license, the frequencies authorized to be used by the grantees of such authorizations, and the rights therein granted by such authorizations shall not be transferred, assigned, or in any manner either voluntarily or involuntarily disposed of.
Federal Communications Commission.
Final rule.
In this document, the Federal Communications Commission (Commission) establishes a limited technical trial of direct access to numbers. Specifically, it grants Vonage Holdings Corporation (Vonage) and other interconnected VoIP providers that have pending petitions for waiver of the Commission's rules and that meet the terms and conditions outlined a limited, conditional waiver to obtain a small pool of telephone numbers directly from the NANPA and/or the PA for use in providing interconnected VoIP services. We tailor this waiver to test whether giving interconnected VoIP providers direct access to numbers will raise issues relating to number exhaust, number porting, VoIP interconnection, or intercarrier compensation, and if so, how those issues may be efficiently addressed. The trial, and the public comment, will improve the
Effective June 19, 2013, and is applicable beginning April 18, 2013.
Federal Communications Commission, 445 12th Street SW., Washington, DC 20554.
Marilyn Jones, Wireline Competition Bureau, Competition Policy Division, (202) 418–1580, or send an email to
This is a summary of the Commission's Order in WC Docket Nos. 13–97, 04–36, 07–243, 10–90 and CC Docket Nos. 95–116, 01–92, 99–200, FCC 13–51, adopted and released April 18, 2013. The full text of this document is available for public inspection during regular business hours in the FCC Reference Information Center, Portals II, 445 12th Street SW., Room CY–A257, Washington, DC 20554. The document may 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 at
1. In the Order, the Commission establish a limited trial of direct access to numbers. We grant Vonage and other interconnected VoIP providers that have pending petitions for waiver of § 52.15(g)(2)(i) of the Commission's rules, and that meet the terms and conditions outlined below, a time-limited waiver, subject to a number of conditions and limitations, to obtain a small pool of telephone numbers directly from the administrators for use in providing IP services, including VoIP services, on a commercial basis to residential and business customers.
2. We grant this waiver to permit us to conduct a trial to help inform our decision on whether, and if so how, the Commission should amend the rules to allow interconnected VoIP providers to obtain telephone numbers directly. During the trial, Vonage and other participants will be subject to monthly reporting requirements that will be made public to provide an opportunity for the state commissions, industry and general public to comment. Moreover, we make clear that providers participating in the trial may be required to return numbers to a LEC partner if problems arise. With these safeguards, and subject to the conditions described below, we expect that the narrowly tailored trial will provide valuable technical insight for the Commission to assess whether amending our rules to provide direct access to numbers routinely will raise issues relating to number exhaust, number porting, VoIP interconnection, and intercarrier compensation, and if so, how those issues may be efficiently addressed. Within 45 days of completion of the trial, the Bureau will report to the Commission on the results of the trial. The report will be placed in the record and state commissions, the industry and general public will have 30 days to provide comments on the report.
3. We limit this trial to VoIP providers that have already sought waivers to obtain direct access to numbers. With the exception of Vonage, those providers have not specifically committed to comply with the terms or conditions set forth below. The waiver we grant is not a blanket waiver, as Vonage and other VoIP providers requested. Rather, it is circumscribed in a variety of ways described herein. We expect that we could obtain useful information from a trial involving additional VoIP providers, however. For example, different providers might highlight unique problems or develop solutions to problems that would assist us in crafting final rules. Therefore, other interconnected VoIP providers that have pending petitions for waiver of § 52.15(g)(2)(i) of the Commission's rules may participate on the same terms and conditions and proportionate scale as Vonage so long as they file a proposal with the Wireline Competition Bureau and proceed on the same schedule as Vonage does. There are a substantial number of pending waiver requests, which will give us adequate opportunity to trial a variety of factual scenarios. Because these petitions have been pending for months or years, we believe that all potentially interested providers have had ample time to request a waiver. We therefore limit this grant to pending petitioners. Moreover, the Commission has provided and received comment on those waiver petitions. Thus interested parties have had an opportunity to comment about specific petitioners. The Bureau may reject any proposal from a provider that is “red-lighted” by the Commission, is out of compliance with any Commission obligation to which it is subject, or is otherwise determined to pose a risk to consumers that is not outweighed by the benefits of permitting the VoIP provider to participate in the trial.
4. In the Order, we also grant TCS, a provider of VPC service, a narrow waiver to allow it to obtain p-ANI codes directly from the RNA for the purpose of providing 911 and E911 service, in states where TCS is unable to obtain certification because TCS has either been denied certification or can demonstrate that a state does not certify VPC providers.
5. On March 5, 2005, Vonage filed a petition requesting a waiver of § 52.15(g)(2)(i) of the Commission's rules so that it may obtain from the numbering administrator telephone numbers to use in deploying IP-enabled services, including VoIP services, on a commercial basis to residential and business customers. Vonage requested a waiver until the Commission adopts final numbering rules in the
6. Vonage renewed its request on March 8, 2011, noting that the opportunities to provide consumers with advanced features and services continue to grow and maintaining that its request is consistent with the Commission's approach to numbering and porting obligations for interconnected VoIP providers. On November 11, 2011, Vonage supplemented its request and offered to satisfy additional conditions.
7. We find that good cause exists to grant Vonage and other interconnected VoIP providers with pending petitions a limited, conditional waiver of § 52.15(g)(2)(i) to permit them to obtain telephone numbers directly from the number administrator, subject to the conditions set forth in the
8. Several competitive LECs including Bandwidth.Com, Voice Services, and Level 3 Communications, LLC (“CLEC Participants”) urge the Commission not to grant a waiver or conduct a trial concurrent with the rulemaking. They assert that it is inappropriate to conduct such a trial before the Commission has made a finding that “it is good policy to provide numbers to non-carriers” or has established rules that will protect consumers and other companies. We disagree. The record on access to numbers contains questions on a host of technical issues, and the trial we establish here will provide critical information as we consider the questions raised in this Notice. Delaying the trial until after the NPRM has been completed would needlessly delay resolution of these issues.
9. We tailor the trial to provide a circumscribed and informative test case that will allow the Commission to identify any problems and create industry-wide rules to address such issues. We therefore limit the duration and geographic scope of the trial. We also impose on Vonage (and other interconnected providers with pending petitions) a number of conditions that are similar to conditions we are exploring in the rulemaking. These conditions are thus designed not only to protect the public interest but to maximize the probative value of the trial and help us identify the terms and conditions under which we might expand direct access to numbers.
10.
11. First, under the trial, Vonage may obtain up to (1) twenty 1,000-blocks of new numbers in pooling rate centers or LATAs, or (2) nineteen 1,000-blocks in pooling rate centers or LATAs and one 10,000-block in a non-pooling rate center or LATA. Vonage can use these blocks of new numbers to sign up a new customer that is changing providers or to give a number to a customer does not yet have a number. In addition, up to 125,000 numbers may be reassigned from Vonage's CLEC partners directly to Vonage. This will enable Vonage to test porting processes for existing and new customers, as well as trial the process for assigning numbers to non-ported customers. By design, these numerical limits will also limit the geographic scope of the trial for Vonage. Other providers interested in participating in the trial may obtain a quantity of numbers proportionate to their overall scale. Trial participants other than Vonage may obtain direct access to numbers to port up to five percent of their interconnected VoIP service customers as of the date of the release of this order. The limits we impose on Vonage represent less than 5 percent of its existing numbers, and approximately 5 percent of its total subscribers.
12. Second, Vonage must submit to the Wireline Competition Bureau and each relevant state commission a numbering proposal within 30 days of the release of this order. That proposal must (1) Include a certification that Vonage will comply with the terms and conditions of this waiver, (2) identify the rate centers or LATAs in which it wishes to have numbers directly assigned to it, and note how many numbers in each rate center or LATA it proposes to receive as new numbers and how many it proposes to port in from existing or new customers, and (3) describe the phase-in process to implement the trial.
13. Third, the trial will remain in effect for six months from the date when Vonage receives Bureau approval of its proposal to the Bureau. At the end of that time, the trial will expire and Vonage may not obtain direct access to additional numbers under this time-limited waiver. We note that the expiration of the waiver alone does not
14. Fourth, to permit states, the public, and the Commission to monitor the impact of the trial, Vonage must file monthly reports beginning 60 days after Vonage requests direct access to numbers from a numbering administrator. These reports must include: (1) the total of new numbers placed in service by Vonage; (2) Vonage's total number of port-in requests (including existing Vonage customers as well as newly won customers), and the percentage of successful ports-in; (3) the number of requests to port out from Vonage a number that it holds directly rather than through a CLEC partner, and the percentage of successful ports-out; (4) the total number of routing failures, along with the causes of those failures; and (5) a description of any billing or compensation disputes. These reports will be public, and entered into the record of the attached NPRM to provide an opportunity for public comment.
15. We find that these limitations appropriately balance our goal of obtaining useful, real-world data without prejudging the questions raised above regarding industry-wide changes. Finally, we establish safeguards in the event the Commission has concerns that Vonage's actions during this trial are inconsistent with our rules, policies, or the conditions set forth herein. Specifically, under such circumstances, immediately upon a directive from the Commission (or the Wireline Competition Bureau) Vonage must make arrangements to port to a carrier numbering partner any numbers already in use by customers, promptly and in a manner that does not disrupt service to consumers or other providers and to return to the number administrators any numbers not yet in use by customers. For numbers already assigned to end users, we require Vonage to port those numbers to a carrier that can obtain numbers directly from the administrators.
16.
17. In addition to committing to comply with the requirements of the
18. In addition to the above conditions proposed by Vonage, some state commissions recommended additional conditions to ensure efficient use of telephone numbers. We agree that many of those conditions will help protect the efficient use of valuable, and limited, numbers, and will help our assessment of whether and how to modify our rules governing access to numbers. Accordingly, we require Vonage to comply with the following conditions: (1) Provide the relevant State commission with regulatory and numbering contacts when it requests numbers in that State; (2) consolidate and report all numbers under its own unique Operating Company Number (OCN); (3) provide customers with the ability to access all N11 numbers in use in a State; and (4) maintain the original rate center designation of all numbers in its inventory. Maintaining the original rate center designation is important in order to facilitate number porting requests. As noted above, Vonage is required to comply with specific reporting requirements regarding the progress of the trial. In addition, we invite parties to submit information regarding the trial. We are particularly interested in the experiences of customers and service providers that are directly affected by Vonage receiving direct access to numbers. Commenters should address any benefits or concerns with the trial as well as the effectiveness of the conditions. Upon completion of the trial, the Bureau will report to the Commission on the results of the trial. The report will be placed in the record and state commissions, the industry and general public may comment on the report. We will consider those comments when we evaluate the trial and develop rules with respect to expanding access to numbers.
19. Pursuant to the parameters and the conditions set forth herein, we find that good cause exists to grant Vonage a waiver of § 52.15(g)(2)(i) of the Commission's rules in order to conduct a limited technical trial.
20. On February 20, 2007, TCS filed a petition requesting that the Commission waive § 52.15(g)(2)(i) of our rules and find that TCS, as a provider of VPC service, is an eligible user of p-ANI codes without having to demonstrate that it is certified in all 50 states.
21. In 2012, TCS refreshed the record in this proceeding and announced that it was certified as a competitive local exchange carrier in 42 states and could obtain p-ANI codes directly for use in those states. However, TCS states that it cannot obtain p-ANI codes in all states due to state certification issues. TCS lacks certification in Idaho, Colorado, Wyoming, South Dakota, South Carolina, West Virginia, Alaska, and the District of Columbia, and has an open application in Maine. TCS encountered certification questions in Iowa, Illinois, Ohio, and Arizona that directly related to the inapplicability of CLEC certification to VoIP Positioning Services. Moreover, TCS notes that it had to relinquish its inventory of p-ANI codes to Neustar as part of the Commission's move to a permanent p-ANI administrator. TCS thus cannot obtain p-ANI codes in certain states, and TCS asserts that this may result in disruptions to E911 and homeland security. It notes in particular that its difficulty obtaining codes in South Carolina “is currently causing a 911 routing disruption” in that state. TCS states that, “because it is not [a] CLEC certified in South Carolina and there is not `central 911 authority' in South Carolina from which to secure a waiver, [TCS] has been denied access to p-ANI in this area. This places TCS's customers, and their end users, in jeopardy.” TCS requests that the Commission grant a waiver so that TCS may obtain p-ANIs in states where TCS is not certified.
22. We grant TCS a limited waiver of § 52.15(g)(2)(i) of the Commission's rules so that it may obtain p-ANI codes from the RNA in South Carolina and other states where it cannot obtain certification. TCS may show that it cannot obtain state certification by demonstrating that the state does not certify VPC providers (it has already done so in South Carolina). We grant this limited waiver while the Commission considers whether § 52.15(g)(2)(i) should be modified to allow all providers of VPC service to directly access p-ANI codes.
23. This waiver is limited in duration and scope. It lasts only until the Commission addresses whether to modify § 52.15(g)(2)(i) of the rules to allow all VPC providers direct access to numbers, specifically p-ANI codes, for the purpose of providing 911 and E911 service. The waiver applies only with respect to states where TCS demonstrates that it cannot obtain p-ANI codes because it cannot obtain state certification. For example, TCS could provide the Commission with a denial from a state commission with the reason for denial being that the state does not certify VPC providers, or a statement from the state commission or its general counsel that it does not certify VPC providers. Upon such a showing, the Bureau will notify the RNA that TCS may directly access p-ANI codes in a particular state. We will consider broader relief, including options that TCS proposed, in the rulemaking. During the pendency of the rulemaking, we find good cause to grant TCS a limited waiver of § 52.15(g)(2)(i) of the Commission's rules so that it may obtain p-ANIs in those states where it cannot obtain certification.
24. The proceeding this Notice initiates shall be treated as a “permit-but-disclose” proceeding in accordance with the Commission's
25. This document does not contain proposed information collection requirements subject to the Paperwork Reduction Act of 1995, Public Law 104–13. In addition, therefore, it does not contain any proposed information collection burden for small business concerns with fewer than 25 employees, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107–198,
26. The Commission will not send a copy of this Order pursuant to the Congressional Review Act,
27.
Federal Communications Commission.
Final rule.
In this document, the Audio Division, at the request of Bowen Broadcasting, allots FM Channel 228A
Effective July 19, 2013.
Deborah Dupont, Media Bureau, (202) 418–2180.
This is a synopsis of the Commission's
Radio, Radio broadcasting.
For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 73 as follows:
47 U.S.C. 154, 303, 334, 336 and 339.
Federal Communications Commission.
Correcting amendments.
This document contains corrections to the final regulations (§ 90.1213(a)), which were published in the
Effective June 19, 2013.
Federal Communications Commission, 445 12th Street SW., Washington, DC 20554.
Thomas Eng, Policy and Licensing Division, Public Safety and Homeland Security Bureau, Federal Communications Commission, 445 12th Street SW., Washington, DC 20554, at (202) 418–0019, TTY (202) 418–7233, or via email at
The final regulations that are the subject of these corrections are the band plan for the 4940–4990 MHz band. Section 90.1203(a) was amended to change the bandwidth of Channel 14 from five megahertz to one megahertz. The table in § 90.1203(a) was amended to add a bandwidth column, which assigned a bandwidth value to each center frequency and channel number.
The
Communications equipment; Radio.
Accordingly, 47 CFR part 90 is corrected by making the following correcting amendments:
Sections 4(i), 11, 303(g), 303(r), and 332(c)(7) of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 161, 303(g), 303(r), and 332(c)(7).
(a) The following channel center frequencies are permitted to be aggregated for channel bandwidths of 5, 10, 15 or 20 MHz as described in paragraph (b) of this section. Channel numbers 1 through 5 and 14 through 18 are 1 MHz bandwidth channels, and channel numbers 6 through 13 are 5 MHz bandwidth channels.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Final rule; closure.
NMFS establishes 2013 quota specifications for the Atlantic bluefin tuna (BFT) fishery and closes the incidental Longline category northern and southern area fisheries for large medium and giant BFT for the remainder of 2013. These actions are necessary to implement binding recommendations of the International Commission for the Conservation of Atlantic Tunas (ICCAT), as required by the Atlantic Tunas Convention Act (ATCA), and to achieve domestic management objectives under the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act). Under the closure, fishing for, retaining, possessing, or landing BFT in the Longline category northern and southern areas is prohibited for the remainder of 2013. The Longline fishery in the Northeast Distant gear restricted area (NED) remains open at this time. The closure is necessary to prevent overharvest of the adjusted Longline category subquotas as finalized in this action.
The quota specifications are effective June 25, 2013 through December 31, 2013. The closure of the Longline category northern and southern area fisheries is effective 11:30 p.m., local time, June 25, 2013, through December 31, 2013.
Supporting documents, including a Supplemental Environmental Assessment and the Fishery Management Plans described below may be downloaded from the HMS Web site at
Sarah McLaughlin or Brad McHale, 978–281–9260.
Atlantic bluefin tuna, bigeye tuna, albacore tuna, yellowfin tuna, and skipjack tuna (hereafter referred to as “Atlantic tunas”) are managed under the dual authority of the Magnuson-Stevens Act and ATCA. As an active member of ICCAT, the United States implements binding ICCAT recommendations to comply with this international treaty. ATCA authorizes the Secretary of Commerce (Secretary) to promulgate regulations, as may be necessary and appropriate to carry out ICCAT recommendations. The authority to issue regulations under the Magnuson-Stevens Act and ATCA has been delegated from the Secretary to the Assistant Administrator for Fisheries, NMFS.
NMFS annually implements BFT quota specifications to adjust the annual U.S. baseline BFT quota to account for any underharvest or overharvest of the adjusted U.S. BFT quota from the prior year.
In May 2011, NMFS prepared an Environmental Assessment (EA)/Regulatory Impact Review/Final Regulatory Flexibility Analysis for a final rule that: (1) Implemented and allocated the U.S. BFT quota recommended by ICCAT for 2011 and for 2012 (ICCAT Recommendation 10–03); (2) adjusted the 2011 U.S. quota and subquotas to account for unharvested 2010 quota allowed to be carried forward to 2011, and to account for a portion of the estimated 2011 dead discards up front; and (3) implemented several other BFT management measures (76 FR 39019, July 5, 2011). In that final rule, NMFS implemented the 923.7-mt baseline quota consistent with ICCAT Recommendation 10–03 and set the domestic BFT fishing category subquotas per the allocation percentages established in the 2006 Consolidated HMS FMP and implementing regulations (71 FR 58058, October 2, 2006). The baseline quota and category subquotas are codified and remain effective until changed (for instance, if any new ICCAT BFT Total Allowable Catch (TAC) recommendation is adopted).
At its 2012 annual meeting, ICCAT recommended a one-year rollover of the 1,750-mt TAC as part of ICCAT Recommendation 12–02—Supplemental Recommendation by ICCAT concerning the Western Atlantic Bluefin tuna Rebuilding Program. This amount is expected to allow for continued stock growth under both the low and high stock recruitment scenarios, considering the 2012 ICCAT BFT stock assessment results, which were not substantively different than those of an assessment that ICCAT conducted in 2010. The annual U.S. baseline quota for 2013 continues to be 923.7 mt, and the annual total U.S. quota, including 25 mt to account for bycatch related to pelagic longline fisheries in the NED, continues to be 948.7 mt.
Although it is unnecessary to prepare an EA for quota specifications alone (in accordance with the approach described in the 2006 Consolidated HMS FMP), NMFS has prepared a Supplemental EA to present and analyze updated information regarding the affected environment, including information from a 2012 ICCAT stock assessment for BFT, among other things.
Until the final specifications for 2013 are effective, the existing BFT base quotas continue to apply as codified. (See Table 1, second column.) Although the baseline quota is unchanged this year because the 2012 ICCAT recommendation included the same TAC as the prior recommendation, NMFS is carrying forward underharvest from 2012, consistent with the 2006 Consolidated HMS FMP. Thus, this final action adjusts the quota as appropriate and allowable for the 2013 fishing year. Further background information, including the need for the 2013 BFT quota specifications, was provided in the preamble to the proposed rule (78 FR 21584, April 11, 2013) and is not repeated here.
NMFS determines the amount of BFT quota actually available for the year by adjusting the ICCAT-recommended baseline BFT quota for overharvest or underharvest from the previous fishing year and any accounting for dead discards. For the proposed rule, NMFS used the 2011 estimate of 145.2 mt as a proxy for potential 2013 dead discards, because the BFT dead discard estimate for 2012 was not yet available. In late May 2013, the preliminary 2012 dead discard estimate of 239.5 mt became available from the NMFS Southeast Fisheries Science Center. As anticipated and explained to the public at the proposed rule stage, NMFS is using the more recent dead discard estimate in this final rule because it is the best available and most complete information NMFS has regarding dead discards.
Based on preliminary data available as of May 31, 2013, BFT landings in 2012 totaled 713.2 mt. Adding the 2012 dead discard estimate (239.5 mt) results in a preliminary 2012 total catch of 952.7 mt, which is 90.9 mt less than the amount of quota (inclusive of dead
As anticipated in the proposed rule, NMFS is accounting up front (i.e., at the beginning of the fishing year) for half of the expected dead discards for 2013, using the best available estimate of dead discards (now the 2012 estimate received as of May 31, 2013), and deducting that portion directly from the Longline category subquota. This is the same approach that NMFS took for the final 2011 and 2012 BFT quota specifications.
Regarding the unharvested 2012 BFT quota, NMFS had proposed to carry 94.9 mt of available underharvest forward to 2013, and distribute half of that amount to the Longline category and half to the Reserve category. NMFS stated that any necessary adjustments to the 2013 specifications would be made in the final rule after considering updated 2012 landings information and the 2012 dead discard estimate. NMFS also stated that it could allocate the amount carried forward in another manner after considering domestic management needs for 2013.
Considering the best available information regarding 2012 landings and dead discards—as well as actual 2013 Longline category BFT landings to date—NMFS is finalizing the 2013 BFT specifications as follows. As shown in the third column of Table 1, NMFS is accounting for half of the 2012 dead discard estimate of 239.5 mt (i.e., 119.75 mt) up front by deducting that portion of estimated longline discards directly from the baseline Longline category subquota of 74.8 mt. If NMFS deducts one half of the dead discard estimate from the Longline category subquota and provide half of the available underharvest, the result is a 2013 adjusted Longline category subquota of less than 1 mt (74.8 mt −119.75 mt + 45.45 mt = 0.5 mt). Therefore, NMFS has decided in the final rule to add all of the 2012 underharvest that can be carried forward to 2013 (i.e., 90.9 mt) to the Longline category (fourth column). Thus, the adjusted Longline category subquota would be 74.8 mt − 119.75 mt + 90.9 mt = 46 mt (not including the separate 25-mt allocation for the Northeast Distant gear restricted area). In these specifications, NMFS is balancing the need of the pelagic longline fishery to continue fishing for swordfish and Atlantic tunas with the need of directed bluefin fisheries participants to receive their base quota.
In the proposed rule, NMFS stated that any necessary adjustments to the 2013 specifications would be made in the final rule after considering updated 2012 landings information and the dead discard estimate for 2012. NMFS requested public comment and consideration of the possibility that deduction of half of the final estimate of dead discards from the baseline Longline category subquota could result in little to no quota for the Longline category for 2013 prior to application of any available underharvest, as well as the possibility that NMFS may close the Longline category fishery to BFT retention based on codified quotas and account fully for landings to date in the final specifications, as occurred in 2012 (
In this final rule NMFS deducts half of the 2012 dead discard estimate of 239.5 mt directly from the baseline Longline category quota of 74.8 mt and applies the full 90.9 mt allowed to be carried forward to 2013 to the Longline category. This action results in a 46-mt adjusted Longline subquota, not including the 25-mt allocation set aside by ICCAT for the NED (i.e., 74.8 mt − 119.75 mt + 90.9 mt = 46 mt). For the directed fishing categories (i.e., the Angling, General, Harpoon, Purse Seine categories), as well as the Trap and Reserve categories, NMFS maintains the codified baseline BFT quotas and subquotas that were established in July 2011 (76 FR 39019, July 5, 2011), as proposed.
Thus, in accordance with ICCAT Recommendation 12–02, the domestic category allocations established in the 2006 Consolidated HMS FMP, and regulations regarding annual adjustments at 50 CFR 635.27(a)(10), NMFS establishes BFT quota specifications for the 2013 fishing year as follows, and as shown in the fifth column of Table 1: General category—435.1 mt; Harpoon category—36 mt; Purse Seine category—171.8 mt; Angling category—182 mt; Longline category—46 mt; and Trap category—0.9 mt. The Longline category quota of 46 mt is subdivided as follows: 18.4 mt to pelagic longline vessels landing BFT north of 31° N. latitude, and 27.6 mt to pelagic longline vessels landing BFT south of 31° N. latitude. NMFS accounts for landings under the 25-mt NED allocation separately from other Longline category landings. The amount allocated to the Reserve category for inseason adjustments, scientific research collection, potential overharvest in any category except the Purse Seine category, and potential quota transfers, is 23.1 mt.
As described in the proposed rule, NMFS considers the deduction of half of the dead discard estimate from the Longline category as a transition from the method used for 2007 through 2010, as NMFS continues to develop Draft Amendment 7 to the 2006 Consolidated HMS FMP. Draft Amendment 7 to the 2006 Consolidated HMS FMP will explore related BFT fishery management issues consistent with the need to end overfishing and rebuild the stock. NMFS anticipates that measures in Draft Amendment 7 will address several of the long-standing challenges facing the fishery and will examine, among other things, revisiting quota allocations; reducing and accounting for dead discards; adding or modifying time/area closures or gear-restricted areas; and improving the reporting and monitoring of dead discards and landings in all categories. NMFS anticipates that Draft Amendment 7 will publish in 2013.
NMFS received a total of 13 written comments to the proposed rule. There were no participants at the two public hearings in Gloucester, MA, and Silver Spring, MD. Few of the comments NMFS received focused specifically on the proposed quota specifications, and those comments supported the proposed adjustment of the 2013 baseline BFT quota and subquotas. Below, NMFS summarizes and responds to all comments made specifically on the proposed rule during the comment period. Most of the comments received were outside the scope of this rule and are summarized under “Other Issues” below.
Through Amendment 7, NMFS is considering how best to reduce and account for BFT dead discards, as well as methods to improve reporting and monitoring of discards and landings.
In addition to the few comments specifically on the content of the proposed rule, all 13 written comments raised issues beyond the scope of this rule, regarding HMS management measures generally and the quota allocations in the 2006 Consolidated HMS FMP. Specifically, commenters articulated: concern about the division of the U.S. baseline quota, and stated that priority allocation should be to full-time commercial fish harvesters; concern that the volume of dead discards is negatively impacting directed BFT fishery participants; support for eliminating “regulatory” dead discards and increasing quota use within a fishing year, including year-end transfer of unused quota to a “discard reserve” and more liberal target catch requirements in the NED; support for allocating sufficient quota to cover incidental discards first; concern about recreational landings estimates and fishery monitoring; support for greater opportunities to land trophy BFT; concern about the complexity of the exempted fishing permit process and its effect on biological sampling; and support for changes in U.S. policies regarding ICCAT, including BFT quota negotiations. NMFS anticipates that Amendment 7 to the 2006 Consolidated HMS FMP in 2013 will address many of the issues raised in comments that were outside the scope of the 2013 BFT quota specifications.
Under § 635.27(a)(3), the total amount of large medium and giant BFT (measuring 73 inches (185 cm) curved fork length (CFL) or greater) that may be caught incidentally and retained, possessed, or landed by vessels that possess Longline category Atlantic Tunas permits is 8.1 percent of the baseline annual U.S. BFT quota. NMFS may allocate no more than 60 percent of the Longline category incidental BFT quota for landing in the area south of 31°00′ N. lat. (i.e., the “southern area”), with the remainder allocated for landing in the area north of 31°00′ N. lat. (i.e., the “northern area”). As described above, this final action adjusts the Longline category baseline BFT quota to 46 mt, with 18.4 mt allocated to the northern area, and 27.6 mt allocated to the southern area.
In addition to the Longline category quota of 46 mt, 25 mt are allocated, consistent with ICCAT Recommendation 12–02, for incidental catch of BFT by pelagic longline vessels fishing in the NED, an area far offshore the northeastern United States. The NED is the Atlantic Ocean area bounded by straight lines connecting the following coordinates in the order stated: 35°00′ N. lat., 60°00′ W. long.; 55°00′ N. lat., 60°00′ W. long.; 55°00′ N. lat., 20°00′ W. long.; 35°00′ N. lat., 20°00′ W. long.; 35°00′ N. lat., 60°00′ W. long. NMFS accounts for landings under the 25-mt NED allocation separately from other Longline category landings.
Under § 635.28(a)(1), NMFS is required to file a closure notice with the Office of the Federal Register when a BFT quota is reached or is projected to be reached. On and after the effective date and time of such notification, for the remainder of the fishing year, or for a specified period as indicated in the notification, fishing for, retaining,
Based on the best available landings information for the incidental Longline category BFT fishery (i.e., 16.2 mt in the northern area and 27.1 mt in the southern area as of May 31, 2013), NMFS projects that the Longline category northern and southern area BFT subquotas will be reached by the effective date of this action. Given the extended duration of longline fishing trips, NMFS has determined that a closure of the Longline category BFT northern area fishery (other than the NED) and the southern area fishery (including the Gulf of Mexico) is warranted at this time with 7 days' advance notice. Therefore, fishing for, retaining, possessing, or landing large medium or giant BFT north and south of 31°00′ N. lat., including the Gulf of Mexico, and other than the NED, by vessels permitted in the Atlantic tunas Longline category must cease at 11:30 p.m. local time on June 25, 2013 and will be prohibited through December 31, 2013. While pelagic longline fishing for swordfish and other target species may continue in the northern and southern Longline areas, BFT may no longer be retained, possessed, or landed by longline vessels in those areas. The intent of this closure is to prevent overharvest of the Longline category northern and southern area BFT subquotas.
The incidental Longline fishery for BFT in the NED, an area far offshore the northeastern United States, remains open at this time. NMFS will continue to monitor incidental Longline category BFT landings from the NED against the 25 mt allocated for that area and may take further action, if necessary. Any subsequent adjustments to the Longline category fishery for 2013 would be published in the
The NMFS Assistant Administrator has determined that this final rule is consistent with the Magnuson-Stevens Act, ATCA, and other applicable law, and is necessary to achieve domestic management objectives under the 2006 Consolidated HMS FMP.
The Assistant Administrator for Fisheries (AA) finds good cause under 5 U.S.C. sec. 553(d)(3) to reduce the 30-day delay in effective date for the 2013 BFT quota specifications and fishery closures in this action to seven days. A reduced, 7-day delay in effectiveness will allow NMFS to close a portion of the BFT fishery based the adjusted 2013 subquotas, while allowing time to notify pelagic longline vessels that are already on the water. This delay is contrary to the public's interest, because without it, the codified BFT quota and subquotas would remain in effect, and the United States would very quickly exceed its available quota for the year in certain quota subcategories, which could create enforcement problems this year in the relevant international forum (ICCAT) and exacerbate management difficulties into next year.
Regarding the closure notice, the AA finds that it is impracticable and contrary to the public interest to provide prior notice of, and an opportunity for public comment on, the closure portion of the action for the following reasons:
Prohibiting further BFT landings against the Longline category northern and southern area subquotas is necessary to prevent overharvest of the Longline northern and southern area BFT subquotas in the final 2013 quota specifications. The 2012 dead discard estimate became available only at the end of May 2013. NMFS acted immediately following receipt of these data, in combination with the latest landings data for 2013, to determine whether additional action was needed to remain within the subcategory quotas this year, and it is only because of external circumstances (i.e., the availability of data), rather than any Agency delay, that the waiver is needed for this portion of the action. Given the extended duration of longline fishing trips, we have determined that a closure of the Longline category BFT northern area fishery (other than the NED) and the southern area fishery (including the Gulf of Mexico) is warranted at the time of the filing of the final specifications with 7 days' advance notice. NMFS provides notification of closures by publishing the notice in the
These fisheries are currently underway, and delaying this action would be contrary to the public interest as it could result in excessive BFT landings, which could have adverse effects on the stock and/or may result in future potential quota reductions for the Longline category. NMFS must close the Longline category northern and southern area fisheries to landings before large medium and giant BFT exceed the available subquotas for those areas. The quotas as adjusted in this action are consistent with HMS regulations, and are a logical outgrowth of the proposed action. The final rule distributes the available underharvest differently than proposed, but is within the range of actions we told the public was possible in the final rule and requested comment on that possibility. NMFS discussed at the proposed rule stage the possibility that NMFS may need to close the Longline category fishery to BFT retention based on codified quotas and account fully for landings to date in the final specifications, as occurred in 2012. Therefore, the regulated community reasonably could have anticipated both the resultant moderate changes in amounts and distribution and the Longline category closures.
Therefore, the AA finds good cause under 5 U.S.C. 553(b)(B) to waive prior notice and the opportunity for public comment regarding the closure portion of this action. For all of the above reasons, there is good cause under 5 U.S.C. 553(d) to reduce the 30-day delay in effectiveness of the final adjusted 2013 BFT quota specifications to 7 days.
The rule to implement the final BFT quota specifications is exempt from the procedures of E.O. 12866. The action to close the Longline category northern and southern area fisheries is being taken under §§ 635.27(a)(3) and 635.28(a)(1), and is exempt from review under E.O. 12866.
The Chief Council for Regulation of the Department of Commerce certified to the Chief Council for Advocacy of the Small Business Administration during the proposed rule stage that this action would not have a significant economic impact on a substantial number of small entities. The factual basis for the certification was published in the proposed rule and is not repeated here. No comments were received regarding this certification. As a result, a regulatory flexibility analysis was not required and none was prepared.
Section 212 of the Small Business Regulatory Enforcement Fairness Act of
16 U.S.C. 971
Federal Aviation Administration (FAA), Department of Transportation (DOT).
Notice of proposed rulemaking (NPRM).
We propose to adopt a new airworthiness directive (AD) for all Piaggio Aero Industries S.p.A Model P–180 airplanes. This proposed AD results from mandatory continuing airworthiness information (MCAI) originated by an aviation authority of another country to identify and correct an unsafe condition on an aviation product. The MCAI describes the unsafe condition as cracks at the joint between the hinge pin sub-assembly and the lock pin of the main landing gear lever hinge fitting. We are issuing this proposed AD to require actions to address the unsafe condition on these products.
We must receive comments on this proposed AD by August 5, 2013.
You may send comments by any of the following methods:
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•
•
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For service information identified in this proposed AD, contact Piaggio Aero Industries S.p.A—Airworthiness Office, Via Luigi Cibrario, 4–16154 Genova-Italy; phone: +39 010 6481353; fax: +39 010 6481881; email:
You may examine the AD docket on the Internet at
Mike Kiesov, Aerospace Engineer, FAA, Small Airplane Directorate, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone: (816) 329–4144; fax: (816) 329–4090; email:
We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued AD No. 2013–0084, dated April 5, 2013 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states:
The results of the subsequent investigation revealed that the cracks were initiated by an unforeseen friction in the MLG wheel lever sub-assembly.
This condition, if not detected and corrected, could lead to a structural failure of the MLG, possibly resulting in loss of control of the aeroplane during take-off or landing runs.
To address this potential unsafe condition, Piaggio Aero Industries (PAI) issued Service Bulletin (SB) 80–0345 to provide instructions for early identification of cracks in the MLG LHF and, in case of identification of the crack, replacement of the MLG.
For the reasons described above, this AD required inspections of the MLG LHF and, depending on findings, replacement of the MLG.
This AD is considered to be an interim action, and based on gathered experience, further AD action may follow.
You may obtain further information by examining the MCAI in the AD docket.
Piaggio Aero Industries S.p.A. has issued Mandatory Service Bulletin No. 80–0345, and Appendix A, both dated September 20, 2012, which includes Messier-Dowty Service Bulletin No. P180–32–32, dated September 10, 2012. The actions described in this service information are intended to correct the unsafe condition identified in the MCAI.
This product has been approved by the aviation authority of another country, and is approved for operation
We consider this AD interim action. We are requiring inspection(s) of the left and right MLG LHF with a report to the manufacturer of the results if cracks are found. We will work with the type certificate holder to evaluate the report results to determine repetitive inspection intervals and subsequent terminating action. Based on this evaluation, we may initiate further rulemaking action to address the unsafe condition identified in this AD.
We estimate that this proposed AD will affect 109 products of U.S. registry. We also estimate that it would take about 11 total work-hours, which is 2 work-hours for the initial visual inspection; 2 work-hours for the detailed visual inspection; and 7 work-hours for the fluorescent penetrant inspection, per product to comply with the basic requirements of this proposed AD. The average labor rate is $85 per work-hour.
Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $101,915, or $935 per product.
In addition, we estimate that any necessary follow-on actions would take about 7 work-hours and require parts costing $21,540 to replace a left-hand LHF, for a cost of $22,153, and $20,662 to replace a right-hand LHF, for a cost of $21,257.
According to the manufacturer, some of the costs of this proposed AD may be covered under warranty, thereby reducing the cost impact on affected individuals. We do not control warranty coverage for affected individuals. As a result, we have included all costs in our cost estimate
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
We must receive comments by August 5, 2013.
None.
This AD applies to Piaggio Aero Industries S.p.A Model P–180 airplanes, all serial numbers, certificated in any category.
Air Transport Association of America (ATA) Code 32: Landing Gear.
This AD was prompted by results from mandatory continuing airworthiness information (MCAI) originated by an aviation authority of another country to identify and correct an unsafe condition on an aviation product. The MCAI describes the unsafe condition as cracks at the joint between the hinge pin sub-assembly and the lock pin of the main landing gear (MLG) lever hinge fitting (LHF). We are issuing this AD to prevent structural failure of the MLG LHF, which could result in loss of control during take-off or landing runs.
Unless already done, do the following actions in paragraphs (f)(1) through (f)(8), including all subparagraphs, of this AD:
(1) Within the next 200 hours time-in-service (TIS) after the effective date of this AD or within the next 3 months after the effective date of this AD, whichever occurs first, and repetitively thereafter before further flight after each MLG (subassembly) replacement, visually inspect each MLG LHF for cracks and verify freedom of rotation of the MLG wheel lever subassemblies. Do the inspection following Part 1 of the Accomplishment Instructions in Piaggio Aero Industries S.p.A. Mandatory Service Bulletin No. 80–0345, dated September 20, 2012; and Paragraph A of the Accomplishment Instructions in Piaggio Aero Industries S.p.A. Appendix A, dated September 20, 2012, which includes Messier-Dowty Service Bulletin No. P180–32–32, dated September 10, 2012.
(2) If, during the inspection required in paragraph (f)(1) of this AD, freedom of rotation of the MLG wheel lever subassembly is not assured, before further flight, mark the LHF on the affected MLG as “inspect as per SB–80–0345” with an indelible pen, and replace the MLG LHF with a serviceable part. Do the replacement following Part 1 of the Accomplishment Instructions in Piaggio Aero Industries S.p.A. Mandatory Service Bulletin No. 80–0345, dated September 20, 2012. The newly installed MLG LHF is subject to the repetitive inspection requirement specified in paragraph (f)(1) of this AD and all inspection requirements specified in paragraphs (f)(3) and (f)(4) of this AD.
(3) Within the compliance times specified in paragraphs (f)(3)(i), (f)(3)(ii), and (f)(3)(iii) of this AD, and repetitively thereafter at intervals not to exceed 200 hours TIS, do a detailed visual inspection of each MLG LHF for cracks. Do the inspection following Part
(i) As of the effective date of this AD, if the MLG LHF has accumulated 2,300 hours TIS or less since new, inspect before exceeding 2,500 hours TIS since new.
(ii) As of the effective date of this AD, if the MLG LHF has accumulated more than 2,300 hours TIS since new, but less than 2,500 hours TIS since new, inspect within the next 200 hours TIS after the effective date of this AD.
(iii) As of the effective date of this AD, if the MLG LHF has accumulated 2,500 hours TIS or more since new, inspect within the next 200 hours TIS after the effective date of this AD or within the next 3 months after the effective date of this AD, whichever occurs first.
(4) Within the compliance times specified in paragraphs (f)(3)(i), (f)(3)(ii), and (f)(3)(iii) of this AD and repetitively thereafter at intervals not to exceed 750 hours TIS, do a fluorescent penetrant inspection on each MLG LHF for cracks. Do the inspection following Part 3 of the Accomplishment Instructions in PIAGGIO AERO INDUSTRIES S.p.A. Mandatory Service Bulletin No. 80–0345, dated September 20, 2012, and Paragraph C of the Accomplishment Instructions in PIAGGIO AERO INDUSTRIES S.p.A. Appendix A, dated September 20, 2012, that includes Messier-Dowty Service Bulletin No. P180–32–32, dated September 10, 2012.
(5) If, during any inspection required by paragraphs (f)(1), (f)(3), (f)(4), (f)(7), and (f)(8) of this AD, including all subparagraphs, any crack is found, before further flight, replace the MLG with a serviceable part. Do the replacement following the Accomplishment Instructions in Piaggio Aero Industries S.p.A. Mandatory Service Bulletin No. 80–0345, dated September 20, 2012. After installing a serviceable MLG, continue with the repetitive inspection requirements of paragraphs (f)(1), (f)(3), and (f)(4) this AD.
(6) Within 30 days after each MLG LHF replacement, submit an inspection result report to Piaggio Aero Industries S.p.A at the address specified in paragraph (h) of this AD using the Confirmation Slip attached to Piaggio Aero Industries S.p.A. Mandatory Service Bulletin No. 80–0345, dated September 20, 2012.
(7) For the purpose of this AD, a “serviceable” MLG is an airworthy MLG verified before installation for freedom of rotation and has been inspected following paragraphs (f)(3) and (f)(4) of this AD, including all subparagraphs, and is found free of cracks. If status of detailed visual inspections intervals, fluorescent penetrant inspections intervals, or hours TIS since new cannot be determined from the Authorized Release Certificate of the MLG to be installed, before next flight after installation, inspect the MLG LHF as specified in paragraphs (f)(3) and (f)(4) of this AD. Any newly install MLG LHF is subject to the repetitive inspections required in paragraphs (f)(1), (f)(3), and (f)(4) of this AD.
(8) As of the effective date of this AD, any MLG with LHF marked “inspect as per SB 80–0345” that was removed as specified in paragraph (f)(2) of this AD may be reinstalled provided that before installation, freedom of rotation has been restored. Before further flight after installation, the MLG LHF must be inspected as specified in paragraphs (f)(3) and (f)(4) of this AD. Continue thereafter with the repetitive inspections at the intervals specified paragraphs (f)(1), (f)(3), and (f)(4) of this AD.
The following provisions also apply to this AD:
(1) Refer to MCAI European Aviation Safety Agency (EASA) AD No. 2013–0084, dated April 5, 2013; Messier-Dowty PCS–2700 Paint Stripping document, dated January 2011; Messier-Dowty PCS–2622 Cold Degreasing (Solvent) document, Issue 2, dated May 12, 2008; and Messier-Dowty Ltd 201034005 and 201034006 Component Maintenance Manual, page 2, dated May 1, 2004, and page 1020, dated March 17, 2006, for related information.
(2) For service information identified in and related to this AD, contact Piaggio Aero Industries S.p.A—Airworthiness Office, Via Luigi Cibrario, 4–16154 Genova-Italy; phone: +39 010 6481353; fax: +39 010 6481881; email:
Federal Trade Commission (“FTC” or “Commission”).
Supplemental notice of proposed rulemaking.
To promote consistency between the guaranty provisions in its Rules and Regulations under the Fur Products Labeling Act and those governing textile products, the Commission proposes amendments clarifying a signature requirement for separate guaranties and requiring guarantors to renew continuing guaranties annually.
Written comments must be received on or before July 23, 2013.
Interested parties may file a comment online or on paper by following the instructions in the Request for Comment part of the
Matthew J. Wilshire, Attorney, (202) 326–2976, Federal Trade Commission, Division of Enforcement, Bureau of Consumer Protection, 600 Pennsylvania Avenue NW., Washington, DC 20580.
On April 30, 2013, the Federal Trade Commission (“FTC” or “Commission”) issued a Notice of Proposed Rulemaking (“Textile NRPM”) announcing proposed amendments to its Rules and Regulations (“Textile Rules”) under the Textile Fiber Products Identification Act (“Textile Act”). Among other things, the proposed changes would alter the form for continuing guaranties filed with the Commission and require annual renewal of such guaranties. Both the Textile and the Fur Products Labeling Act (“Fur Act”) provide exemptions from liability for retailers and other recipients of covered products based on certifications that the transferred products are not misbranded, falsely invoiced, or falsely advertised.
On September 17, 2012, the Commission proposed amendments to the Fur Rules to update the Fur Products Name Guide, provide greater labeling flexibility, and incorporate provisions of the recently enacted Truth in Fur Labeling Act. Since that proposal, the Commission proposed altering the textile guaranty provisions in the Textile NPRM. In addition, one commenter has urged changes to the fur guaranty provisions. The Commission, therefore, now proposes additional guaranty amendments for the Fur Rules to provide notice and an opportunity to comment on this proposal while the Commission considers comments received in response to the changes it proposed in 2012. Doing so will allow the Commission to incorporate any guaranty final amendments in conjunction with any other final amendments, and thereby assist businesses in understanding their compliance obligations under the revised rules.
This document provides information on guaranties, explains the proposed amendments, solicits additional comment, provides analyses under the Regulatory Flexibility Act and the Paperwork Reduction Act, and sets forth the Commission's proposed amendments.
The Fur Act, Textile Act, and Wool Products Labeling Act (“Wool Act”)
Entities providing continuing guaranties for fur products must file those guaranties with the Commission using the form specified in the Textile Rules at 16 CFR 303.38(b).
In response to the Commission's September 17, 2012, proposed amendments (“Fur NPRM”),
On April 30, 2013, the Commission issued the Textile NPRM, which announced several proposed amendments to the rules governing guaranties.
In light of the proposed amendments to the Textile Rules, as well as NRF's comment, the Commission proposes conforming amendments to the Fur Rules. As explained below, the Commission declines to propose amendments specifically providing for electronic transmission of separate guaranties, and proposes that guarantors renew continuing guaranties annually. In addition, the Commission does not propose amendments regarding NRF's concerns about guaranty protections for retailers directly importing products because a recently announced Enforcement Policy Statement provides the requested protections.
NRF urged the Commission to publish amendments explicitly providing for the electronic transmission of separate guaranties. Currently, section 301.47 provides a “suggested form” for such guaranties, which includes the guarantor's “signature and address.”
The Commission declines to propose amendments specifically addressing electronic transmittal of guaranties. The
Moreover, NRF has not presented any evidence showing that the current Fur Rules impose significant costs on businesses or that making its recommended change would decrease those costs. The Rules appear to provide sufficient flexibility for compliance without providing specifically for “electronic guaranties.” Although the Commission is not proposing NRF's recommended amendment, the Commission seeks comment on this issue.
The Commission proposes two amendments, however, to make clear that electronically transmitted guaranties are not prohibited. First, the Commission proposes, as it did in the Textile NPRM, changing the term “invoice” in section 301.47 and the phrase “invoice or other paper” in section 301.48(b) to “invoice or other document.” The proposed change would make clear that “invoice” includes documents that are electronically stored or transmitted. Second, the Commission proposes amending section 301.47 to include, as the Textile Rules currently do, a statement that the guarantor's printed name and address will meet the signature component for separate guaranties.
Section 301.48 requires that guarantors use the prescribed form in 16 CFR 303.38(b) for a continuing guaranty filed with the Commission. The current form requires the guarantor to sign the guaranty under penalty of perjury. NRF recommended making the guaranty form optional and eliminating the penalty-of-perjury requirement.
NRF recommended making the continuing guaranty form optional to allow businesses to use electronic processes without the obligation to revert to paper documents and signatures.
In addition, requiring a specific form does not appear to inhibit electronic processes or cause any other burden. NRF did not present any evidence showing that businesses cannot adapt the prescribed form to electronic communications, including electronic signatures. Businesses may send the prescribed form electronically, and the Fur Rules allow electronic signatures.
NRF also recommended that the Commission eliminate the penalty of perjury language for continuing guaranties. It argued that requiring sworn statements inappropriately introduces the criminal elements of perjury into private contracts and that the person providing the attestation cannot attest to the truth of labels and invoices in the future.
Although swearing under penalty of perjury in private agreements is not unusual,
Continuing guaranties, however, must provide sufficient indicia of reliability to permit buyers to rely on them on an ongoing basis. The perjury language addressed this concern. Therefore, instead of requiring guarantors to swear under penalty of perjury, the Textile NPRM proposed requiring guarantors to acknowledge that providing a false guaranty is unlawful; to certify that they will actively monitor and ensure compliance with the Fur, Textile, and Wool Acts and Rules; and to renew guaranties annually.
As explained in the Textile NPRM, the new form should increase a guaranty's reliability by focusing the guarantor's attention on, and underscoring, its obligation to comply. However, the new form would not impose additional burdens on guarantors because they would simply be acknowledging the Fur Act's prohibition against false guaranties
Additionally, requiring guarantors to renew guaranties annually provides needed assurance of reliability in the absence of a sworn statement. Annual renewal should encourage guarantors to take regular steps to ensure that they remain in compliance with the Fur Act and Rules and thereby increase the guaranties' reliability. Moreover, these benefits should outweigh the minimal burden of completing the one-page form. As discussed above, the form
Unlike changes to the continuing guaranty form, requiring annual renewal necessitates an amendment to the Fur Rules. Thus, the Commission proposes amending section 301.48(a)(2) to provide that continuing guaranties are valid for a year or until revoked.
The Fur Act authorizes fur guaranties from persons “residing in the United States by whom the fur product or fur guaranteed was manufactured or from whom it was received.”
Because many retailers now regularly rely on global supply chains, NRF recommended that the Commission adopt an alternative guaranty for such businesses. Specifically, NRF recommended that the Commission allow such businesses to rely on compliance representations from foreign manufacturers or suppliers when: (1) The businesses do not embellish or misrepresent the representations; (2) the fur products are not sold as private label products; and (3) the businesses have no reason to know that the marketing or sale of the products would violate the Act or Rules.
As discussed in the Textile NPRM, NRF's argument has merit. Changes in the clothing industry resulting in increased imports mean that more businesses cannot obtain guaranties. In light of the increased reliance on global supply chains for fur products, the Commission finds it in the public interest to provide protections for retailers that: (1) Cannot legally obtain a guaranty under the Fur Act; (2) do not embellish or misrepresent claims provided by the manufacturer related to the relevant Act or Rules; and (3) do not market the products as private label products; unless the retailers knew or should have known that the marketing or sale of the products would violate the Act or Rules. Such protections provide greater consistency for retailers regardless of whether they directly import products or use third-party domestic importers. Accordingly, on January 3, 2013, the Commission announced an enforcement policy statement providing that it will not bring enforcement actions against retailers that meet the above criteria.
You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before July 23, 2013. Write “Fur Rules Review, 16 CFR Part 301, Project No. P074201” on your comment. Your comment—including your name and your state—will be placed on the public record of this proceeding, including, to the extent practicable, on the public Commission Web site, at
Because your comment will be made public, you are solely responsible for making sure that your comment doesn't include any sensitive personal information, such as anyone's Social Security number, date of birth, driver's license number or other state identification number or foreign country equivalent, passport number, financial account number, or credit or debit card number. You are also solely responsible for making sure that your comment does not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, don't include any “[t]rade secret or any commercial or financial information which is obtained from any person and which is privileged or confidential,” as provided in Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). In particular, do not include competitively sensitive information such as costs, sales statistics, inventories, formulas, patterns, devices, manufacturing processes, or customer names.
If you want the Commission to give your comment confidential treatment, you must file it in paper form, with a request for confidential treatment, and you have to follow the procedure explained in FTC Rule 4.9(c), 16 CFR 4.9(c).
Postal mail addressed to the Commission is subject to delay due to heightened security screening. As a result, we encourage you to submit your comments online. To make sure that the Commission considers your online comment, you must file it at
If you file your comment on paper, write “Fur Rules Review, 16 CFR Part 301, Project No. P074201” on your comment and on the envelope, and mail or deliver it to the following address: Federal Trade Commission, Office of the Secretary, Room H–113 (Annex O), 600 Pennsylvania Avenue NW., Washington, DC 20580. If possible, submit your paper comment to the Commission by courier or overnight service.
Visit the Commission Web site at
The Commission invites members of the public to comment on any issues or concerns they believe are relevant or appropriate to the Commission's consideration of proposed amendments to the Fur Rules. The Commission requests that comments provide factual
1. Do the Fur Rules and the proposed changes to the guaranty provisions in sections 301.47 and 301.48 provide sufficient flexibility for compliance using electronic transmittal of guaranties? If so, why and how? If not, why not?
2. Should the Commission amend section 301.47 by changing the term “invoice” to “invoice or other document” and removing “the date of shipment of the merchandise”? If so, why? If not, why not?
3. Should the Commission revise the proposed certification requirement for continuing guaranties provided by suppliers pursuant to section 301.48? If so, why and how? If not, why not?
4. Should the Rules require those providing a continuing guaranty pursuant to section 301.48 to renew the certification annually or at some other interval? If so, why? If not, why not? To what extent would requiring guarantors to renew certifications annually increase costs? What benefits would requiring annual renewal provide?
5. What evidence supports your answers?
Written communications and summaries or transcripts of oral communications respecting the merits of this proceeding from any outside party to any Commissioner or Commissioner's advisor will be placed on the public record.
The Regulatory Flexibility Act (“RFA”)
The Commission believes that the proposed amendments would not have a significant economic impact upon small entities, although it may affect a substantial number of small businesses. The proposed amendments clarify and update the guaranty provisions of sections 301.47 and 301.48 by, among other things, replacing the requirement that suppliers that provide a guaranty sign under penalty of perjury with a certification requirement for continuing guaranties that must be renewed every year.
In the Commission's view, the proposed amendments should not have a significant or disproportionate impact on the costs of small entities that manufacture or import fur products. Therefore, based on available information, the Commission certifies that amending the Rules as proposed will not have a significant economic impact on a substantial number of small businesses.
Although the Commission certifies under the RFA that the proposed amendments would not, if promulgated, have a significant impact on a substantial number of small entities, the Commission has determined, nonetheless, that it is appropriate to publish an Initial Regulatory Flexibility Analysis to inquire into the impact of the proposed amendments on small entities. Therefore, the Commission has prepared the following analysis:
In response to public comments, the Commission proposes amending the Rules to update its fur guaranty provisions.
The objective of the proposed amendments is to clarify and update the Rules' guaranty provisions by, among other things, replacing the requirement that suppliers that provide a guaranty sign under penalty of perjury with an annually renewed certification. The Fur Act authorizes the Commission to implement its requirements through the issuance of rules.
The proposed amendments would clarify and update the Fur Rules without imposing significant new burdens or additional costs. The proposal that continuing guaranty certifications expire after one year would likely impose minimal additional costs on businesses that choose to provide a guaranty. Providing a new continuing guaranty each year would likely entail minimal costs.
The Rules apply to various segments of the fur industry, including manufacturers and importers of furs and fur products. Under the Small Business Size Standards issued by the Small Business Administration, apparel manufacturers qualify as small businesses if they have 500 or fewer employees. Importers qualify as small businesses if they have 100 or fewer employees. The Commission's staff has estimated that approximately 1,290 fur product manufacturers and importers are covered by the Rules' disclosure requirements.
As explained earlier in this document, the proposed amendments would clarify and update the Rules' guaranty provisions by, among other things, replacing the requirement that suppliers that provide a guaranty sign under penalty of perjury with a certification requirement that must be renewed annually. The small entities potentially covered by these proposed amendments will include all such entities already subject to the existing Rules. The professional skills necessary for compliance with the Rules as modified by the proposed amendments would include clerical personnel to submit guaranties and keep records. The Commission invites comment and information on these issues.
The Commission has not identified any other federal statutes, rules, or policies that would duplicate, overlap, or conflict with the proposed amendments. The Commission invites comment and information on this issue.
The Commission has not proposed any specific small entity exemption or other significant alternatives, as the proposed amendments simply clarify and update the Rules' guaranty provisions by, among other things, replacing the requirement that suppliers that provide a guaranty sign under penalty of perjury with a certification requirement. Under these limited circumstances, the Commission does not believe a special exemption for small entities or significant compliance alternatives are necessary or appropriate to minimize the compliance burden, if any, on small entities while achieving the intended purposes of the proposed amendments. As discussed above, adopting NRF's proposed changes is unnecessary to allow electronic compliance with the Fur Rules.
Nonetheless, the Commission seeks comment and information on the need, if any, for alternative compliance methods that would reduce the economic impact of the Fur Rules on small entities. If the comments filed in response to this document identify small entities that would be affected by the proposed amendments, as well as alternative methods of compliance that would reduce the economic impact of the proposed amendments on such entities, the Commission will consider the feasibility of such alternatives and determine whether they should be incorporated into the final Rules.
The Rules contain various “collection of information” (
The proposed amendments to the guaranties would impose no additional collection of information requirements. The proposal that continuing guaranty certifications expire after one year would likely impose minimal additional costs on businesses that choose to provide a guaranty.
Furs, Labeling, Trade practices.
For the reasons discussed in the preamble, the Federal Trade Commission proposes to amend title 16, Chapter I, Subchapter C, of the Code of Federal Regulations, part 301, as follows:
15 U.S.C. 69 et seq.
The following is a suggested form of separate guaranty under section 10 of the Act which may be used by a guarantor residing in the United States, on and as part of an invoice or other document in which the merchandise covered is listed and specified and which shows the date of such document and the signature and address of the guarantor:
We guarantee that the fur products or furs specified herein are not misbranded nor falsely nor deceptively advertised or invoiced under the provisions of the Fur Products Labeling Act and rules and regulations thereunder.
The printed name and address on the invoice or other document will suffice to meet the signature and address requirements.
(a) * * *
(2) Continuing guaranties filed with the Commission shall continue in effect for one year unless revoked earlier. The guarantor shall promptly report any change in business status to the Commission.
* * *
(b) Any person who has a continuing guaranty on file with the Commission may, during the effective dates of the guaranty, give notice of such fact by setting forth on the invoice or other document covering the marketing or handling of the product guaranteed the following: “Continuing guaranty under the Fur Products Labeling Act filed with the Federal Trade Commission.”
By direction of the Commission.
Food and Drug Administration, HHS.
Proposed rule.
The Food and Drug Administration (FDA) is proposing to reclassify nucleic acid-based in vitro diagnostic devices for the detection of
Submit either electronic or written comments on the proposed rule by August 19, 2013. See section XIII for the proposed effective date of any final rule that may publish based on this proposal.
You may submit comments, identified by Docket No. FDA–2013–N–0544, by any of the following methods:
Submit electronic comments in the following way:
•
Submit written submissions in the following ways:
•
Janice A. Washington, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, rm. 5554, Silver Spring, MD 20993–0002, 301–796–6207
The Federal Food, Drug, and Cosmetic Act (the FD&C Act), as amended by the Medical Device Amendments of 1976 (the 1976 amendments) (Public Law 94–295), the Safe Medical Devices Act of 1990 (Pub. L. 101–629), and the Food and Drug Administration Modernization Act of 1997 (Pub. L. 105–115), the Medical Device User Fee and Modernization Act of 2002 (Pub. L. 107–250), the Medical Devices Technical Corrections Act (Pub. L. 108–214), and the Food and Drug Administration Amendments Act of 2007 (Pub. L. 110–85), establish a comprehensive system for the regulation of medical devices intended for human use. Section 513 of the FD&C Act (21 U.S.C. 360c) established three categories (classes) of devices, reflecting the regulatory controls needed to provide reasonable assurance of their safety and effectiveness. The three categories of devices are class I (general controls), class II (special controls), and class III (premarket approval).
Under the FD&C Act, FDA clears or approves the three classes of medical devices for commercial distribution in the United States through three regulatory processes: Premarket approval (PMA), product development protocol, and premarket notification (a premarket notification is generally referred to as a “510(k)” after the section of the FD&C Act where the requirement is found). The purpose of a premarket notification is to demonstrate that the new device is substantially equivalent to a legally marketed predicate device. Under section 513(i) of the FD&C Act, a device is substantially equivalent if it has the same intended use and technological characteristics as a predicate device, or has different technological characteristics but data demonstrate that the new device is as safe and effective as the predicate device and does not raise different issues of safety or effectiveness.
FDA determines whether new devices are substantially equivalent to previously offered devices by means of premarket notification procedures in section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 of the regulations (21 CFR part 807). Section 510(k) of the FD&C Act and the implementing regulations in part 807, subpart E, require a person who intends to market a medical device to submit a premarket notification submission to FDA before proposing to begin the introduction, or delivery for introduction into interstate commerce, for commercial distribution of a device intended for human use.
In accordance with section 513(f)(1) of the FD&C Act, devices that were not in commercial distribution before May 28, 1976, the date of enactment of the 1976 amendments, generally referred to as postamendment devices, are classified automatically by statute into class III without any FDA rulemaking process. These devices remain in class III and require premarket approval, unless FDA classifies the device into class I or class II by issuing an order finding the device to be substantially equivalent, in accordance with section 513(i) of the FD&C Act, to a predicate device that does not require premarket approval or the device is reclassified into class I or class II. The Agency determines whether new devices are substantially equivalent to predicate devices by means of premarket notification procedures in section 510(k) of the FD&C Act and part 807 of FDA's regulations.
Section 513(f)(2) of the FD&C Act establishes procedures for “de novo” risk-based review and classification of postamendment devices automatically classified into class III by section 513(f)(1). Under these procedures, any person whose device is automatically classified into class III by section 513(f)(1) of the FD&C Act may seek reclassification into class I or II, either after receipt of an order finding the device to be not substantially equivalent, in accordance with section 513(i) of the FD&C Act, to a predicate device that does not require premarket approval, or at any time after determining there is no legally marketed device upon which to base a determination of substantial equivalence. In addition, under section 513(f)(3) of the FD&C Act, FDA may initiate, or the manufacturer or importer of a device may petition for, the reclassification of a device classified into class III under section 513(f)(1).
A nucleic acid-based in vitro diagnostic device for the detection of M. tuberculosis complex in respiratory specimens is a postamendment device classified into class III under section 513(f)(1) of the FD&C Act in 1995. Consistent with the FD&C Act and FDA's regulations in 21 CFR 860.130(a), FDA believes that these devices should be reclassified from class III into class II because there is sufficient information from FDA's accumulated experience with these devices to establish special controls that can provide reasonable assurance of the device's safety and effectiveness.
Nucleic acid-based in vitro diagnostic devices for the detection of
At an FDA/Centers for Disease Control (CDC)/National Institute of Allergy and Infectious Diseases public
FDA is proposing that nucleic acid-based in vitro diagnostic devices for the detection of
After considering the information discussed by the Microbiology Devices Panel during the June 29, 2011, meeting, the published literature, and the Medical Device Reporting system reports, FDA believes the following risks are associated with nucleic acid-based in vitro diagnostic devices for the detection of
FDA, consistent with the opinions expressed by the Microbiology Devices Panel of the Medical Devices Advisory Committee, believes that the establishment of special controls, in addition to general controls, provides reasonable assurance of the safety and effectiveness of nucleic acid-based in vitro diagnostic devices for the detection of
1. The safety and effectiveness of nucleic acid-based systems for
2. The risk of false positive test results can be mitigated by specifying minimum performance standards in the special controls guideline and including information regarding patient populations appropriate for testing in the device labeling. Additional risk mitigation strategies include the indication for use that the device be used as an aid to the diagnosis of pulmonary tuberculosis in conjunction with other clinical and laboratory findings. The device also should be accurately described and have labeling that addresses issues specific to these types of devices.
3. The risk of false negative test results can be mitigated by specifying minimum performance standards for test sensitivity in the special controls guideline and ensuring that different patient populations are included in clinical trials. Additional risk mitigation strategies include the indication for use that the device be used as an aid to the diagnosis of pulmonary tuberculosis in conjunction with other clinical and laboratory findings. The device also should be accurately described and have appropriate labeling that addresses issues specific to these types of devices.
4. Biosafety risks to health care workers handling specimens and control materials with the possibility of transmission of tuberculosis infection to health care workers could be addressed similarly to existing devices of this type that we have already approved. It is believed there are no additional biosafety risks introduced by reclassification from class III to class II. The need for appropriate biosafety measures can be addressed in labeling recommendations that are included in the special controls guideline and by adherence to recognized laboratory biosafety procedures.
Based on FDA's review of published literature, the information presented by outside speakers invited to the Microbiology Devices meeting, and the opinions of panel members expressed at that meeting, FDA believes that there is a reasonable basis to determine that nucleic acid-based in vitro diagnostic devices for the detection of
Nucleic acid-based in vitro diagnostic devices for the detection of
FDA believes that the measures set forth in the special controls guideline entitled “Nucleic Acid-Based In Vitro Diagnostic Devices for the Detection of
If this proposed rule is finalized, nucleic acid-based in vitro diagnostic devices for the detection of
Persons interested in obtaining a copy of the draft guideline may do so by using the Internet. A search capability for all Center for Devices and Radiological Health guidelines and guidance documents is available at
To receive “Class II Special Controls Guideline: Nucleic Acid-Based In Vitro Diagnostic Devices for the Detection of
The Agency has determined under 21 CFR 25.34(b) that this proposed reclassification action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.
This proposed rule refers to previously approved collections of information found in FDA regulations. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520). The collections of information in 21 CFR 56.115 have been approved under OMB control number 0910–0130; the collections of information in 21 CFR part 807, subpart E have been approved under OMB control number 0910–0120; the collections of information in 21 CFR part 812 have been approved under OMB control number 0910–0078; the collections of information in 21 CFR part 820 have been approved under OMB control number 0910–0073; and the collections of information in 21 CFR part 801 and 21 CFR 809.10 have been approved under OMB control number 0910–0485.
This special controls guideline reflects changes the Agency is making to clarify its position on the binding nature of special controls. The changes include referring to the document as a “guideline,” as that term is used in section 513(a) of the FD&C Act, which the Secretary has developed and disseminated to provide a reasonable assurance of safety and effectiveness for class II devices, and not a “guidance,” as that term is used in 21 CFR 10.115. The guideline clarifies that firms will need either to: (1) Comply with the particular mitigation measures set forth in the special controls guideline or (2) use alternative mitigation measures, but demonstrate to the Agency's satisfaction that those alternative measures identified by the firm will provide at least an equivalent assurance of safety and effectiveness. Finally, the guideline uses mandatory language to emphasize that firms must comply with special controls to legally market their class II devices. These revisions do not represent a change in FDA's position about the binding effect of special controls, but rather are intended to address any possible confusion or misunderstanding.
FDA proposes that any final regulation based on this proposed rule become effective 30 days after its date of publication in the
FDA has examined the impacts of the proposed rule under Executive Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5 U.S.C. 601–612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4). Executive Orders 12866 and 13563 direct Agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The Agency believes that this proposed rule is not a
The Regulatory Flexibility Act requires Agencies to analyze regulatory options that would minimize any significant impact of a rule on small entities. Because the proposed reclassification would relieve manufacturers of premarket approval requirements of section 515 of the FD&C Act (21 U.S.C. 360e) it would not create new burdens. Thus, the Agency proposes to certify that the proposed rule, if finalized, will not have a significant economic impact on a substantial number of small entities.
Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires that Agencies prepare a written statement, which includes an assessment of anticipated costs and benefits, before proposing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $139 million, using the most current (2011) Implicit Price Deflator for the Gross Domestic Product. FDA does not expect this proposed rule, if finalized, to result in any 1-year expenditure that would meet or exceed this amount.
Our estimate of benefits annualized over 20 years is $11.85 million at a 3 percent discount rate and $7.83 million at a 7 percent discount rate. The change in pre- and post-marketing requirements between a 510(k) and a PMA lead to benefits in the form of reduced submission costs, review-related activities, and inspections. Another unquantifiable benefit from the rule is that a decrease in entry could lead to further product innovation. FDA is unable to quantify the costs that could arise if there is a change in risk which could lead to adverse events, recalls, warning letters, or unlisted letters.
The full discussion of economic impacts is available in docket FDA–2013–N–0544 at
Interested persons may submit either electronic comments regarding this document or the associated Special Controls guideline to
The following references have been placed on display in the Dockets Management Branch (see
1. Transcript of the Tuberculosis Public Workshop, June 7, 2010, (Available at:
2. Transcript of FDA's Microbiology Devices Panel Meeting, June 29, 2011. (Available at:
3. “Updated Guidelines for the Use of Nucleic Acid Amplification Tests in the Diagnosis of Tuberculosis,”
4. Full Disclosure Preliminary Regulatory Impact Analysis of the proposed rule “Microbiology Devices; Reclassification of Nucleic Acid-Based Systems for
Biologics, Laboratories, Medical devices.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, it is proposed that 21 CFR part 866 is amended as follows:
21 U.S.C. 351, 360, 360c, 360e, 360j, 371.
(a)
(b)
Food and Drug Administration, HHS.
Proposed order.
The Food and Drug Administration (FDA) is issuing a proposed administrative order to reclassify intra-aortic balloon and
Submit either electronic or written comments by September 17, 2013. FDA intends that, if a final order based on this proposed order is issued, anyone who wishes to continue to market intra-aortic balloon and control system devices indicated for septic shock or pulsatile flow generation will need to file a PMA or a notice of completion of a PDP within 90 days of the effective date of the final order. See section XVII of this document for the proposed effective date of any final order based on this proposed order.
You may submit comments, identified by Docket No. FDA–2013–N–0581, by any of the following methods:
Submit electronic comments in the following way:
• Federal eRulemaking Portal:
Submit written submissions in the following ways:
• Mail/Hand delivery/Courier (for paper or CD–ROM submissions): Division of Dockets Management (HFA–305), Food and Drug Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
Angela Krueger, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 1666, Silver Spring, MD 20993, 301–796–6380,
The Federal Food, Drug, and Cosmetic Act (the FD&C Act), as amended by the Medical Device Amendments of 1976 (the 1976 amendments) (Pub. L. 94–295), the Safe Medical Devices Act of 1990 (Pub. L. 101–629), the Food and Drug Administration Modernization Act of 1997 (FDAMA) (Pub. L. 105–115), the Medical Device User Fee and Modernization Act of 2002 (Pub. L. 107–250), the Medical Devices Technical Corrections Act (Pub. L. 108–214), the Food and Drug Administration Amendments Act of 2007 (Pub. L. 110–85), and the Food and Drug Administration Safety and Innovation Act (FDASIA) (Pub. L. 112–144), establish a comprehensive system for the regulation of medical devices intended for human use. Section 513 of the FD&C Act (21 U.S.C. 360c) established three categories (classes) of devices, reflecting the regulatory controls needed to provide reasonable assurance of their safety and effectiveness. The three categories of devices are class I (general controls), class II (special controls), and class III (premarket approval).
Under section 513 of the FD&C Act, devices that were in commercial distribution before the enactment of the 1976 amendments, May 28, 1976 (generally referred to as preamendments devices), are classified after FDA has: (1) Received a recommendation from a device classification panel (an FDA advisory committee); (2) published the panel's recommendation for comment, along with a proposed regulation classifying the device; and (3) published a final regulation classifying the device. FDA has classified most preamendments devices under these procedures.
Devices that were not in commercial distribution prior to May 28, 1976 (generally referred to as postamendments devices), are automatically classified by section 513(f) of the FD&C Act into class III without any FDA rulemaking process. Those devices remain in class III and require premarket approval unless, and until, the device is reclassified into class I or II or FDA issues an order finding the device to be substantially equivalent, in accordance with section 513(i) of the FD&C Act, to a predicate device that does not require premarket approval. The Agency determines whether new devices are substantially equivalent to predicate devices by means of premarket notification procedures in section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807).
A preamendments device that has been classified into class III and devices found substantially equivalent by means of premarket notification (510(k)) procedures to such a preamendments device or to a device within that type may be marketed without submission of a PMA until FDA issues a final order under section 515(b) of the FD&C Act (21 U.S.C. 360e(b)) requiring premarket approval or until the device is subsequently reclassified into class I or class II.
Although, under the FD&C Act, the manufacturer of class III preamendments device may respond to the call for PMAs by filing a PMA or a notice of completion of a PDP, in practice, the option of filing a notice of completion of a PDP has not been used. For simplicity, although corresponding requirements for PDPs remain available to manufacturers in response to a final order under section 515(b) of the FD&C Act, this document will refer only to the requirement for the filing and receiving approval of a PMA.
On July 9, 2012, FDASIA was enacted. Section 608(a) of FDASIA amended section 513(e) of the FD&C Act, changing the process for reclassifying a device from rulemaking to an administrative order. Section 608(b) of FDASIA amended section 515(b) of the FD&C Act changing the process for requiring premarket approval for a preamendments class III device from rulemaking to an administrative order.
FDA is publishing this document to propose the reclassification of intra-aortic balloon and control system devices when indicated for acute coronary syndrome, cardiac and non-
Section 513(e) of the FD&C Act governs reclassification of classified preamendments devices. This section provides that FDA may, by administrative order, reclassify a device based upon “new information.” FDA can initiate a reclassification under section 513(e) or an interested person may petition FDA to reclassify a preamendments device. The term “new information,” as used in section 513(e) of the FD&C Act, includes information developed as a result of a reevaluation of the data before the Agency when the device was originally classified, as well as information not presented, not available, or not developed at that time. (See, e.g.,
Reevaluation of the data previously before the Agency is an appropriate basis for subsequent action where the reevaluation is made in light of newly available authority (see
FDA relies upon “valid scientific evidence” in the classification process to determine the level of regulation for devices. To be considered in the reclassification process, the valid scientific evidence upon which the Agency relies must be publicly available. Publicly available information excludes trade secret and/or confidential commercial information, e.g., the contents of a pending PMA. (See section 520(c) of the FD&C Act (21 U.S.C. 360j(c)).) Section 520(h)(4) of the FD&C Act, added by FDAMA, provides that FDA may use, for reclassification of a device, certain information in a PMA 6 years after the application has been approved. This can include information from clinical and preclinical tests or studies that demonstrate the safety or effectiveness of the device but does not include descriptions of methods of manufacture or product composition and other trade secrets.
Section 513(e)(1) of the FD&C Act sets forth the process for issuing a final order. Specifically, prior to the issuance of a final order reclassifying a device, the following must occur: (1) Publication of a proposed order in the
FDAMA added section 510(m) to the FD&C Act, which provides that a class II device may be exempted from the premarket notification requirements under section 510(k) of the FD&C Act, if the Agency determines that premarket notification is not necessary to assure the safety and effectiveness of the device.
FDA is proposing to require PMAs for intra-aortic balloon and control system devices when indicated for septic shock or pulsatile flow generation.
Section 515(b)(1) of the FD&C Act sets forth the process for issuing a final order. Specifically, prior to the issuance of a final order requiring premarket approval for a preamendments class III device, the following must occur: (1) Publication of a proposed order in the
Section 515(b)(2) of the FD&C Act provides that a proposed order to require premarket approval shall contain: (1) The proposed order, (2) the proposed findings with respect to the degree of risk of illness or injury designed to be eliminated or reduced by requiring the device to have an approved PMA or a declared completed PDP and the benefit to the public from the use of the device, (3) an opportunity for the submission of comments on the proposed order and the proposed findings, and (4) an opportunity to request a change in the classification of the device based on new information relevant to the classification of the device.
Section 515(b)(3) of the FD&C Act provides that FDA shall, after the close of the comment period on the proposed order, consideration of any comments received, and a meeting of a device classification panel described in section 513(b) of the FD&C Act, issue a final order to require premarket approval or publish a document terminating the proceeding together with the reasons for such termination. If FDA terminates the proceeding, FDA is required to initiate reclassification of the device under section 513(e) of the FD&C Act, unless the reason for termination is that the device is a banned device under section 516 of the FD&C Act (21 U.S.C. 360f).
A preamendments class III device may be commercially distributed without a PMA until 90 days after FDA issues a final order (a final rule issued under section 515(b) of the FD&C Act prior to the enactment of FDASIA is considered to be a final order for purposes of section 501(f) of the FD&C Act (21 U.S.C. 351(f))) requiring premarket approval for the device, or 30 months after final classification of the device under section 513 of the FD&C Act, whichever is later. For intra-aortic balloon and control system devices, the preamendments class III devices that are the subject of this proposal, the later of these two time periods is the 90-day period. Since these devices were classified in 1980, the 30-month period has expired (45 FR 7939; February 5, 1980). Therefore, if the proposal to require premarket approval for intra-aortic balloon and control system devices indicated for septic shock or pulsatile flow generation is finalized, section 501(f)(2)(B) of the FD&C Act requires that a PMA for such device be filed within 90 days of the date of issuance of the final order. If a PMA is not filed for such device within 90 days after the issuance of a final order, the device would be deemed adulterated under section 501(f) of the FD&C Act.
Also, a preamendments device subject to the order process under section 515(b) of the FD&C Act is not required to have an approved investigational device exemption (IDE) (see part 812 (21 CFR part 812)) contemporaneous with its interstate distribution until the date identified by FDA in the final order requiring the filing of a PMA for the device. At that time, an IDE is required only if a PMA has not been filed. If the manufacturer, importer, or other sponsor of the device submits an IDE application and FDA approves it, the device may be distributed for investigational use. If a PMA is not filed by the later of the two dates, and the
In accordance with section 515(b) of the FD&C Act, interested persons are being offered the opportunity to request reclassification of intra-aortic balloon and control system devices indicated for septic shock or pulsatile flow generation.
In the preamble to the proposed rule (44 FR 13369; March 9, 1979), the Cardiovascular Device Classification Panel (the 1979 Panel) recommended that intra-aortic balloon and control system devices be classified into class III because the device is life-supporting, and there was insufficient medical and scientific information to establish a standard to assure the safety and effectiveness of the device. The 1979 Panel noted that controversy exists as to whether the device is beneficial in many situations in which it is used and that it is difficult to use the device safely and effectively. The 1979 Panel further noted that accurate and precise labeling and directions for use are especially critical and voiced concern that the various components of the device would not function properly if its modular components were poorly matched. The 1979 Panel indicated that the balloon of the device is used within the main artery of the body and because this portion of the device is in contact with internal tissues and blood, the materials used with it require special controls, and because the device is electrically powered and portions of the device may be in direct contact with the heart, the electrical characteristics of the device, e.g., electrical leakage current, need to meet certain requirements. Additionally, if the design of the device is inadequate for accurate and precise blood pumping, a resulting failure could lead to death. Consequently, the 1979 Panel believed that premarket approval was necessary to assure the safety and effectiveness of the device. In 1980, FDA classified intra-aortic balloon and control system devices into class III after receiving no comments on the proposed rule (45 FR 7939; February 5, 1980).
In 1987, FDA published a clarification by inserting language in the codified language stating that no effective date had been established for the requirement for premarket approval for intra-aortic balloon and control system devices (52 FR 17736; May 11, 1987).
In 2009, FDA published an order for the submission of information on intra-aortic balloon and control system devices by August 7, 2009 (74 FR 16214; April 9, 2009). FDA received four responses to that order from device manufacturers. One manufacturer stated in their response that they were “not aware of adequate and valid scientific information that would support reclassification of the device to Class I or II.” The other three manufacturers recommended that intra-aortic balloon and control system devices be reclassified to class II. The manufacturers stated that safety and effectiveness of these devices may be assured based on data available in the clinical literature; preclinical and clinical testing; 40 or more years of knowledge and information regarding the clinical use of the devices; and the overall number of marketed devices.
As explained further in sections VII and XI of this document, a meeting of the Circulatory System Devices Panel (the 2012 Panel) took place December 5, 2012, to discuss whether intra-aortic balloon and control system devices should be reclassified or remain in class III. The 2012 Panel recommended that intra-aortic balloon and control system devices be reclassified to class II with special controls when indicated for acute coronary syndrome, cardiac and non-cardiac surgery, or complications of heart failure based on available evidence that supports the safety and effectiveness of the devices for these uses and the ability of special controls to mitigate identified risks to health. The 2012 Panel also recommended that intra-aortic balloon and control system devices indicated for septic shock or pulsatile flow generation remain in class III because the devices are life-supporting and there was insufficient information to establish special controls for these uses. FDA is not aware of new information that would provide a basis for a different recommendation or findings.
An intra-aortic balloon and control system, also known as an intra-aortic balloon pump (IABP), consists of a balloon, which inflates and deflates in synchronization with the cardiac cycle, and console, which provides the pneumatic flow of helium to the balloon so that it can inflate and deflate. The balloon is usually manufactured from polyurethane. It is inserted through the femoral artery and resides in the descending aorta. Conventional timing sets inflation of the balloon to occur at the onset of diastole or the aortic valve closure timepoint. During diastole, the balloon will inflate, increasing blood flow to the coronary arteries, therefore increasing myocardial oxygen supply. The balloon remains inflated throughout the diastolic phase, maintaining the increased pressure in the aorta. The deflation of the balloon takes place at the onset of systole during the isovolumetric contraction or very early in the systolic ejection phase. This deflation will cause a decrease in pressure in the aorta and this decrease in pressure assists the left ventricle by reducing the pressure that needs to be generated to achieve ejection through the aortic valve. As the balloon deflates during systole, it increases blood flow to the systemic circulation by reducing afterload and also decreases the oxygen demand of the myocardium.
The console includes software that controls the inflation and deflation of the balloon based upon the patient's electrocardiogram or arterial pressure waveform. The console also controls the amount of helium that is transferred from the internal helium cylinder to the balloon. Most balloons come in sizes of 30cc, 40cc, and 50cc with a catheter diameter of 7.5Fr or 8Fr.
FDA is proposing that intra-aortic balloon and control system devices when indicated for acute coronary syndrome, cardiac and non-cardiac surgery, or complications of heart failure be reclassified from class III to class II. In this proposed order, the Agency has identified special controls under section 513(a)(1)(B) of the FD&C Act that, together with general controls applicable to the devices, would provide reasonable assurance of their safety and effectiveness. Absent the special controls identified in this proposed order, general controls applicable to the device are insufficient to provide reasonable assurance of the safety and effectiveness of the device.
Therefore, in accordance with sections 513(e) and 515(i) of the FD&C
Section 510(m) of the FD&C Act authorizes the Agency to exempt class II devices from premarket notification (510(k)) submission. FDA has considered intra-aortic balloon and control system devices when indicated for acute coronary syndrome, cardiac and non-cardiac surgery, or complications of heart failure in accordance with the reserved criteria set forth in section 513(a) of the FD&C Act and decided that the device requires premarket notification. Therefore, the Agency does not intend to exempt this proposed class II device from premarket notification (510(k)) submission.
After considering available information, including the recommendations of the advisory committees (panels) for the classification of these devices, FDA has evaluated the risks to health associated with the use of intra-aortic balloon and control system devices and determined that the following risks to health are associated with its use:
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If properly manufactured and used as intended, intra-aortic balloon and control system devices can provide a treatment option for patients when indicated for acute coronary syndrome, cardiac and non-cardiac surgery, or complications of heart failure, by increasing myocardial oxygen supply, decreasing myocardial oxygen demand, and improving cardiac output. FDA believes that intra-aortic balloon and control system devices indicated for acute coronary syndrome, cardiac and non-cardiac surgery, or complications of heart failure, should be reclassified from class III to class II because, in light of new information about the effectiveness of these devices, FDA believes that special controls, in addition to general controls, can be established to provide reasonable assurance of the safety and effectiveness of the device, and because general controls themselves are insufficient to provide reasonable assurance of its safety and effectiveness.
Since the time of the original 1979 Panel recommendation, sufficient evidence has been developed to support a reclassification of intra-aortic balloon and control system devices to class II with special controls when indicated for acute coronary syndrome, cardiac and non-cardiac surgery, or complications of heart failure. FDA has been reviewing these devices for many years and their risks are well known. FDA conducted a comprehensive review of available literature for IABP devices for acute coronary syndrome, cardiac and non-cardiac surgery, and complications of heart failure. FDA's review found 18 cohort studies (9 retrospective and 9 prospective), 6 randomized controlled trials, 3 case-control studies, 2 case series, 4 systematic reviews, and a meta-analysis, which provided consistent evidence of the safety and effectiveness of intra-aortic balloon and control system devices for acute coronary syndrome, cardiac and non-cardiac surgery, and complications of heart failure.
Collectively these studies support that the overall complication rates for intra-aortic balloon and control systems is low. For example, in the Benchmark Registry (Ref. 1), there were low IABP complication rates, including IABP-related mortality (0.05 percent and 0.07 percent in the United States and European Union, respectively), major limb ischemia (0.09 percent, 0.8 percent) and severe bleeding (0.9 percent, 0.8 percent). This is consistent with other studies of IABP use with large sample sizes. Additionally, in the most recently published trial of IABP use, the IABP SHOCK II trial (Ref. 2), published in October 2012, 600 patients were randomized to IABP (301 patients) or no IABP (299 patients). The IABP group and the control group did not differ significantly with respect to the rates of adverse events, including major bleeding (3.3 percent and 4.4 percent, respectively; P = 0.51), peripheral ischemic complications (4.3 percent and 3.4 percent, P = 0.53), sepsis (15.7 percent and 20.5 percent, P = 0.15), and stroke (0.7 percent and 1.7 percent, P = 0.28). These rates represent recent IABP usage outcomes in a randomized trial of patients with high associated morbidity using modern aggressive interventional approaches to acute myocardial infarction (MI) and cardiogenic shock, which include the use of percutaneous coronary intervention and aggressive anticoagulation. The trial demonstrates low rates of adverse events that can be attributed directly to the IABP itself.
It is important to note that the patients in whom IABP is used have severe comorbidities and underlying illnesses. As a result, overall mortality in these patients is high. Patients recruited for studies on the IABP are of a population segment that is at an inherently greater risk of mortality because of the high-risk procedures they require, and the illnesses that necessitated the procedures. Additionally, there are trends to less balloon-related mortality over time, as balloon catheter sizes have decreased and procedural techniques have improved.
The literature data also supports the effectiveness of IABP for acute coronary syndrome, cardiac and non-cardiac surgery, and complications of heart failure. With respect to acute coronary syndrome, the Benchmark Registry (Ref. 1) demonstrated that the mortality of patients with cardiogenic shock was 30.7 percent, which was low compared to other cardiogenic shock trials, and has been cited as evidence of a benefit from IABP use. Further evaluation of this registry has shown that in U.S. patients, compared to patients outside the United States (OUS), an IABP was placed at earlier stages of the disease. After appropriate adjustment of risk factors, U.S. patients showed decreased mortality (10.8 percent (U.S.) vs. 18 percent (OUS), P < 0.001). The results of the Global Utilization of Streptokinase and Tissue Plasminogen Activator for Occluded Coronary Arteries (GUSTO–1 trial) (Ref. 3) also demonstrated a 12-month survival advantage in cardiogenic shock with early IABP implantation. This was a retrospective study of IABP use in patients presenting with acute MI and cardiogenic shock who received systemic fibrinolysis. Sixty-eight of 310 cardiogenic shock patients received an IABP. The significantly higher frequency of IABP use in the United States in relation to Europe in these two trials was associated with more bleeding complications, but also with a lower mortality rate, both nonsignificantly at 30 days (47 percent vs. 60 percent) and significantly at 1 year (57 percent vs. 67 percent). This mortality benefit is also supported by two publications regarding the National Registry of Myocardial Infarction (Refs. 4 and 5).
The literature regarding the effectiveness of IABPs in cardiac and non-cardiac surgery has demonstrated utility in some studies and in others has been equivocal in demonstrating effectiveness. However, FDA and the 2012 Panel (as described in further detail in this document) find that there are certain subgroups of patients that may benefit from IABP use for cardiac and non-cardiac surgery indications. This is demonstrated in Christenson et al. (Ref. 6), which randomized 30 high-risk off-pump coronary artery bypass graft (CABG) surgery recipients to receive an IABP preoperatively or no IABP. The use of an IABP improved preoperative and postoperative cardiac performance significantly (P < 0.0001). The postoperative course was also improved, including decreased pneumonia and acute renal failure, shorter duration of ventilator support, and fewer patients requiring postoperative inotropic medications for greater than 48 hours. The lengths of stay in the intensive care unit and in the hospital were shorter in the IABP group. Additionally, Miceli et al. (Ref. 7) studied 141 consecutive patients from 2004–2007 undergoing CABG, in which 38 patients (27 percent) received a prophylactic IABP. After risk-adjusting for propensity score, prophylactic IABP patients had a lower incidence of postcardiotomy low cardiac output syndrome (adjusted OR 0.07, P < 0.006) and postoperative myocardial infarction (adjusted OR 0.04, P < 0.04), as well as a shorter length of hospital stay (10.4±0.8 vs. 12.2±0.6 days, P < 0.0001) compared to those who did not receive an IABP.
Much of the evidence that supports the effectiveness of an IABP for complications of heart failure is outlined previously in this document with respect to acute coronary syndrome (e.g., cardiogenic shock from acute MI). However, there are additional smaller studies that support use in heart failure specifically, including bridge to transplant and acute decompensated dilated cardiomyopathy. For example, Norkiene et al. (Ref. 8) studied 11 patients with decompensated dilated cardiomyopathy (CMP) listed for heart transplant who were recorded in the Benchmark Registry from September 2004 to December 2005, with New York Heart Association Class IV functional status. Frequency of complications and clinical outcomes were assessed prior to and after IABP insertion as well as hemodynamics and end-organ function (renal and hepatic). After 48 hours of IABP support, there was a significant increase of mean systemic arterial pressure from 74.5±9.6 to 82.3±4.7 mmHg (P = 0.02), and ejection fraction from 14.7±6.4 to 21.0±8.6 (P = 0.014). Improvement of the cardiac index, pulmonary wedge pressure, and end-organ perfusion markers did not reach statistical significance. The authors concluded that IABP support may be successfully and safely used in acute decompensated dilated cardiomyopathy patients as an urgent measure of cardiac support to stabilize the patient and maintain organ perfusion until transplant is available, ventricular assist device is placed, or the patient is weaned from the IABP.
Rosenbaum et al. (Ref. 9) studied 43 patients with end-stage congestive heart failure in whom an IABP was used as a bridge to transplant. Twenty-seven patients had non-ischemic CMP (NICM), and 16 had ischemic CMP (ISCM). Hemodynamics improved in both groups, immediately (15 to 30 minutes) following IABP insertion, with greater improvement (p < 0.05) in cardiac index and a trend toward greater reduction in filling pressures in the NICM group. Systemic vascular resistance fell to a similar degree in both groups. During continued IABP support (0.13 to 38 days in NICM, 1 to 54 days in ISCM), all hemodynamic changes persisted in both groups, with a larger decrease (p < 0.05) in systemic vascular resistance and greater increase (p < 0.05) in cardiac index in the patients with NICM. The reduction in filling pressures, however, tended to be greater in patients with
The literature data outlined previously in this document supports a conclusion of reasonable evidence for the safety and effectiveness of intra-aortic balloon and control system devices when indicated for acute coronary syndrome, cardiac and non-cardiac surgery, and complications of heart failure. In addition, bench studies designed to demonstrate the devices' ability to function as intended have been well characterized.
FDA's presentation to the 2012 Panel included a summary of the available safety and effectiveness information for intra-aortic balloon and control system devices when indicated for acute coronary syndrome, cardiac and non-cardiac surgery, or complications of heart failure, including adverse event reports from FDA's Manufacturer and User Facility Device Experience (MAUDE) database and available literature. Based on the available scientific literature, which supports that use of intra-aortic balloon and control system devices may be beneficial for patients when indicated for acute coronary syndrome, cardiac and non-cardiac surgery, or complications of heart failure, FDA recommended to the 2012 Panel that intra-aortic balloon and control system devices indicated for acute coronary syndrome, cardiac and non-cardiac surgery, or complications of heart failure be reclassified to class II (special controls). The 2012 Panel discussed and made recommendations regarding the regulatory classification of intra-aortic balloon and control system devices to either reconfirm to class III (subject to premarket approval application) or reclassify to class II (subject to special controls) as directed by section 515(i) of the FD&C Act. The 2012 Panel agreed with FDA's conclusion that the available scientific evidence is adequate to support the safety and effectiveness of intra-aortic balloon and control system devices when indicated for acute coronary syndrome, cardiac and non-cardiac surgery, or complications of heart failure. Several members of the 2012 Panel noted that not all available data supports the effectiveness of the device conclusively; however, there was consensus that IABPs improve hemodynamics and provide an important tool for clinicians in treating a patient population with high morbidity and mortality. The 2012 Panel also acknowledged that intra-aortic balloon and control systems are life-supporting devices and provided the following rationale per § 860.93 for recommending that IABPs for acute coronary syndrome, cardiac and non-cardiac surgery, or complications of heart failure be reclassified to class II: (1) There is a wealth of clinical experience that attests to the benefit of the device; (2) there is an important advantage to use of intra-aortic balloon counter-pulsation to provide hemodynamic stability or protection from ischemia in precarious or unstable patients; and (3) the recommended special controls will mitigate the health risks associated with the device.
The 2012 Panel also agreed with the identified risks to health presented at the meeting; however, the 2012 Panel recommended that compartment syndrome, death, and stroke be added to the list of risks to health and that ischemia be added to “vessel occlusion resulting in infarction to an organ (including paraplegia)”. FDA agrees with the 2012 Panel's recommendations and modified the risks to health accordingly as outlined in section V. The 2012 Panel also agreed with FDA's proposed special controls outlined in section VIII; however, the 2012 Panel further recommended that information about IABP clinical trials should be added to the device labeling as a special control. FDA does not agree with this recommendation from the 2012 Panel. FDA determined that it was not appropriate to require that clinical trial information be included in the device labeling as a special control because available clinical trial information would most accurately represent the device type, not individual devices, so including such information in the labeling for a specific device may be misleading. On this basis, the special controls outlined in section VIII were not modified based on this recommendation from the 2012 Panel.
The 2012 Panel transcript and other meeting materials are available on FDA's Web site (Ref. 10).
FDA believes that the following special controls, together with general controls, are sufficient to mitigate the risks to health described in section V: (1) Appropriate analysis and non-clinical testing must be conducted to validate electromagnetic compatibility and electrical safety of the device; (2) appropriate software verification, validation, and hazard analysis must be performed; (3) the device must be demonstrated to be biocompatible; (4) sterility and shelf life testing must demonstrate the sterility of patient-contacting components and the shelf life of these components; (5) non-clinical performance evaluation of the device must provide a reasonable assurance of safety and effectiveness for mechanical integrity, durability, and reliability; and (6) labeling must bear all information required for the safe and effective use of the device, including a detailed summary of the device- and procedure-related complications pertinent to use of the device.
Intra-aortic balloon and control system devices are prescription devices restricted to patient use only upon the authorization of a practitioner licensed by law to administer or use the device. (Proposed 21 CFR 870.3535(a); see section 520(e) of the FD&C Act and 21 CFR 801.109 (Prescription devices)). Prescription-use requirements are a type of general controls authorized under section 520(e) of the FD&C Act and defined as a general control in section 513(a)(1)(A)(i) of the FD&C Act; and under 21 CFR 807.81, the device would continue to be subject to 510(k) notification requirements.
In accordance with section 515(b) of the FD&C Act, FDA is proposing to require that a PMA be filed with the Agency for intra-aortic balloon and control systems indicated for septic shock or pulsatile flow generation within 90 days after issuance of any final order based on this proposal. An applicant whose device was legally in commercial distribution before May 28, 1976, or whose device has been found to be substantially equivalent to such a device, will be permitted to continue marketing such class III devices during FDA's review of the PMA provided that the PMA is timely filed. FDA intends to review any PMA for the device within 180 days of the date of filing. FDA cautions that under section 515(d)(1)(B)(i) of the FD&C Act, the Agency may not enter into an agreement to extend the review period for a PMA beyond 180 days unless the Agency finds that “the continued availability of the device is necessary for the public health.”
An applicant whose device was legally in commercial distribution before May 28, 1976, or whose device has been found to be substantially equivalent to such a device, who does not intend to market such device for septic shock or pulsatile flow generation, may remove such intended uses from the device's labeling by initiating a correction within 90 days after issuance of any final order based on this proposal. Under 21 CFR 806.10(a)(2) a device manufacturer or importer initiating a correction to remedy a violation of the FD&C Act that
FDA intends that under § 812.2(d), the preamble to any final order based on this proposal will state that, as of the date on which the filing of a PMA is required to be filed, the exemptions from the requirements of the IDE regulations for preamendments class III devices in § 812.2(c)(1) and (c)(2) will cease to apply to any device that is: (1) Not legally on the market on or before that date, or (2) legally on the market on or before that date but for which a PMA is not filed by that date, or for which PMA approval has been denied or withdrawn.
If a PMA for a class III device is not filed with FDA within 90 days after the date of issuance of any final order requiring premarket approval for the device, the device would be deemed adulterated under section 501(f) of the FD&C Act. The device may be distributed for investigational use only if the requirements of the IDE regulations are met. The requirements for significant risk devices include submitting an IDE application to FDA for review and approval. An approved IDE is required to be in effect before an investigation of the device may be initiated or continued under § 812.30. FDA, therefore, recommends that IDE applications be submitted to FDA at least 30 days before the end of the 90-day period after the issuance of the final order to avoid interrupting any ongoing investigations.
Because intra-aortic balloon and control systems indicated for acute coronary syndrome, cardiac and non-cardiac surgery, or complications of heart failure, can currently be marketed after receiving clearance of an application for premarket notification and FDA is proposing to reclassify these devices as class II requiring clearance of an application for premarket notification, this order, if finalized, will not require a new premarket submission for intra-aortic balloon and control systems indicated for acute coronary syndrome, cardiac and non-cardiac surgery, or complications of heart failure.
As required by section 515(b) of the FD&C Act, FDA is publishing its proposed findings regarding: (1) The degree of risk of illness or injury designed to be eliminated or reduced by requiring that this device have an approved PMA when indicated for septic shock or pulsatile flow generation and (2) the benefits to the public from the use of intra-aortic balloon and control systems indicated for septic shock or pulsatile flow generation.
These findings are based on the reports and recommendations of the advisory committees (panels) for the classification of these devices along with information submitted in response to the 515(i) order (74 FR 16214; April 9, 2009), and any additional information that FDA has obtained. Additional information regarding the risks as well as classification associated with this device type is discussed in Section XI B.,
An intra-aortic balloon and control system is a prescription device that consists of an inflatable balloon, which is placed in the aorta to improve cardiovascular functioning during certain life-threatening emergencies, and a control system for regulating the inflation and deflation of the balloon. The control system, which monitors and is synchronized with the electrocardiogram, provides a means for setting the inflation and deflation of the balloon with the cardiac cycle.
When indicated for septic shock or pulsatile flow generation, FDA concludes that the safety and effectiveness of these devices have not been established by adequate scientific evidence. There is limited scientific evidence regarding the effectiveness of intra-aortic balloon and control system devices for these indications. Specifically, based on FDA's review of the published scientific literature, it appears that there are no studies regarding intra-aortic balloon and controls systems indicated for septic shock in humans. The use of the IABP for pulsatile flow generation made up less than 1 percent of the indications for use evaluated in FDA's literature search. Three observational studies regarding pulsatile flow generation were found during FDA's review of the literature. All three articles state that the device is associated with low mortality and adverse event rates; however, none of the studies was stratified by indication. As a result, it cannot be concluded that these results apply to septic shock or pulsatile flow generation specifically.
FDA presented the findings of our literature search for intra-aortic balloon and control system devices for the indications of septic shock and pulsatile flow generation to the 2012 Panel on December 5, 2012. Based on FDA's findings, the Panel recommended that available scientific evidence is not adequate to support the effectiveness of intra-aortic balloon and control system devices for the indications of septic shock or pulsatile flow generation. As a result, the 2012 Panel concluded that intra-aortic balloon and control system devices for the indications of septic shock or pulsatile flow generation should remain in class III (subject to premarket approval application). The 2012 Panel transcript and other meeting materials are available on FDA's Web site (Ref. 10).
The risks to health for intra-aortic balloon and control system devices for the indications of septic shock or pulsatile flow generation are the same as outlined in section V.
As discussed previously in this document, there is limited scientific evidence regarding the effectiveness of intra-aortic balloon and control system devices for the indications of septic shock or pulsatile flow generation. For indications of septic shock, the hemodynamic effects generated by use of intra-aortic balloon and control systems do not address the fundamental hemodynamic derangements of septic shock syndrome. FDA is not aware of any theoretical or demonstrated benefit to using intra-aortic balloon and control systems for this clinical syndrome. For indications of pulsatile flow generation, it is impossible to estimate the direct effect of the devices on patient outcomes based on the lack of effectiveness data for this indication as described previously.
A PMA for intra-aortic balloon and control system devices indicated for septic shock or pulsatile flow generation must include the information required by section 515(c)(1) of the FD&C Act. Such a PMA should also include a detailed discussion of the risks identified previously, as well as a discussion of the effectiveness of the device for which premarket approval is sought. In addition, a PMA must include all data and information on: (1) Any risks known, or that should be reasonably known, to the applicant that have not been identified in this
A PMA must include valid scientific evidence to demonstrate reasonable assurance of the safety and effectiveness of the device for its intended use (see § 860.7(c)(1)). Valid scientific evidence is “evidence from well-controlled investigations, partially controlled studies, studies and objective trials without matched controls, well-documented case histories conducted by qualified experts, and reports of significant human experience with a marketed device, from which it can fairly and responsibly be concluded by qualified experts that there is reasonable assurance of the safety and effectiveness of a device under its conditions of use . . . Isolated case reports, random experience, reports lacking sufficient details to permit scientific evaluation, and unsubstantiated opinions are not regarded as valid scientific evidence to show safety or effectiveness.” (see § 860.7(c)(2)).
Before requiring the filing of a PMA for a device, FDA is required by section 515(b)(2)(D) of the FD&C Act to provide an opportunity for interested persons to request a change in the classification of the device based on new information relevant to the classification. Any proceeding to reclassify the device will be under the authority of section 513(e) of the FD&C Act.
A request for a change in the classification of intra-aortic balloon and control system devices indicated for septic shock or pulsatile flow generation is to be in the form of a reclassification petition containing the information required by § 860.123, including new information relevant to the classification of the device.
Prior to the amendments by FDASIA, section 513(e) of the FD&C Act provided for FDA to issue regulations to reclassify devices and section 515(b) of the FD&C Act provided for FDA to issue regulations to require approval of an application for premarket approval for preamendments devices or devices found to be substantially equivalent to preamendments devices. Because sections 513(e) and 515(b) as amended require FDA to issue final orders rather than regulations, FDA will continue to codify reclassifications and requirements for approval of an application for premarket approval, resulting from changes issued in final orders, in the Code of Federal Regulations. Therefore, under section 513(e)(1)(A)(i) of the FD&C Act, as amended by FDASIA, in this proposed order, we are proposing to revoke the requirements in § 870.4360 related to the classification of non-roller type cardiopulmonary and circulatory bypass blood pump devices as class III devices and to codify the reclassification of non-roller type cardiopulmonary and circulatory bypass blood pump devices into class II.
The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.
This proposed order refers to collections of information that are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520).
The collections of information in 21 CFR part 814 have been approved under OMB control number 0910–0231. The collections of information in part 807, subpart E, have been approved under OMB control number 0910–0120.
The effect of this order, if finalized, is to shift certain devices from the 510(k) premarket notification process to the PMA process. FDA estimates that there will be two fewer 510(k) submissions as a result of this order, if finalized. Based on FDA's most recent estimates, this will result in a 91-hour burden decrease to OMB control number 0910–0120, which is the control number for the 510(k) premarket notification process. However, because FDA does not expect to receive any new PMAs as a result of this order, if finalized, we estimate no burden increase to OMB control number 0910–0231 based on this order, if finalized. Therefore, on net, FDA expects a burden hour decrease of 91 due to this proposed regulatory change.
The collections of information in 21 CFR part 812 have been approved under OMB control number 0910–0078.
FDA is proposing that any final order based on this proposed order become effective 90 days after date of publication of the final order in the
Interested persons may submit either electronic comments regarding this document to
The following references have been placed on display in the Division of Dockets Management (see
Medical devices, Cardiovascular devices.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, it is proposed that 21 CFR part 870 be amended as follows:
21 U.S.C. 351, 360, 360c, 360e, 360j, 371.
(a)
(b)
(i) Appropriate analysis and non-clinical testing must be conducted to validate electromagnetic compatibility and electrical safety of the device;
(ii) Appropriate software verification, validation, and hazard analysis must be performed;
(iii) The device must be demonstrated to be biocompatible;
(iv) Sterility and shelf life testing must demonstrate the sterility of patient-contacting components and the shelf life of these components;
(v) Non-clinical performance evaluation of the device must provide a reasonable assurance of safety and effectiveness for mechanical integrity, durability, and reliability; and
(vi) Labeling must bear all information required for the safe and effective use of the device, including a detailed summary of the device- and procedure-related complications pertinent to use of the device.
(2) Class III (premarket approval) when the device is indicated for septic shock and pulsatile flow generation.
(c)
Food and Drug Administration, HHS.
Notification of public meeting; request for comments.
The Food and Drug Administration (FDA or Agency) is announcing a public meeting regarding FDA's implementation of Title VII of the Food and Drug Administration Safety and Innovation Act (FDASIA), which provides FDA with important new authorities to help it better protect the integrity of the drug supply chain. In addition to providing a general overview of Title VII and FDA's approach to implementing these provisions, the meeting will give interested persons an opportunity to provide input that will assist FDA in the development of regulations implementing two sections of Title VII, which relate to standards for admission of imported drugs and commercial drug importers. Specifically, FDA is seeking information on the types of information that importers should be required to provide under Title VII as a condition of admission. FDA is also seeking information regarding registration requirements for commercial drug importers and good importer practices to be established under Title VII.
The public meeting will be held on July 12, 2013, from 9 a.m. to 5 p.m. at the FDA White Oak Campus, 10903 New Hampshire Ave., Bldg. 31 Conference Center, the Great Room (rm. 1503), Silver Spring MD 20993. Please note that visitors to the White Oak Campus must enter through Building 1. The White Oak Campus location is a Federal facility with security procedures and limited seating. There is no fee to register for the meeting and registration will be on a first come, first serve basis. Early registration is recommended because seating is limited. Onsite registration will also be permitted if there is available space. See section IV of this document, “How to Participate in
Susan DeMars, Office of Global Regulatory Operations and Policy, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 32, rm. 3302, Silver Spring, MD 20993, 301–796–4635, email:
The globalization of the pharmaceutical market has created tremendous challenges for FDA, including dramatic increases in drug imports, complex and fragmented global supply chains, and increasing threats of fraudulent and substandard drugs. Title VII of FDASIA (Pub. L. 112–144) amends the Federal Food, Drug, and Cosmetic Act (the FD&C Act) to provide FDA with important new authorities to respond to these challenges and better ensure the safety, effectiveness, and quality of drugs imported into the United States. These authorities increase FDA's ability to collect and analyze data to make risk-informed decisions, employ risk-based approaches to facility oversight, partner with foreign regulatory authorities to leverage resources through information sharing and recognition of foreign inspections, and drive safety and quality throughout the supply chain. Implementation of these authorities will significantly advance the strategies set forth in the Pathway to Global Product Safety and Quality report published by FDA (available at
At the same time, implementation of Title VII of FDASIA is difficult and complex, and requires not only the development of new regulations, guidances, and reports, but also major changes in FDA information systems, processes, and policies. Since the enactment of FDASIA in July 2012, FDA has been working diligently to implement the provisions of Title VII and has prioritized these efforts based on public health impact in order to maximize use of the Agency's limited resources.
Sections 713 and 714 in Title VII of FDASIA relate to drugs imported or offered for import and commercial drug importers. Section 713 allows FDA to require, as a condition of granting admission to a drug imported or offered for import into the United States, that an importer electronically submit information demonstrating that the drug complies with applicable requirements of the FD&C Act. As specified in section 713, such information may include: Information demonstrating the regulatory status of the drug, such as the new drug application number, abbreviated new drug application number, investigational new drug number, or drug master file number; facility information, such as proof of registration and the unique facility identifier; indication of compliance with current good manufacturing practice (CGMP), testing results, certifications relating to satisfactory inspections, and compliance with the country of export regulations; and any other information deemed necessary and appropriate by the Secretary to assess compliance. Section 713 also allows FDA to take into account differences among importers and types of imported drugs and, based on the level of risk posed by the imported drug, provide for expedited clearance for those importers that volunteer to participate in partnership programs for highly compliant companies and pass a review of internal controls, including sourcing of foreign manufacturing inputs, and plant inspections. Section 713 requires FDA to adopt regulations implementing section 713 not later than 18 months after the date of enactment of FDASIA.
Section 714 requires commercial drug importers to register with FDA and submit a unique identifier for the principal place of business at the time of registration. FDA is to specify a unique facility identifier system to be used by registrants. Section 714 amends section 502(o) of the FD&C Act (21 U.S.C. 352(o)) to deem misbranded a drug imported or offered for import by a commercial importer of drugs not duly registered. Section 714 also requires FDA, in consultation with the Secretary of the Department of Homeland Security acting through U.S. Customs and Border Protection, to issue regulations establishing good importer practices that specify the measures an importer shall take to ensure that imported drugs are in compliance with the FD&C Act and the Public Health Service Act. Section 714 requires FDA to adopt regulations implementing section 714 not later than 36 months after the date of enactment of FDASIA.
The public meeting is an opportunity for FDA to share information regarding Title VII and the Agency's approach to implementation, and to obtain input from stakeholders that will assist FDA in developing regulations under sections 713 and 714.
The first part of the public meeting will consist of introductory presentations by FDA that will provide an overview to stakeholders regarding Title VII, including the new authorities granted to FDA under Title VII and their importance in ensuring drug safety, effectiveness, and quality; how Title VII relates to and will help advance FDA's larger strategic initiatives; the Agency's approach to implementation; and the progress achieved to date.
The second part of the meeting will be used to obtain input from stakeholders on issues relating to standards for admission of imported drugs, registration of commercial importers, and good importer practices that will assist FDA in the development of the regulations described previously. Individuals will have opportunities to express their views by making presentations at the meeting and submitting written comments to the dockets for these matters (see section V of this document).
FDA is particularly interested in obtaining information and public comment on the following topics:
1. How should the regulations implementing section 801(r) of the FD&C Act (21 U.S.C. 381(r)), as amended by section 713 of FDASIA, define “importer” as that term is used in 801(r)(l)?
2. What information should FDA require importers to submit at the time of entry that would demonstrate a drug's compliance with applicable requirements of the FD&C Act as a condition of granting admission of the drug into the United States?
3. What information could an importer submit to FDA at the time of entry to demonstrate compliance with applicable requirements of the FD&C Act relating to:
a. homeopathic drugs intended for human use,
b. articles intended for human drug compounding,
c. articles intended for animal drug compounding, and
d. drugs intended for research?
4. What facility information should FDA request from importers at the time of entry to help assess whether a drug
5. What information could importers submit at the time of entry to demonstrate compliance with country of export regulations in accordance with section 801(r)(2)(C) of the FD&C Act?
6. What information could importers submit at the time of entry to demonstrate that a drug offered for import complies with U.S. CGMP requirements?
7. What information could importers submit at the time of entry that would serve as evidence of satisfactory inspection, such as by a foreign government or an agency of a foreign government?
8. Should FDA require that importers submit certificates of analysis (COAs) to the Agency as a condition of admission under section 801(r) of the FD&C Act? If so, how could an importer demonstrate a COA's authenticity?
9. Section 801(r)(4)(B)(i) of the FD&C Act permits FDA, as appropriate, to consider differences among imports and types of drugs and “based on the level of risk posed by the imported drug, provide for expedited clearance for those importers that volunteer to participate in partnership programs for highly compliant companies and pass a review of internal controls, including sourcing of foreign manufacturing inputs, and plant inspections.”
a. What criteria should FDA use to evaluate potential participants in “voluntary partnership programs for highly compliant companies”?
b. How could FDA take into account differences among importers and types of drugs to allow for expedited entry as part of a voluntary partnership program?
c. What risk factors should FDA consider when determining drug admissibility under a voluntary partnership program?
10. What benefits and burdens may be created by requiring drug importers to electronically submit information demonstrating that a drug complies with applicable requirements of the FD&C Act as a condition of admission? How could we minimize any possible burdens? How do we strike a reasonable balance between rigor and efficiency in requiring information that is both reliable and yet can be submitted and reviewed efficiently?
1. How should the regulations implementing section 714 of FDASIA (section 801(s) of the FD&C Act) define “commercial importer” to ensure that the appropriate entities are required to register with FDA and meet requirements regarding good importer practices (GIP)? Should these “commercial importers” be the same entities as the “importers” required to comply with the standards for admission to be adopted under section 801(r) of the FD&C Act?
2. Under section 801(s)(1) of the FD&C Act, the registration regulations will apply to commercial importers of “drugs.” A “drug” is defined in section 201(g)(1) of the FD&C Act (21 U.S.C. 321(g)(1)) and includes, but is not limited to, finished dosage form drug products, drugs for further processing, active pharmaceutical ingredients, and other drug components, including inactive ingredients. Should commercial importers of certain types of drugs, such as inactive ingredients, be exempt from the commercial importer registration requirements? Should the importation of drugs for certain purposes (e.g., research use) be exempt from registration?
3. What information should commercial importers be required to submit as part of their registration?
4. What benefits and burdens might be created by requiring commercial drug importers to register with FDA? How can we minimize any possible burdens (e.g., through gradual implementation, exemption of certain commercial importers, use of other alternatives)?
1. How might FDA structure the GIP regulations to avoid imposing redundant regulatory requirements on commercial importers that also are drug manufacturers and therefore would be subject to both the GIP and CGMP requirements?
2. Should the GIP regulations require commercial importers of drugs to establish drug safety management programs to ensure that imported drugs meet the requirements of the FD&C Act and the Public Health Service Act, as applicable? If so, what matters (e.g., procedures, personnel) should the GIP regulations require commercial importers to address in such programs?
3. What drug safety management programs or other measures do commercial importers currently have in place to ensure that imported drugs are manufactured in compliance with applicable FDA requirements? How do these programs and measures differ for different “types” of drugs?
4. Should the GIP regulations include qualifications and training for personnel who perform GIP activities? If so, what qualifications and training should be required?
5. Should the GIP regulations include a requirement for commercial importers to assess whether it is appropriate to import a particular drug from a particular foreign supplier? If so, what information on the drug and the supplier should the commercial importer be required to consider as part of this assessment?
6. Should commercial importers be required to conduct activities to verify that a drug that is offered for import is in compliance with applicable U.S. requirements (e.g., the CGMP regulations) and are not adulterated under section 501 of the FD&C Act (21 U.S.C. 351) or misbranded under section 502 of the FD&C Act? If so, what supplier verification activities should commercial importers be required to conduct?
7. Should there be different supplier verification or other GIP requirements for different “types” of drugs? Should there be different requirements for particular types of finished dosage form drug products that might be associated with different levels of risk (e.g., sterile injectables, drugs that require temperature controls)? If so, what should these requirements be?
8. Should the GIP regulations require commercial importers to obtain a COA for each imported drug? Should such a requirement apply only to certain types of drugs or commercial importers? If commercial importers are required to obtain COAs, should the commercial importer also be required to conduct testing to verify the accuracy of the COA?
9. Should the GIP regulations include specific requirements for drugs imported for export in accordance with section 801(d)(3) of the FD&C Act? If so, what should these requirements be?
10. How should the GIP regulations reflect or incorporate the requirements concerning the standards for admission of imported drugs under section 801(r) of the FD&C Act? For example, should the GIP requirements include the adoption of procedures to ensure that the commercial importer submits the compliance information required under section 801(r) and the regulations implementing that section? If so, what procedures should commercial importers be required to follow to ensure that these requirements are met?
11. Should the GIP regulations require commercial importers to take corrective actions when the drugs they import or offer for import are not in compliance with applicable U.S. requirements? If so, what actions should importers be required to take?
12. Should the GIP regulations include a requirement for commercial importers to list the drugs they import or offer for import? If so, what
13. What records should commercial importers be required to maintain under the GIP regulations?
14. What other matters, if any, should the GIP regulations address?
15. How should FDA take into account “differences among importers and types of imports, including based on the level of risk posed by the imported product,” in determining reasonable time periods for commercial importers to come into compliance with the GIP regulations under section 714(d)(3) of FDASIA? In considering such differences, how should FDA determine the level of risk posed by an imported drug?
16. What benefits and burdens might be created by requiring commercial importers to comply with GIP regulations? How can we minimize any possible burdens (e.g., through gradual implementation, exemption of certain commercial importers, use of other alternatives)?
Individuals who wish to present at the public meeting must register on or before July 5, 2013, through the FDASIA Web site at
Table 1 of this document provides information on participating in the meeting and on submitting comments to the docket. See table 2 of this document for a list of docket numbers and corresponding sections of FDASIA and topics.
Regardless of attendance at the public meeting, interested persons may submit either electronic comments regarding this document to the Federal eRulemaking Portal at
Transcripts of the meeting will be available for review at the Division of Dockets Management and
Department of Veterans Affairs.
Advanced notice of proposed rulemaking; correction.
In a document published in the
The comment period for the proposed rule published May 13, 2013, at 78 FR 27882, remains open until July 12, 2013
Tom Leney, Executive Director of the Office of Small and Disadvantaged Business Utilization (00SB), Department of Veterans Affairs, 810 Vermont Ave. NW., Washington, DC 20420, (202) 461–4300. This is not a toll-free number.
The advance notice of proposed rulemaking (FR Doc. 2013–11326) that VA published on May 13, 2013, at 78 FR 27882, contained two errors—the word “advanced” was missing from the
In the first column, second sentence of the
Environmental Protection Agency (EPA).
Notice of intent to hold public hearings.
On February 5, 2013, EPA proposed a Best Available Retrofit Technology (BART) determination for emissions of oxides of nitrogen (NO
EPA will announce dates and locations for the public hearings at a later time in the
The public hearings will be held at various locations in Indian country and in the state of Arizona. Please see the section on
Anita Lee, EPA Region 9, (415) 972–3958,
EPA intends to hold public hearings at one location each on the Navajo Reservation, on the Hopi Reservation, and in Page, Phoenix, and Tucson, Arizona. These hearings will provide interested parties the opportunity to present facts, views, or arguments concerning the proposed rule requiring NGS to meet emission limits for NO
Written statements and supporting information submitted during the comment period will be considered with the same weight as any oral comments and supporting information presented at the public hearing. Written comments must be postmarked on or before the last day of the comment period, August 5, 2013.
If you are unable to attend the hearing but wish to submit comments on the proposed rule, you may submit comments, identified by docket number EPA–R09–OAR–2013–0009, by one of the following methods:
(1)
(2)
(3)
For more detailed instructions concerning how to submit comments on this proposed rule, and for more information on our proposed rule, please see the notice of proposed rulemaking, published in the
Environmental protection, Air pollution control, Indians, Intergovernmental relations, Nitrogen dioxide.
Environmental Protection Agency (EPA).
Proposed rule; withdrawal and new issuance.
On August 26, 2008, EPA published a proposed rule to approve a revision to the Commonwealth of Pennsylvania (Pennsylvania) State Implementation Plan (SIP) submitted by the Pennsylvania Department of Environmental Protection (PADEP) on behalf of Philadelphia Air Management Services (AMS). The SIP revision, submitted to EPA on September 29, 2006 (the 2006 SIP revision), consists of a demonstration that Philadelphia County is meeting the requirements of reasonably available control technology (RACT) of the Clean Air Act (CAA) for nitrogen oxides (NO
The proposed rule published on August 26, 2008 (73 FR 50270) is withdrawn as of July 19, 2013. Written comments on EPA's proposed conditional approval action must be received on or before July 19, 2013.
Submit your comments, identified by Docket ID Number EPA–R03–OAR–2008–0603 by one of the following methods:
A.
B.
C.
D.
Emlyn Vélez-Rosa, (215) 814–2038, or by email at
On September 29, 2006, and on June 22, 2010, PADEP submitted on behalf of AMS two SIP revisions for Philadelphia County addressing the requirements of RACT under the 1997 8-hour ozone NAAQS.
Ozone is formed in the atmosphere by photochemical reactions between VOC, NO
Since the 1970's, EPA has consistently interpreted RACT to mean the lowest emission limit that a particular source is capable of meeting by the application of the control technology that is reasonably available considering technological and economic feasibility (
Section 182(b)(2) and (f) of the CAA requires that moderate (or worse) ozone nonattainment areas, as well as marginal and attainment areas in the ozone transport region (OTR) established pursuant to section 184 of the CAA, implement RACT controls on all major VOC and NOx emission sources (point sources) and on all sources and source categories covered by a control technique guideline (CTG) issued by EPA. A major source in a nonattainment area is defined as any stationary source that emits or has the potential to emit NOx and VOC emissions above a certain applicability threshold that is based on the ozone nonattainment classification of the area: marginal, moderate, serious, or severe. (
Philadelphia County was designated under the 1-hour ozone NAAQS as part of the Philadelphia-Wilmington-Trenton severe ozone nonattainment area.
On July 18, 1997 (62 FR 38856), EPA promulgated an 8-hour ozone NAAQS. On April 30, 2004, Philadelphia County was designated under the 1997 8-hour ozone NAAQS as part of the Philadelphia-Wilmington-Atlantic City moderate ozone nonattainment area.
On November 29, 2005 (70 FR 71612), EPA published an ozone implementation rule to address nonattainment SIP requirements for the 1997 8-hour ozone NAAQS (the Phase 2 Ozone Implementation Rule). This rule addressed various statutory requirements, including the requirement for RACT level controls for sources located within nonattainment areas generally, and controls for NO
As set forth in the preamble to the Phase 2 Ozone Implementation Rule, a certification must be accompanied by appropriate supporting information such as consideration of information received during the public comment period and consideration of new data. This information may supplement existing RACT guidance documents that were developed for the 1-hour standard, such that the state's SIP accurately reflects RACT for the 1997 8-hour ozone standard based on the current availability of technically and economically feasible controls. Adoption of new RACT regulations will occur when states have new stationary sources not covered by existing RACT regulations, or when new data or technical information indicates that a previously adopted RACT measure does not represent a newly available RACT control level. Another 1997 8-hour ozone NAAQS requirement for RACT is to submit a negative declaration if there are no CTG major sources of VOC and NO
For addressing interstate transport of ozone pollution, EPA determined in the Phase 2 Ozone Implementation Rule that the regional NO
In November 2008, several parties challenged EPA's Phase 2 Ozone Implementation Rule. In particular, EPA's determination that compliance with the NO
On September 29, 2006, PADEP submitted on behalf of AMS a SIP revision for Philadelphia County to meet the RACT requirements for the 1997 8-hour ozone NAAQS. The 2006 SIP revision consists of a demonstration that Philadelphia County has met the RACT requirements for NO
On August 26, 2008 (73 FR 50270), EPA published a notice of proposed rulemaking (NPR) proposing approval of the 2006 SIP revision. However, the 2006 SIP revision relies on the NO
Upon further review, EPA also determined that the 2006 SIP revision does not specifically and sufficiently address if the source-specific RACT controls for 46 major sources in Philadelphia County that were previously approved in the SIP under the 1-hour ozone NAAQS continue to represent RACT under the 1997 8-hour ozone NAAQS. Therefore, to satisfy the major source RACT requirement for the 1997 8-hour ozone NAAQS, AMS needs to either: (1) Provide a certification that previously adopted source-specific RACT controls approved by EPA in Pennsylvania's SIP under the 1-hour ozone NAAQS for major sources in Philadelphia County (as listed in 40 CFR 52.2020(d)(1)) continue to adequately represent RACT for the 1997 8-hour ozone NAAQS, or (2) perform a source-specific RACT analysis for each source which controls are not currently adequately representing RACT under the 1997 8-hour ozone standard.
On June 22, 2010, PADEP submitted another SIP revision addressing Philadelphia County's RACT requirements under the 1997 8-hour ozone standard. The 2010 SIP revision consists of: (1) The adoption of two regulations to meet CTG RACT requirements, and (2) a negative declaration for a CTG source category.
Since the 2006 SIP revision relies on the NO
Nevertheless, in this rulemaking action, EPA is proposing conditional approval of Philadelphia County's 1997 8-hour ozone RACT demonstration
In the 2006 SIP revision, in lieu of adopting regulations to address VOC CTG RACT requirements, Federally-enforceable permits were included for the following four major VOC sources in Philadelphia County: (1) Philadelphia Gas Works—Richmond Station, (2) Philadelphia Energy Solutions Refinery (formerly Sunoco Philadelphia Refinery), (3) Aker Philadelphia Shipyard, and (4) Sunoco Chemicals. In Section 4 of the 2006 SIP revision, AMS certified that these permits established RACT controls that are as stringent as EPA's presumptive RACT provided in the applicable CTG documents for the specific source categories. Table 1 identifies the four major VOC sources and the applicable CTG RACT requirements covered by these permits.
However, in the 2006 SIP revision, Philadelphia Gas Works—Richmond Station and Philadelphia Energy Solutions Refinery (formerly Sunoco Philadelphia Refinery) were erroneously defined as natural gas processing plants under EPA's CTG “Control of Volatile Organic Equipment Leaks from Natural Gas/Gasoline Processing Plants,” (EPA–450/2–83–007, December 1983). Subsequently, as part of the 2010 SIP revision, AMS submitted a negative declaration demonstrating that no sources exist in Philadelphia County for this CTG source category.
In addition, the 2010 SIP revision adopts VOC RACT rules that address the following CTGs: (1) “Control Techniques Guidelines for Shipbuilding and Ship Repair Operations (Surface Coating” (61 FR 44050, August 27, 1996); (2) “Control of Volatile Organic Compound Emissions from Air Oxidation Processes in Synthetic Organic Chemical Manufacturing Industry” (EPA–450/3–84–015, December 1984); and (3) “Control of Volatile Organic Compound Emissions from Reactor Processes and Distillation Operations in Synthetic Organic Chemical Manufacturing Industry” (EPA–450/4–91–031, August 1993). Therefore, the 2010 SIP revisions addresses each of the CTG requirements listed in Table 1 and it supersedes Section 4 of the 2006 SIP revision addressing these CTG RACT requirements.
For Philadelphia Gas Works—Richmond Station and Philadelphia Energy Solutions (formerly Sunoco Refinery), which were erroneously defined as natural gas processing plants in the 2006 SIP revision, EPA approved source-specific RACT evaluations under the 1-hour ozone standard.
In addition to the 2010 SIP revision's negative declaration, the 2006 SIP revision includes a negative declaration for the VOC source category defined under EPA's CTG “Control of Volatile Organic Emissions from Existing Stationary Sources, Volume VII: Factory Surface Coating of Flat Wood Paneling” (EPA–450/2–78–032, June 1978). Table 2 below lists the negative declarations submitted by AMS in the 2006 and 2010 SIP revisions, which EPA is proposing to conditionally approve. AMS certified that these VOC CTG source categories do not exist in Philadelphia County. Therefore, AMS does not need to adopt regulations addressing the applicable CTGs for these source categories.
AMS Regulation (AMR) V (“Control of Emissions of Organic Substances From Stationary Sources”) and PADEP Regulation Title 25, Chapter 129 contain the CTG and non-CTG VOC RACT controls that were implemented and approved in Philadelphia County SIP under the 1-hour ozone NAAQS. The 2006 SIP revision identifies Philadelphia County's VOC RACT regulations for which AMS has provided the required evaluation and is certifying as currently representing RACT under the 1997 8-hour ozone NAAQS. Although alternative control technology documents (ACTs) are not regulatory documents and have no legal effect on state regulations, EPA requires that states verify that ACTs have been considered in the RACT program development process. Therefore, Philadelphia County included ACTs in their review of applicable RACT requirements in the 2006 SIP revision. Further details of Philadelphia County's RACT determination for the 1997 8-hour ozone NAAQS can be found in the technical support document (TSD) prepared for this rulemaking action.
The 2010 SIP revision adopts the following regulations to meet CTG RACT requirements: (1) AMR V, section XV “Control of Volatile Organic Compounds (VOC) from Marine Vessel Coating Operations” and (2) AMR V, section XVI “Synthetic Organic Manufacturing Industry (SOCMI) Air Oxidation, Distillation, and Reactor Processes.” These regulations are in accordance with EPA's presumptive RACT provided in the following CTGs: (1) “Control Techniques Guidelines for Shipbuilding and Ship Repair Operations (Surface Coating)” (61 FR 44050, August 27, 1996), (2) “Control of Volatile Organic Compound Emissions from Air Oxidation Processes in Synthetic Organic Chemical Manufacturing Industry” (EPA–450/3–84–015, December 1984), and (3) “Control of Volatile Organic Compound Emissions from Reactor Processes and Distillation Operations in Synthetic Organic Chemical Manufacturing Industry” (EPA–450/4–91–031, August 1993). The 2010 SIP revision also amends AMR V, section I “Definitions” for incorporating various definitions applicable to the adopted provisions in Sections XV and XVI. These definitions are in accordance with EPA's recommendations in the applicable CTGs. These amendments to AMR V were adopted by AMS on April 26, 2010 and became effective upon adoption.
AMR V, section XV is applicable to marine vessel coating operations at a facility at which the total potential VOC emissions equal or exceed 25 tons (22.75 metric tons) per year; or the actual VOC emissions from all marine vessel coating operations exceed 15 pounds (7 kilograms) per day or 2.7 tons (2,455 kilograms) per year. The regulation establishes VOC emissions limits from general use coatings and from various specialty coatings. The limits, provided in Table 3 below, are expressed in two sets of equivalent units: grams/liter coating (minus water and exempt compounds) or grams/liter of solids. The limits are identical to those recommended in the corresponding CTG document, except that the cold-weather was specified to a period of every year, November 1st through March 31st. Further, for any coating used in a marine vessel coating operation for which the regulation does not provide an emissions standard, AMR V, section XV establishes a maximum VOC content limit of 340 grams/liter (minus water and exempt solvents) or 571 grams per liter solids.
AMR V, section XV also specifies as RACT the following cleanup requirements to minimize VOC emissions: (1) Storing all waste materials containing VOC, including cloth and paper, in closed containers; (2) maintaining lids on any VOC-bearing materials when not in use; and (3) using enclosed containers or VOC recycling equipment to clean spray gun equipment.
AMR V, section XVI applies to a vent stream from an air oxidation unit processes, distillation operations, or reactor processes in the SOCMI. The regulation is limited to vent streams from reactor processes and distillation operations producing one or more of the chemicals listed in Appendix A of “Control of Volatile Organic Compound Emissions from Reactor Processes and Distillation Operations in Synthetic Organic Chemical Manufacturing Industry (SOCMI) for Reactor and Distillation CTG” (EPA–450/4–91–031, August 1993) and vent streams from an air oxidation unit process producing one or more of the chemicals listed in 40 CFR 60.617.
The owner or operator of an affected source subject to AMR V, section XVI is required to comply with the New Source Performance Standards (NSPS) requirements found in 40 CFR part 60, subpart III, subpart NNN, and/or subpart RRR, with some exceptions listed. The NSPS requirements for SOCMI sources are essentially identical to those recommendations in the applicable CTGs, and therefore are as stringent as EPA's presumptive RACT. An air oxidation unit process, a distillation operation or reactor process in SOCMI subject to AMR V, section XVI must comply with either one of the following standards: (1) Reduction of emissions of total organic compounds (TOC) (minus methane and ethane) by 98 weight-percent, or to a TOC (minus methane and ethane) concentration of 20 ppmv on a dry basis corrected to 3 percent oxygen, whichever is less stringent; (2) combustion of the emissions in a flare that meets the requirements of 40 CFR 60.18; or (3) maintenance of a total resource effectiveness (TRE) index value greater than 1.0 without use of VOC emission control devices.
The TRE index is a measure of the supplemental total resource requirement per unit of VOC reduction, associated with VOC control by a flare or incinerator. The TRE index value can be determined for each vent stream for which the off-gas characteristics are known, including: flow rate, hourly VOC emissions, corrosion properties, and net heating value. AMR V, section XVI provides two equations for calculating the TRE index value: (1) For a vent stream controlled by a flare, and (2) a vent stream controlled by an incinerator. For purposes of complying with maintaining a TRE index value greater than 1.0 without the use of VOC emission control devices, the owner or operator of a facility affected should calculate the TRE index value of the vent stream using the equation for incineration. The TRE index value of a non-halogenated vent stream is determined by calculating values using both the incinerator equation and the flare equation, and selecting the lower of the two values.
EPA finds that the provisions adopted in AMR V, sections XV and XVI and the amendments of AMR V, section I are consistent with the CTG documents issued by EPA and that they represent RACT under the 1997 8-hour ozone standard for these VOC source categories in Philadelphia County. Thus, EPA is proposing conditional approval of the 2010 SIP revision as part of Philadelphia County's RACT demonstration for the 1997 8-hour ozone NAAQS.
The 2006 SIP revision demonstrates that AMR VII (“Control of Emissions of Nitrogen Oxides From Stationary Sources”) and PADEP Regulation Title 25, Chapter 129 (“Standards for Sources”) contain NO
In the 2006 SIP revision, AMS also certifies that PADEP's interstate pollution transport regulations currently represent NO
AMS is implementing PADEP's regulation 25 Pa. Code sections 129.91 through 129.95 as RACT for the 1997 8-hour ozone standard for all major sources of NO
Under the 1-hour ozone NAAQS, EPA previously approved into Pennsylvania's SIP source-specific RACT determinations for 46 major sources of VOC and NO
In this rulemaking action, EPA is withdrawing its August 26, 2008 NPR (73 FR 50270), which proposed to approve the 2006 SIP revision submitted by PADEP on behalf of AMS as Philadelphia County's 1997 8-hour ozone RACT demonstration in accordance with the Court's Opinion in
Once EPA has determined that AMS has satisfied this condition, EPA shall remove the conditional nature of its approval and Philadelphia County's 1997 8-hour ozone RACT demonstration will, at that time, receive a full approval status. Should AMS fail to meet the condition specified above, the final conditional approval of Philadelphia County's 1997 8-hour ozone RACT demonstration will convert to a disapproval. EPA is soliciting public comments on the issues discussed in
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely proposes to approve state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this proposed action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);
• does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4);
• does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, this proposed rule, pertaining to Philadelphia County's RACT under the 1997 8-hour ozone NAAQS, does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the SIP is not approved to apply in Indian country located in the state, and EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law.
Environmental protection, Air pollution control, Nitrogen dioxide, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.
42 U.S.C. 7401
Office of Governmentwide Policy (OGP), General Services Administration (GSA).
Proposed rule.
GSA is proposing to amend the Federal Management Regulation (FMR) provisions pertaining to the use of United States air carriers for cargo under the provisions of the “Fly America Act.” This proposed rule would additionally update the current provisions in the FMR regarding the Cargo Preference Act of 1954, as amended. Also, this proposed rule would amend the Federal Management Regulation (FMR) to state clearly that this part applies to all agencies and wholly-owned Government corporations except where otherwise expressly provided.
Interested parties should submit comments in writing on or before July 19, 2013 to be considered in the formulation of a final rule.
Submit comments in response to FMR Case 2012–102–5 by any of the following methods:
•
•
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The Regulatory Secretariat at 202–501–4755, for information pertaining to status or publication schedules. For clarification of content, contact Ms. Lee Gregory, Office of Governmentwide Policy, at 202–501–1533 or email at
This proposed rule, if adopted, would inform readers where to find additional information regarding bilateral or multilateral air transport agreements, to which the United States Government and the government of a foreign country are parties, and which the Department of Transportation has determined meets the requirements of the Fly America Act.
As these agreements qualify as exceptions to the use of U.S. flag air carrier service mandated by FMR section 102–117.135(a), this proposed rule, if adopted, would advise of an Internet-based source of information regarding the use of foreign air carriers under the terms of these bilateral or multilateral agreements. Additionally, this proposed rule would incorporate language regarding other exceptions to the Fly America Act and would more clearly define who would be subject to the provisions implementing the Fly America Act and the Cargo Preference Act.
The Fly America Act, 49 U.S.C. 40118, requires the use of United States air carrier service for all air cargo transportation services funded by the United States Government. The requirements of the Fly America Act apply whenever the air transportation of the cargo is funded by the U.S. Government. One exception to this requirement is transportation provided under a bilateral or multilateral air
The United States Government has entered into several air transport agreements that allow Federally-funded transportation services for cargo movements to use foreign air carriers under certain circumstances. For example, on April 25 and April 30, 2007, the United States-European Union (EU) Air Transport Agreement (U.S.-EU Agreement) was signed, providing EU air carriers the right to transport cargo, including household goods, on scheduled and charter flights funded by the United States Government (excluding transportation funded by the Secretary of Defense or in the Secretary of a military department), between any point in the United States and any point in an EU Member State or between any two points outside the United States for which a U.S. Government civilian Department, Agency, or instrumentality (1) obtains the transportation for itself or in carrying out an arrangement under which payment is made by the U.S. Government or payment is made from amounts provided for use of the U.S. Government; or (2) provides transportation to or for a foreign country or international or other organization without reimbursement.
The United States Government and the European Union amended the U.S.-EU Agreement with a Protocol signed on June 24, 2010. In the amended agreement, the United States further extended the rights of EU air carriers to transport cargo on scheduled and charter flights funded by the United States Government between any point in the United States and any point outside the United States, or between any two points outside the United States. Norway and Iceland joined the U.S.-EU Air transportation agreement as amended by the Protocol on June 21, 2011, granting carriers from those countries the same rights.
The United States has air transport agreements with Australia, Switzerland, and Japan, which allow carriers from those countries to transport cargo subject to the Fly America Act between their respective home countries and the United States and between two points outside the United States. The provisions in the agreements with Australia and Switzerland became effective on October 1, 2008. The provisions in the agreement with Japan took effect on October 1, 2011.
The United States previously entered into an agreement with Saudi Arabia regarding Federally-funded transportation services for cargo movements under which Saudi Arabian air carriers are permitted to transport cargo from Saudi Arabia to the United States and from the United States to Saudi Arabia when the transportation is funded by U.S. Government contractors providing services to Federal Government entities.
Accordingly, rather than amend the FMR to include language from each of these agreements, and thereafter amending the FMR each time there is a change in air transport agreements that affect U.S. Government-funded cargo transportation, GSA is issuing this proposed rule which, if adopted, would provide an Internet-based source of information (
Additionally, GSA is proposing to update the FMR to include additional exceptions to the Fly America Act, such as cargo transportation services that are fully reimbursed by a third party,
In accordance with 49 U.S.C. § 40118(c), GSA is proposing regulations under which agencies may expend appropriations for cargo transportation using foreign air carriers when it is deemed necessary. There have been limited circumstances in the past where the use of a foreign air carrier was deemed necessary. For example, when the Government Accountability Office (formerly the General Accounting Office), had responsibility for implementing the Fly America Act, the Comptroller General held that when time requirements could not be met the use of a foreign flag carrier was deemed necessary. (See
The use of foreign carriers should be very limited and approval should only be granted after a determination that one or more of these circumstances exist: no U.S. flag air carrier can provide the specific air transportation needed, no U.S. flag air carrier can accomplish the agency's mission, no U.S. flag air carrier can meet the time requirements in cases of emergency, there is a lack of or inadequate U.S. flag air carrier aircraft, or to avoid an unreasonable risk to safety. This rule proposes to include a provision stating that use of a foreign air carrier is permissible in these circumstances, but these circumstances should be rare.
Further, this proposed rule would update section 102–117.135(b) to include the current telephone number, email address, and Web site for the U.S. Department of Transportation Maritime Administration (MARAD), Office of Cargo Preference and Domestic Trade. This proposed rule would also identify the Web site for agencies to go to for information that MARAD requires to be submitted by the shipping Department or Agency when cargo is shipped subject to 46 U.S.C. 55305, the Cargo Preference Act of 1954, as amended.
Finally, GSA is proposing to revise the language in FMR section 102–117.15 to state clearly that this part applies to all agencies and wholly-owned Government corporations except as otherwise expressly provided.
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. This is not a significant regulatory action, and therefore, would not be subject to review under Section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule would not be a major rule under 5 U.S.C. 804.
While these revisions are substantive, this proposed rule would not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601,
The Paperwork Reduction Act does not apply because the proposed changes to the FMR would not impose recordkeeping or information collection requirements, or the collection of information from offerors, contractors, or members of the public that require the approval of the Office of Management and Budget (OMB) under 44 U.S.C. 3501,
This proposed rule is also exempt from Congressional review prescribed under 5 U.S.C. 801 since it relates to agency management or personnel.
Transportation Management.
For the reasons set forth in the preamble, GSA proposes to amend 41 CFR Part 102–117 as follows:
31 U.S.C. 3726; 40 U.S.C. 121(c); 40 U.S.C. 501,
This part applies to all agencies and wholly-owned Government corporations as defined in 5 U.S.C. 101,
3. Revise § 102–117.135 to read as follows:
Several statutes mandate the use of U.S. flag carriers for international shipments, such as 49 U.S.C. 40118, commonly referred to as the “Fly America Act”, and 46 U.S.C. 55305, the Cargo Preference Act of 1954, as amended. The principal restrictions are as follows:
(a)
(1) The transportation is provided under a bilateral or multilateral air transportation agreement to which the United States Government and the government of a foreign country are parties, and which the Department of Transportation has determined meets the requirements of the Fly America Act.
(i) Information on bilateral or multilateral air transport agreements impacting United States Government procured transportation can be accessed at
(ii) If determined appropriate, GSA may periodically issue FMR Bulletins providing further guidance on bilateral or multilateral air transportation agreements impacting United States Government procured transportation. These bulletins may be accessed at
(2) When the costs of transportation are reimbursed in full by a third party, such as a foreign government, an international agency, or other organization; or
(3) Use of a foreign air carrier is determined to be a matter of necessity by your agency, on a case-by-case basis, when:
(i) No U.S. flag air carrier can provide the specific air transportation needed;
(ii) No U.S. flag air carrier can meet the time requirements in cases of emergency;
(iii) There is a lack of or inadequate U.S. flag air carrier aircraft;
(iv) There is an unreasonable risk to safety; or
(v) No U.S. flag air carrier can accomplish the agency's mission.
The use of foreign flag air carriers should be rare.
(b)
Federal Communications Commission.
Proposed rule.
In this document, the Federal Communications Commission (Commission) propose to promote innovation and efficiency by allowing interconnected Voice over Internet Protocol (VoIP) providers to obtain telephone numbers directly from the North American Numbering Plan Administrator (NANPA) and the Pooling Administrator (PA), subject to certain requirements. We anticipate that allowing interconnected VoIP providers to have direct access to numbers will help speed the delivery of innovative services to consumers and businesses, while preserving the integrity of the network and appropriate oversight of telephone number assignments. The accompanying Notice of Inquiry further seeks comment on a range of issues regarding our long-term approach to numbering resources. The relationship between numbers and geography—taken for granted when numbers were first assigned to fixed wireline telephones—is evolving as consumers turn increasingly to mobile and nomadic services. We seek comment on these trends and associated Commission policies.
Comments are due on or before July 19, 2013. Reply comments are due on or before August 19, 2013.
You may submit comments, identified by [WC Docket Nos. 13–97, 04–36, 07–243, 10–90 and CC Docket Nos. 95–116, 01–92, 99–200], by any of the following methods:
For detailed instructions for submitting comments and additional information on the rulemaking process, see the
Marilyn Jones, Wireline Competition Bureau, Competition Policy Division, (202) 418–1580, or send an email to
This is a summary of the Commission's Notice of Proposed Rulemaking (NPRM) in WC Docket Nos. 13–97, 04–36, 07–243, 10–90 and CC Docket Nos. 95–116, 01–92, 99–200, FCC 13–51, adopted and released April 18, 2013. The full text of this document is available for public inspection during regular business hours in the FCC Reference Information Center, Portals II, 445 12th Street SW., Room CY–A257, Washington, DC 20554. The document may 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 at
2. The Communications Act of 1934, as amended (the Act), grants the Commission plenary authority over the North American Numbering Plan (NANP) within the United States. In its Numbering Resource Optimization (NRO) proceeding, the Commission adopted several optimization measures that allow it to monitor more closely how telephone numbers are used within the NANP. These measures also promote more efficient allocation and use of numbers by tying a carrier's ability to obtain them more closely to its actual need for numbers to serve its customers. In particular, to combat the inefficient use of numbers, § 52.15(g)(2)(i) of the Commission's rules requires an applicant for telephone numbers to provide evidence that it is authorized to provide service in the area in which it is requesting those numbers. The Commission interpreted this rule in its
3. Interconnected VoIP service enables users, over broadband connections, to receive calls that originate from the public switched telephone network (PSTN) or other VoIP users, and to terminate calls to the PSTN or other VoIP users. However, the Commission has not addressed the classification of interconnected VoIP services, and thus retail interconnected VoIP providers in many, but not all, instances take the position that they are not subject to regulation as telecommunications carriers, nor can they directly avail themselves of various rights under sections 251 and 252 of the Act.
4. In order to provide interconnected VoIP service, a provider must offer consumers NANP telephone numbers; otherwise, a customer on the PSTN would not have a way to dial the interconnected VoIP customer using his PSTN service. Interconnected VoIP providers often cannot obtain telephone numbers directly from the numbering administrators as they cannot provide the evidence of certification required by § 52.15(g)(2)(i)—they typically do not hold state certifications or Commission licenses. Thus, these providers generally obtain NANP telephone numbers by purchasing wholesale services from a competitive local exchange carrier (CLEC), and then using these services to interconnect with the PSTN in order to send and receive certain types of traffic between the VoIP provider's network and the carrier networks.
5. The Commission has acted to ensure consumer protection, public safety, and other important policy goals in orders addressing interconnected VoIP services, without classifying those services as telecommunications services or information services under the Communications Act.
6. As part of our focused ongoing effort to modernize our rules during a period of significant technology transition, we propose to modify our rules to allow interconnected VoIP providers to obtain numbers directly from the number administrators, subject to a variety of requirements to ensure continued network integrity, allow oversight and enforcement of our numbering regulations, and protect the public interest. We expect that granting VoIP providers direct access to numbers—subject to the number utilization provisions we propose below—will enhance the effectiveness of our number conservation efforts, and will reduce costs and inefficiencies that arise today through the mandatory use of carrier-partners. We anticipate that these proposed rule changes will encourage providers to develop and deploy innovative new technologies and services that benefit consumers.
7. We invite general comment on permitting interconnected VoIP providers to obtain phone numbers directly from the number administrators, as opposed to through carrier partners. Do commenters agree that allowing interconnected VoIP providers direct access to numbers will spur the introduction of innovative new technologies and services, increase efficiency, and facilitate increased choices for American consumers? Are there benefits to requiring carrier-partners? Are there alternate ways to accomplish these goals? We ask commenters who disagree with our proposal to address other ways the Commission's numbering policies can be utilized to achieve the outlined benefits.
8. We note that in October 2010, the Twenty-First Century Communications and Video Accessibility Act (CVAA) became law. The CVAA codified the Commission's definition of “interconnected VoIP service” contained in § 9.3 of the Commission's rules, “as such section may be amended from time to time.” We seek comment on whether any amendments to the Commission's definition of interconnected VoIP service are needed to allow direct access to numbers by interconnected VoIP providers. If so, should the amendments apply to all of the Commission's requirements that involve interconnected VoIP providers or should the Commission use the amended definition of interconnected VoIP solely for purposes of number administration?
9. In various sections of the NPRM, we seek comment on: the type of documentation that interconnected VoIP providers should provide in order to obtain numbers; the numbering administration requirements that should apply to such providers; and enforcement of our numbering rules. In other parts, we discuss and seek comment on commenters' concerns raised in the record, such as databases, call routing and termination, intercarrier compensation, IP interconnection, local number portability, number cost allocation and transitioning to direct access if interconnected VoIP providers are granted direct access to numbers, other entities that potentially could gain access to numbers, and our legal authority for imposing proposed numbering administration and other
10. We seek comment on whether the Commission should expand access to numbers beyond the proposal regarding interconnected VoIP providers. For example, should the Commission expand access to numbers to VoIP providers (regardless of whether they are interconnected or one-way)? We seek comment on the types of services and applications that use numbers today, and that are likely to do so in the future. Is the lack of access to numbers a barrier to deployment of innovative services? Twilio states that making numbers more broadly available to other communications providers will lower the cost of accessing numbers and providing telecommunications services, and will encourage competition and innovation. We seek comment on these assertions.
11. We seek comment on the potential benefits and risks of expanding direct access to numbers. For example, would extending access to numbers accelerate number exhaust and if so, what steps could we take to control number exhaust? What safeguards or countermeasures should the Commission utilize, and should these be specific to innovative providers? We note above that allowing interconnected VoIP providers direct access to numbers could enhance the ability to oversee number use and control exhaust. Do these same benefits apply to other types of innovative service providers that today only receive indirect access to numbers? We also seek comment on how we can maintain the integrity and oversight of our numbering system if we broadly extend direct access to numbers. For example, we seek comment on the numbers that should be provided to these other entities. Should the Commission limit distribution in some fashion? Should the Commission permit these other entities to obtain only non-geographic numbers? We note that the Alliance for Telecommunications Industry Solutions' (ATIS) Industry Numbering Committee (INC) reported on its recent efforts, at the September NANC meeting, to revise the guidelines for assignment of non-geographic numbers to reflect increased demand for their use with machine-to-machine applications. Which machine uses require a telephone number and why? Which ones do not? As an example, could some uses simply require an IP address or device ID to be assigned? Should machine-to-machine uses be assigned one type of number, with common 10-digit area code numbers reserved for voice communications or SMS? We seek comment generally on relevant numbering limitations that should apply to innovative providers.
12. There is a wide array of services and providers that today rely on indirect access to numbers. We recognize that those uses are likely to change and expand in unpredictable ways in the future. Are there distinguishing or limiting factors that should govern whether and how specific services or providers receive certain types of numbers? For example, should the Commission prioritize access to numbers by certain types of providers, or to services that are primarily (or exclusively) voice services? We seek comment on the relevant criteria the Commission should consider when deciding whether and on what terms to allow direct access to numbers.
13. If we grant interconnected VoIP providers and other types of entities direct access to numbers, should we establish the same conditions and criteria, regardless of the service or technology? For example, should we impose the same documentation requirements and enforcement provisions on interconnected VoIP providers and other entities?
14. Twilio states that the conditions Vonage identifies in its request for waiver, including utilization and optimization requirements, are appropriate for access by other VoIP providers. We seek comment on whether these limitations are sufficient for innovative providers. What protections are necessary in order to combat potential abuses by innovative providers? What safeguards should the Commission adopt in order to promote an orderly and efficient use of numbers by innovative providers? Finally, we seek comment on the rule changes necessary to effectively allow other carriers to have access to numbers. How would the proposed rule changes in this Notice need to be modified in order for innovative providers to have access to numbers?
15. We seek comment on whether the Commission should modify § 52.15(g)(2)(i) of our rules to allow VPC providers direct access to p-ANI codes, for the purpose of providing 911 and E911 service. VPC providers are entities that help interconnected VoIP providers deliver 911 calls to the appropriate public safety answering point.
16. Under § 52.15(g)(2)(i) of our rules, applicants for numbers, including p-ANI codes, must provide evidence that they are authorized to provide service in the area in which they are requesting numbers. However, in October 2008, as part of its implementation of the NET 911 Act, the Commission granted interconnected VoIP providers the right to access p-ANI codes, without such authorization, for the purpose of providing 911 and E911 service.
17. We seek comment on whether § 52.15(g)(2)(i) should be modified to allow all providers of VPC service to directly access p-ANI codes. Would allowing VPC providers access to p-ANI codes enhance public safety by further ensuring that emergency calls are properly routed to trained responders of the PSAPs? Are there unique technical characteristics of p-ANI codes that make them different from the numbers currently included in § 52.15(g)(2)(i). Are there any cost benefits to allowing VPC providers direct access to p-ANI codes? Furthermore, would such access help encourage the continued growth of interconnected VoIP services?
18. In the
19. We also seek comment on whether any evidence of authorization should be required for VPC providers to access p-ANI codes. TCS argued, in seeking a waiver of our rule, that if state competitive local exchange carrier certification is required, then obtaining one state certification should be adequate for a waiver. Should § 52.15(g)(2)(i) be modified to require VPC providers to provide the RNA with state certification from at least one state? Alternatively, should a “national authorization” be provided to VPC providers from a public safety organization? Should the Commission consider any other factors, such as whether VPC providers are current on state and local emergency fees and any appropriate universal service fund contributions in granting access to p-ANI codes? Are there other obligations on which we seek comment above for
20. Section 251(e)(1) of the Act gives the Commission plenary authority over that portion of the NANP that pertains to the United States, and the Commission retains “authority to set policy with respect to all facets of numbering administration in the United States.” The Commission has concluded that the plenary numbering authority set forth in section 251(e)(1) of the Act provides ample authority for the Commission to extend numbering-related requirements to interconnected VoIP providers that obtain telephone numbers directly or indirectly, regardless of the statutory classification of interconnected VoIP service. Thus, because the Commission has plenary authority over the administration of NANP numbers in the United States, any entity that participates in that administration—including VoIP providers that obtain numbers, whether or not they are carriers—must adhere to the Commission's numbering rules. We believe that this rationale applies equally to the situation here. Thus, we believe that the Commission has authority under section 251(e)(1) to extend the numbering requirements discussed above to interconnected VoIP providers, and seek comment on this analysis.
21. We also believe that the Commission has additional authority under Title I of the Act to impose numbering obligations on interconnected VoIP providers. Ancillary authority may be employed when “(1) the Commission's general jurisdictional grant under Title 1 covers the regulated subject and (2) the regulations are reasonably ancillary to the Commission's effective performance of its statutorily mandated responsibilities.” As to the first predicate, as we have concluded in numerous orders, interconnected VoIP services fall within the subject-matter jurisdiction granted to the Commission in the Act. As to the second predicate, we seek comment on whether imposing numbering obligations on interconnected VoIP providers would be reasonably ancillary to the Commission's performance of particular statutory duties, such as those under sections 251 and 201 of the Act. For example, adopting numbering obligations for interconnected VoIP providers that obtain direct access to numbers is necessary to ensure a level playing field and foster competition by eliminating barriers to, and incenting development of, innovative IP services. We thus seek comment on whether, for these or other reasons, imposing numbering obligations on interconnected VoIP providers that get direct access to numbers are reasonably ancillary to the Commission's responsibilities to ensure that numbers are made available on an “equitable” basis, to advance the number-portability requirements of section 251, or to help ensure just and reasonable rates and practices for voice telecommunications services regulated under section 201 through market discipline from interconnected VoIP services. We also seek comment on other possible bases for the Commission to exercise ancillary authority here.
22. We note further that our proposed rules are consistent with other statutory provisions governing the Commission. For example, section 706(a) of the Telecommunications Act of 1996 directs the Commission to encourage the deployment of advanced telecommunications capability to all Americans by using measures that “promote competition in the local telecommunications market.” Permitting interconnected VoIP providers to obtain direct access to telephone numbers may encourage more VoIP providers to enter the market, enabling consumers to enjoy more competitive service offerings. This will in turn spur consumer demand for these services, thereby increasing demand for broadband connections and consequently encouraging more broadband investment and deployment consistent with the goals of section 706.
23. In the above Notice, we proposed a set of rules that would allow interconnected VoIP providers to obtain telephone numbers directly from number administrators rather than through intermediate carriers, subject to certain requirements. In this Notice of Inquiry (NOI), we seek initial comment on a broader range of numbering issues that result from ongoing transitions from fixed telephony to increased use of mobile services, from TDM to IP technologies, and from geography-based intercarrier compensation to bill-and-keep, focusing particularly on whether telephone numbers should remain associated with particular geographies.
24. With the development of mobile services and IP technology, the way that consumers use telephone numbers has evolved. Some services have already broken the historical tie between a number and a specific device. For example, Skype permits users to register a telephone number that routes to the Skype service, and Google Voice permits users to register a telephone number that acts as an overlay on a user's existing telephony services, allowing selective routing of calls from certain numbers, and listening in on voicemails before picking up the phone. Other services use a single number for multiple devices.
25. In light of these changes, in this Notice we seek comment on some of the important recommendations made by the Technological Advisory Council (TAC) regarding the future of numbering.
26. Aside from the geography-related issues addressed in the foregoing sections, the TAC and others have raised issues concerning number administration more generally. The memorability, ubiquity, convenience, and universality of telephone numbers as identifiers suggest that they will remain relevant for quite a while. Other than shifting away from geographic assignment, should the Commission be considering long-term changes to the basic telephone numbering system?
27. The proceeding this Notice initiates shall be treated as a “permit-but-disclose” proceeding in accordance
28. Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated on the first and second pages of this document. Comments may be filed using the Commission's Electronic Comment Filing System (ECFS).
Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail. All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission.
All hand-delivered or messenger-delivered paper filings for the Commission's Secretary must be delivered to FCC Headquarters at 445 12th St. SW. Room TW–A325, Washington, DC 20554. The filing hours are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes and boxes must be disposed of before entering the building.
Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743.
U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12th Street SW., Washington, DC 20554.
29. As required by the Regulatory Flexibility Act of 1980 (RFA), the Commission has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on small entities of the policies and rules proposed in this document.
30. This NPRM seeks comment on a potential new or revised information collection requirement. If the Commission adopts any new or revised information collection requirement, the Commission will publish a separate notice in the
31. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), the Commission has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on a substantial number of small entities by the policies and rules proposed in this Notice of Proposed Rulemaking (NPRM). Written comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the NPRM. The Commission will send a copy of the NPRM, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration (SBA). In addition, the NPRM and IRFA (or summaries thereof) will be published in the
32. The NPRM proposes to remove unnecessary regulatory barriers to innovation and efficiency by allowing interconnected VoIP providers to obtain telephone numbers directly from the NANPA and the PA, subject to certain requirements. Telephone numbers are a valuable and limited resource, and access to and use of such numbers must be managed judiciously in order to ensure that they remain available and to protect the efficient and reliable operation of the telephone network. At the same time, the Commission is attempting to modernize its rules in light of significant and ongoing technology transitions in the delivery of voice services, with the goal of promoting innovation, investment, and competition for the ultimate benefit of consumers and businesses. In light of these twin concerns, the proposed rules allowing interconnected VoIP providers to have direct access to numbers will help modernize the Commission's
33. The NPRM first proposes to modify the Commission's rules to allow interconnected VoIP providers to obtain numbers directly from the NANPA and the PA, subject to a variety of requirements to ensure continued network integrity, allow oversight and enforcement of our numbering regulations, and protect the public interest. The NPRM seeks comment generally on permitting interconnected VoIP providers to obtain phone numbers directly from the number administrators and on whether allowing these parties direct access to numbers will spur the introduction of innovative new technologies and services, increase efficiency, and facilitate increased choices for American consumers. The NPRM also seeks comment on whether there are alternate ways to accomplish these goals and whether there are benefits to requiring carrier-partners.
34. In October 2010, the CVAA codified the Commission's definition of “interconnected VoIP service” in Section 9.3 of the Commission's rules, “as such section may be amended from time to time.”
35. The NPRM notes that under § 52.15(g)(2)(i) of the rules, an applicant for telephone numbers must provide the number administrator with evidence of the applicant's authority to provide service, such as a license issued by the Commission or a CPCN issued by a state regulatory commission. Interconnected VoIP providers may be unable to provide the evidence required by this rule because states often refuse to certify VoIP providers. After the Commission required interconnected VoIP providers to comply with the same E911 requirements as carriers, the Bureau recognized that VoIP providers would not be able to provide the same documentation as certificated carriers to obtain the non-dialable numbers necessary to provide E911 service. In that case, the Bureau permitted the administrator that disseminates p-ANI codes to accept documentation different than that required by certificated carriers. To ensure continued compliance with part 52 of the Commission's rules and with the NET 911 Act, an interconnected VoIP provider must demonstrate that it provides VoIP service and must identify the jurisdiction(s) in which it provides service.
36. Given these issues, the NPRM seeks comment on what, if any, documentation interconnected VoIP providers should be required to provide to the number administrator to receive numbers. Specifically, comment is sought on whether interconnected VoIP providers should be required to demonstrate that they do or plan to offer service in a particular geographic area in order to receive numbers associated with that area. Comment is sought on whether data regarding the provision of interconnected VoIP services from FCC Form 477 would service this role, or whether there are alternative means for interconnected VoIP providers to demonstrate, absent state certification, that they are providing services in the area for which the numbers are being requested. Comment is further sought on whether the Commission should adopt a process whereby it will provide the certification required by § 52.15(g)(2)(i), but only to the extent a state commission lacks authority to do so or represents that it has a policy of not doing so. The NPRM asks whether certification requirements should be different for providers of facilities-based interconnected VoIP, which is typically offered in a clearly defined geographic area, and over-the-top interconnected VoIP, which can be used anywhere that has a broadband connection. Comment is also sought on whether certification would permit the Commission to exercise forfeiture authority without first issuing a citation. The NPRM further seeks comment on the costs and burdens imposed on small entities from the rules resulting from this requirement, and how those onuses might be ameliorated. Lastly, the NPRM asks whether there are other issues or significant alternatives that the Commission should consider to ease the burden of these proposed measures on small entities.
37. Telecommunications carriers are required to comply with a variety of Commission and state number optimization requirements and are expected to follow industry guidelines. In the
38. The NPRM proposes to allow interconnected VoIP providers to obtain telephone numbers only from rate centers subject to pooling, in order to reduce waste. The NPRM seeks comment on this proposal and any concerns it may raise. Comment is also sought on whether it makes sense to differentiate between traditional carriers and interconnected VoIP providers in terms of the rate centers from which they can request numbers, and whether this approach raises anti-competitive or public policy concerns. The NPRM seeks further comment on how this approach will affect existing VoIP customers with numbers not in these rate centers, if at all. Comment is sought on whether this approach is appropriately tailored to address the problems of waste and number exhaust, and whether there are any alternative measures that would be more effective in dealing with these issues. The NPRM also details an alternative proposal by the California PUC in which the Commission would grant states the right to specify which rate centers are available for VoIP number assignment. The NPRM seeks comment, in particular, on this alternative proposal.
39. In conjunction with these recommendations, the California PUC proposes a system in which all calls to VoIP providers are deemed to be local calls for numbering administration purposes. Comment is sought on the feasibility of this plan and the method by which the Commission might implement it. The NPRM also seeks comment on any drawbacks posed by this system to VoIP providers and their customers.
40. Under the Commission's rules, carriers must demonstrate “facilities readiness” before they can obtain initial numbering resources, which helps to ensure that carriers are not building inventories before they are prepared to offer service. Section 52.15(g)(2)(ii) of the Commission's rules requires that an applicant for initial numbering resources is or will be capable of providing service within sixty (60) days of the activation date of the numbering resources. 47 CFR 52.15(g)(2)(ii). The NPRM proposes to extend these “facilities readiness” requirements to interconnected VoIP providers who obtain direct access to numbers. Comment is sought on whether requiring interconnected VoIP providers to submit evidence that they have ordered an interconnection service pursuant to a tariff is appropriate evidence of “facilities readiness” or whether there are better ways to demonstrate compliance with this requirement. Comment is sought further on whether the Commission should modify this requirement to allow more flexibility, and if so, how.
41. In the
42. In addition to complying with the Commission's existing numbering requirements and the obligations set forth in the
43. To enhance the ability of state commissions to effectively oversee numbers, which will in turn promote better number utilization, the Wisconsin PSC suggests that the Commission require interconnected VoIP providers to do the following in order to obtain telephone numbers: (1) Provide the relevant state commission with regulatory and numbering contacts upon first requesting numbers in that state; (2) consolidate and report all numbers under its own unique Operating Company Number (OCN); (3) provide customers with the ability to access all N11 numbers in use in a state; and (4) maintain the original rate center designation of all numbers in its inventory. The NPRM seeks comment on this proposal and whether additional oversight of the financial and managerial aspects of interconnected VoIP providers is needed. In particular, comment is sought on how providers of nomadic VoIP service could comply with a requirement to provide access to the locally-appropriate N11 numbers.
44. The NPRM further seeks comment on whether the proposal to allow direct access to numbers for interconnected VoIP providers might affect competition, and if so, how.
45. The NPRM notes that in order for the Commission to exercise its forfeiture authority for violations of the Act and its rules without first issuing a warning, the wrongdoer must hold (or be an applicant for) some form of authorization from the Commission, or be engaged in activity for which such an authorization is required. A Commission authorization is not currently required to provide interconnected VoIP service. The NPRM therefore seeks comment on whether the Commission should implement a certification or blanket authorization process applicable to interconnected VoIP providers that elect to obtain direct access to numbers. Comment is also sought on whether Commission certification would be necessary and appropriate for all providers, not just those that cannot obtain certifications from state commissions. Alternatively, comment is sought on whether it would be less administratively burdensome if the Commission amended its rules to establish “blanket” authorization for interconnected VoIP providers for access to numbering resources.
46. In addition, the NPRM seeks comment on whether there are ways to ensure that VoIP providers are subject to the same penalties and enforcement processes as traditional common carriers. More specifically, comment is sought on whether VoIP providers must consent to be subject to the same monetary penalties as common carriers as a condition of obtaining direct access to numbers. Comment is also sought on whether the Commission can and should require VoIP providers to waive any additional process protections that traditional common carriers would not receive. Lastly, the NPRM seeks comments on whether VoIP providers should be prohibited from obtaining direct access to numbers if they are “red-lighted” by the Commission for unpaid debts or other reasons. The NPRM asks if there are any other reasons for which VoIP providers
47. The NPRM also seeks comment on the routing of calls by interconnected VoIP providers that use their own telephone numbers. Specifically, the NPRM explains that interconnected VoIP provider switches do not appear in the LERG, the database which enables carriers to send traffic to, and receive traffic from, a given telephone number. The NPRM notes that some commenters claim that, without association to a switch, carriers will not know where to route calls, likely resulting in end user confusion and interference with emergency services and response. Other commenters have responded that marketplace solutions from companies such as Level 3 or Neutral Tandem can be employed to solve these problems by, for instance, designating the switch of a carrier partner in the LERG and in the NPAC database as the default routing locations for traffic bound for numbers assigned to interconnected VoIP providers in order to route calls originated in the PSTN. The NPRM seeks comment generally on whether providing interconnected VoIP providers direct access to numbers will hinder or prevent call routing or tracking, and how such complications can be prevented or minimized. The NPRM also seeks comment on whether the marketplace solutions described by the commenters will be adequate to properly route calls by interconnected VoIP providers, absent a VoIP interconnection agreement. The NPRM further asks whether the Commission should require interconnected VoIP providers to maintain carrier partners to ensure that calls are routed properly.
48. The NPRM seeks comment on the routing limitations that interconnected VoIP providers currently experience as a result of having to partner with a carrier in order to get numbers, and on the role and scalability of various industry databases in routing VoIP traffic directly to the VoIP provider over IP links. Specifically, the NPRM asks what restrictions are imposed by the administrators of the various database services on access to the databases, and on the practices that service providers may need to alter to increase interconnection and routing efficiency. Specifically, the NPRM asks whether listing a non-facilities-based interconnected VoIP provider in the Alternate Service Provider Identification (ALT SPID) field in the NPAC database is sufficient to allow a provider to route calls directly to a VoIP provider if the VoIP provider has a VoIP interconnection agreement. Lastly, the NPRM seeks comment on how numbering schemes and databases integral to the operation of PSTN call routing will need to evolve to operate well in IP-based networks.
49. In the
50. The NPRM also seeks comment on the regulatory status of competitive tandem providers, and in particular, whether any portions of competitive operations are regulated by the states or Commission. If not, the NPRM asks what intercarrier compensation obligations apply, and to what entity, for traffic that a VoIP provider originates or terminates in partnership with a competitive tandem provider that is not certified by the Commission or any state commission.
51. The NPRM seeks comment generally on the effect that direct access to numbers will have on the industry's transition to direct interconnection in IP, and on the status of IP interconnection for VoIP providers today. The NPRM also asks how many VoIP interconnection agreements currently exist and how parties to those agreements treat technical issues. Comment is further sought on whether access to numbers will increase call routing efficiency when one of the providers is a VoIP provider, and whether such efficiency will affect the likelihood of parties entering into agreements for VoIP interconnection.
52. The NPRM also seeks comment on the extent to which its proposals would promote IP interconnection. As stated in the NPRM, the Commission expects that granting VoIP providers direct access to numbers would facilitate several types of VoIP interconnection, including interconnection between over-the-top VoIP providers and cable providers, interconnection between two over-the-top providers, and interconnection between cable providers. Comment is sought on this analysis, and on whether granting VoIP providers direct access to numbers will encourage IP-to-IP interconnection by eliminating disincentives to interconnect in IP format and lowering the costs associated with implementing IP-to-IP interconnection agreements. The NPRM further asks whether direct access to numbers will affect the rights and obligations of service providers with regards to VoIP interconnection.
53. The NPRM proposes to modify the Commission's rules to include language specifying that users of interconnected VoIP services should enjoy the benefits of local number portability without regard to whether the VoIP provider obtains numbers directly or through a carrier partner. The NPRM seeks comment on this proposal.
54. In the
55. The NPRM also notes that the Commission has established geographic limits on the extent to which a provider must port numbers. The NPRM seeks comment on the geographic limitations,
56. On a general level, the NPRM seeks comment on whether the changes proposed herein should be adopted on a gradual or phased-in basis. More specifically, the NPRM asks what timeframes would be appropriate for a graduated transition, and what period of time would permit the industry to adjust to the proposed changes. Comment is also sought on what steps the Commission should take to ensure that any transition to direct access to numbers by interconnected VoIP providers occurs without unnecessary disruption to consumers or the industry.
57. The NPRM notes that beyond interconnected VoIP providers, an increasingly wide array of services and applications rely on telephone numbers as the addressing system for communications, including home security systems, payment authorization services, text messaging services, and telematics. The NPRM therefore seeks comment on whether the Commission should expand access to numbers beyond the proposal regarding interconnected VoIP providers. Specifically, the NPRM asks whether access to numbers should be expanded to one-way VoIP providers. The NPRM also seeks comment on the types of services and applications that use numbers today and that are likely to do so in the future. Comment is further sought on the potential benefits and risks of expanding direct access to numbers, and any safeguards or countermeasures that could be employed to counteract any conceivable downsides. The NPRM also asks whether there are distinguishing or limiting factors that should govern whether and how specific services or providers receive certain types of numbers. Comment is sought on whether the same criteria and conditions should be implemented regardless of the service or technology offered if interconnected VoIP providers and other types of entities are granted direct access to numbers.
58. The NPRM seeks comment on whether the Commission should modify § 52.15(g)(2)(i) of its rules to allow VoIP Positioning Center (VPC) providers direct access to numbers, specifically p-ANI codes, for the purpose of providing 911 and E911 service. In the
59. The NPRM also seeks comment on the Commission's legal authority to adopt the various requirements proposed. Comment is sought on the Commission's plenary authority under section 251(e)(1) of the Act to impose the various proposed requirements on interconnected VoIP providers obtaining direct access to numbers. The NPRM also asks whether imposing numbering obligations on interconnected VoIP providers would be reasonably ancillary to the Commission's performance of particular statutory duties, such as those under sections 251 and 201 of the Act, to allow the Commission to impose such obligations under its Title I ancillary authority.
60. The legal basis for any action that may be taken pursuant to the NPRM is contained in sections 1, 3, 4, 201–205, 251, and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C. 151, 153, 154, 201–205, 251, and 303(r).
61. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted.
62.
63.
64.
65.
66. We have included small incumbent LECs in this present RFA analysis. As noted above, a “small business” under the RFA is one that,
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
81. In the NPRM, the Commission proposes to require interconnected VoIP providers seeking direct access to numbers to submit specific documentation, a requirement which may necessitate filing FCC Form 477 with the Commission. The NPRM further proposes to require these providers to comply with the same numbering obligations and industry guidelines as traditional common carriers. Specifically, interconnected VoIP providers will be required under § 52.15(f)(6) to file usage forecast and utilization (NRUF) reports on a semi-annual basis. Compliance with these reporting obligations may affect small entities, and may include new administrative processes.
82. In the NPRM, the Commission also proposes to allow interconnected VoIP providers to obtain telephone numbers only from rate centers subject to pooling. The NPRM further suggests imposing a “facilities readiness” requirement on interconnected VoIP providers seeking direct access to numbers under § 52.15(g)(2)(ii) of the Commission's rules. Under this proposal, providers would be required to provide evidence that they have ordered an interconnection service pursuant to a tariff that is generally available to other providers of IP-enabled voice services. The NPRM also proposes to require interconnected VoIP providers to file any requests for numbers with the Commission and relevant state commission at least 30 days prior to requesting numbers from the number administrators.
83. In the NPRM, the Commission further proposes to require all interconnected VoIP providers seeking direct access to numbers to: (1) maintain at least 65 percent number utilization across its telephone number inventory; (2) offer IP interconnection to other carriers and providers; and (3) provide the Commission with a transition plan for migrating customers to its own numbers within 90 days of commencing that migration and every 90 days thereafter for 18 months. Moreover, the NPRM proposes to require these providers to: (1) provide the relevant state commission with regulatory and numbering contacts upon first requesting numbers in that state; (2) consolidate and report all numbers under its own unique Operating Company Number (OCN); (3) provide customers with the ability to access all N11 numbers in use in a state; and (4) maintain the original rate center designation of all numbers in its inventory.
84. In addition, the Commission proposes to amend its rules to establish “blanket” authorization for interconnected VoIP providers for access to numbering resources, or, in the alternative, to require interconnected VoIP providers to obtain a certification from the Commission before gaining direct access to numbering resources. The NPRM also proposes rules that will make clear the requirement to port directly to a non-carrier interconnected VoIP provider upon request. Compliance with these reporting obligations may affect small entities, and may include new administrative processes. We note parenthetically that in the NPRM, the Commission seeks comment on the benefits and burdens of these proposals, on the costs that these proposals are likely to impose on small entities, and how those onuses might be ameliorated. In some instances, the NPRM asks further whether there are other issues or significant alternatives that the Commission should consider to ease the burden of these proposed measures on small entities.
85. The RFA requires an agency to describe any significant, specifically small business, alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): “(1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance and reporting requirements under the rules for such small entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of the rule, or any part thereof, for such small entities.”
86. The Commission is aware that some of the proposals under consideration will impact small entities by imposing costs and administrative burdens. For this reason, the NPRM proposes a number of measures to minimize or eliminate the costs and burdens generated by compliance with the proposed rules.
87. First, the NPRM proposes to require only those interconnected VoIP providers seeking direct access to numbers to comply with the same numbering requirements and industry guidelines as traditional common
88. The NPRM also proposes to impose a “facilities readiness” requirement on interconnected VoIP providers seeking direct access to numbers. Although this may obligate providers to provide evidence that they have ordered an interconnection service pursuant to a tariff, the NPRM seeks comment on whether there are better ways to demonstrate compliance with this requirement, and whether the Commission should modify this requirement to allow providers more flexibility.
89. The NPRM also proposes to require interconnected VoIP providers seeking direct access to numbers to: (1) Maintain at least 65 percent number utilization across its telephone number inventory; (2) offer IP interconnection to other carriers and providers; and (3) provide the Commission with a transition plan for migrating customers to its own numbers within 90 days of commencing that migration and every 90 days thereafter for 18 months. Because the Commission recognizes that some of these requirements may place an administrative burden and exert an economic impact on small entities, it seeks comment on whether it should impose these requirements on interconnected VoIP providers to begin with. Moreover, these requirements are only extended to those interconnected VoIP providers seeking direct access to numbers.
90. The NPRM proposes to require interconnected VoIP providers seeking direct access to numbers to: (1) provide the relevant state commission with regulatory and numbering contacts upon first requesting numbers in that state; (2) consolidate and report all numbers under its own unique Operating Company Number (OCN); (3) provide customers with the ability to access all N11 numbers in use in a state; and (4) maintain the original rate center designation of all numbers in its inventory. While these requirements may impose administrative burdens on small entities, the Commission has limited them to interconnected VoIP providers seeking direct access to numbers. Additionally, the NPRM seeks comment on how providers of nomadic VoIP services could comply with a requirement to provide access to the locally-appropriate N11 numbers, in order to better ease the burden on such entities.
91. Although the NPRM proposes to require interconnected VoIP providers to obtain a certification from the Commission before gaining direct access to numbering resources, it also proposes, in the alternative, to amend the Commission's rules to establish “blanket” authorization for interconnected VoIP providers for access to numbering resources. This proposed alternative would decrease the administrative and cost burdens imposed on small entities.
92. The Commission expects to consider the economic impact on small entities, as identified in comments filed in response to the NPRM, in reaching its final conclusions and taking action in this proceeding. The proposed reporting requirements in the NPRM could have an economic impact on both small and large entities. However, the Commission believes that any impact of such requirements is outweighed by the accompanying benefits to the public and to the operation and efficiency of the telecommunications industry.
93. None.
94. Accordingly,
95.
96.
Communications common carriers, Telecommunications, Telephone.
For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR part 52 as follows:
Sections 1, 2, 4, 5, 48 Stat. 1066, as amended; 47 U.S.C. 151, 152, 154, 155 unless otherwise noted. Interpret or apply secs. 3, 4, 201–05, 207–09, 218, 225–27, 251–52, 271 and 332, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 153, 154, 201–05, 207–09, 218, 225–27, 251–52, 271 and 332 unless otherwise noted.
The additions and revisions read as follows:
(b)
(e)
(i)
(j)
(g) * * *
(2) * * *
(i) The applicant is authorized to provide service in the area for which the numbering resources are being requested; and the applicant is or will be capable of providing service within sixty (60) days of the numbering resources activation date.
(ii) Interconnected VoIP service providers may use the appropriate pages of their most recent FCC Form 477 submission as evidence of authorization to provide service in the area for which resources are being requested. Interconnected VoIP service providers must also provide the relevant state commission with regulatory and numbering contacts upon first requesting numbers in that state.
Subpart C—Number Portability
(b) All telecommunications carriers other than incumbent local exchange carriers may recover their number portability costs in any manner consistent with applicable state and federal laws and regulations.
(c) Telecommunications carriers must facilitate an end-user customer's valid number portability request either to or from an interconnected VoIP or VRS or IP Relay provider. “Facilitate” is defined as the telecommunication carrier's affirmative legal obligation to take all steps necessary to initiate or allow a port-in or port-out itself, subject to a valid port request, without unreasonable delay or unreasonable procedures that have the effect of delaying or denying porting of the NANP-based telephone number.
Federal Railroad Administration (FRA), Department of Transportation (DOT).
Notice of proposed rulemaking (NPRM).
As part of a paperwork reduction initiative, FRA is proposing to eliminate the regulatory requirement that each carrier must file with FRA a signal system status report every five years. FRA believes the report is no longer necessary because advances in technology have made it possible for more updated information regarding railroad signal systems to be available to FRA through alternative sources. Separately, FRA is proposing to amend the criminal penalty provision in the Signal System Reporting Requirements by updating an outdated statutory citation.
Written comments must be received by August 19, 2013. Comments received after that date will be considered to the extent possible without incurring additional delay or expense.
FRA anticipates being able to resolve this rulemaking without a public, oral hearing. However, if FRA receives a specific request for a public, oral hearing prior to July 19, 2013, one will be scheduled, and FRA will publish a supplemental notice in the
You may submit comments related to Docket No. FRA–2012–0104, Notice No. 1, by any one of the following methods:
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Sean Crain, Electronic Engineer, Signal and Train Control Division, Office of Railroad Safety, FRA, 1200 New Jersey Avenue SE., W35–226, Washington, DC 20590 (telephone: (202) 493–6257),
On May 14, 2012, President Obama issued Executive Order (E.O.) 13610—Identifying and Reducing Regulatory Burdens, which seeks “to modernize our regulatory system and to reduce unjustified regulatory burdens and costs.”
FRA has initiated a review of its existing regulations in accordance with E.O. 13610 and the Paperwork Reduction Act of 1995, 44 U.S.C. 3501
Section 233.9 currently requires each carrier to complete and submit an FRA Form F6180.47, Signal System Five-Year Report, in accordance with the instructions and definitions on the form. The information reported on FRA Form F6180.47 is intended to update FRA on the status of a railroad's signal system. It historically has been used to monitor changes in the types of signal systems installed and the methods of operation used on the Nation's railroads.
Prior to 1997, carriers were required to submit a Signal System Annual Report by April 15 of each year. However, based on a regulatory review, FRA extended the reporting requirement to every five years rather than annually.
For the 2012 reporting period, FRA transitioned the Signal System Five-Year Report form into an electronic format. The electronic form required all of the same information as the paper form but could be submitted via the Internet. The form was due to be submitted by no later than April 1, 2012, and pertained to signal systems in service on or after January 1, 2012. The next five-year report is not due until April 2017. The present rulemaking would eliminate the reporting requirement in its entirety for April 2017 and thereafter.
FRA believes that the Signal System Five-Year Report is no longer necessary for several reasons. The data collected in the Signal System Five-Year Report can quickly become outdated. Railroads normally modify signal systems far more frequently than once every five years. Indeed, FRA has generally found that signal system modifications occur with such frequency under 49 CFR §§ 235.5 and 235.7, that the Signal System Five-Year Report often is out-of-date by the time it is received by FRA.
Moreover, FRA has other viable means to monitor a carrier's signal system. It is better able to monitor the status of a railroad signal system through the use of more frequently collected agency data—such as the Block Signal Application,
Finally, the railroad industry and the general public do not appear to derive any useful benefit or information from the Signal System Five-Year Report. The feedback FRA has received from the industry and the general public indicates that, as expected, the data contained in the report was not useful in providing up-to-date information about railroad signal systems. As a result, FRA is confident that eliminating the report will not result in the railroad industry or the general public being less informed about railroad signal systems.
Administrative amendments are sometimes necessary to address citations that have become outdated due to the actions of Congress. This is particularly true when the basis for a legal requirement is moved to a different title, chapter, or section of the U.S. Code. Federal regulations do not “auto-correct” for these types of changes. Therefore, it is incumbent on agencies to monitor their regulations and make appropriate changes whenever feasible. FRA has identified a citation in 49 CFR 233.13(b)—referencing 49 U.S.C. 438(e)—that should be amended for this reason, and proposes to make that amendment in this rulemaking.
The subject statutory provision arises out of the former Federal Railroad Safety Act of 1970 (FRSA), which was enacted on October 16, 1970.
In 1984, FRA amended its Signal and Train Control Regulations, including 49 CFR Part 233.
Congress, however, was not done making changes that applied to section 209(e) of the FRSA. In 1994, Congress enacted a law to “revise, codify, and enact without substantive change certain general and permanent laws, related to transportation” under title 49 of the U.S. Code.
FRA proposes eliminating the Signal System Five-Year Report required by this section and reserving the section for future use. Eliminating this reporting requirement will reduce the railroad industry's paperwork burden in a way that does not endanger the public health, welfare, and safety or our environment. FRA has identified three specific reasons supporting the elimination of this reporting requirement. First, the information contained in the Signal System Five-Year Report quickly becomes obsolete. Second, FRA is better able to determine the status of a railroad's signal system through other more frequently collected types of information. Third, the report does not generally appear to contain information that is useful to the railroad industry or the general public.
FRA proposes making an administrative change to paragraph (b) of this section to correct an out-of-date citation to the U.S. Code. Paragraph (b) provides that it is unlawful to knowingly and willfully file a false report required by part 233. Such conduct is punishable with a fine of $5000 and up to two years imprisonment. The paragraph cites to 45 U.S.C. 438(e) as statutory support for the criminal penalties; however, this statutory provision was repealed and recodified under a different title of the U.S. Code as part of a reorganization of the Federal railroad safety statutes by Congress. The provision is currently housed at 49 U.S.C. 21311. The proposed amendment would correct the outdated citation in paragraph (b) by replacing 45 U.S.C. 438(e) with 49 U.S.C. 21311.
Appendix A to part 233 contains a schedule of civil penalties for use in connection with this part. Because such penalty schedules are statements of agency policy, notice and comment are not required prior to their issuance.
This rulemaking proposes eliminating the requirement in 49 CFR 233.9 that each railroad file with FRA a Signal System Five-Year Report. The proposed rule has been evaluated in accordance with existing policies and procedures. It is not considered a significant regulatory action under E.O. 12866 and E.O. 13563. This rule also is not significant under the DOT Regulatory Policies and Procedures. 44 FR 11034 (Feb. 26, 1979). A regulatory impact analysis addressing the economic impact of this proposed rule has been prepared and placed in the docket.
As part of the regulatory evaluation, FRA has explained the benefits of this proposed rule and provided monetized assessments of the value of such benefits. The proposed rule would eliminate the cost associated with submitting a Signal System Five-Year Report. Each railroad currently expends approximately one hour of labor to prepare and submit the report to FRA every five years. For the 20-year period analyzed, the estimated cost savings would be $234,265. The present value of this is $113,929 (using a 7 percent discount rate). This regulation only reduces the burden on railroads; it does not impose any additional costs. Therefore, the net benefit of this proposed rulemaking would be $113,929 (present value, 7 percent). FRA requests comments on all aspects of this regulatory evaluation and its conclusions.
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601
“Small entity” is defined in 5 U.S.C. 601 as including a small business concern that is independently owned and operated, and is not dominant in its field of operation. The U.S. Small Business Administration (SBA) has authority to regulate issues related to small businesses, and stipulates in its size standards that a “small entity” in the railroad industry is a for profit “line-haul railroad” that has fewer than 1,500 employees, a “short line railroad” with fewer than 500 employees, or a “commuter rail system” with annual receipts of less than seven million dollars.
FRA estimates that there are 719 Class III railroads, all of which would be affected by this proposed rule. However, the impact on these small railroads would not be significant. FRA estimates that each report takes approximately one labor hour to prepare and submit to FRA. The elimination of this reporting requirement would save each railroad one hour of labor every five years. Therefore, this proposed rule would have a positive effect on these railroads, saving each railroad approximately $307 (non-discounted) in labor costs over the 20-year analysis. Since this amount is extremely small and entirely beneficial, FRA concludes that this proposed rule would not have a significant impact on these railroads.
Pursuant to the Regulatory Flexibility Act, 5 U.S.C. 601(b), FRA certifies that this proposed rule would not have a significant impact on a substantial number of small entities. Although a substantial number of small railroads would be affected by the proposed rule, the impact on these entities would be minimal and positive. FRA requests comments on all aspects of this certification.
Executive Order 13132, “Federalism”, 64 FR 43255 (Aug. 10, 1999), requires FRA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” are defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” Under E.O. 13132, the agency may not issue a regulation with federalism implications that imposes substantial direct compliance costs and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, the agency consults with State and local governments, or the agency consults with State and local government officials early in the process of developing the regulation. Where a regulation has federalism implications and preempts State law, the agency seeks to consult with State and local officials in the process of developing the regulation.
This NPRM has been analyzed in accordance with the principles and criteria contained in E.O. 13132. FRA has determined that, if adopted, the proposed rule would not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. In addition, FRA has determined that this proposed rule will not impose substantial direct compliance costs on State and local governments. Therefore, the consultation and funding requirements of E.O. 13132 do not apply.
However, this proposed rule could have preemptive effect by operation of law under certain provisions of the Federal railroad safety statutes, specifically the former Federal Railroad Safety Act of 1970 (FRSA), repealed and recodified at 49 U.S.C. 20106, and the former Signal Inspection Act of 1937, repealed and recodified at 49 U.S.C. 20501–20505.
In sum, FRA has analyzed this proposed rule in accordance with the principles and criteria contained in E.O. 13132. As explained above, FRA has determined that this proposed rule has no federalism implications, other than the possible preemption of State laws under the former FRSA. Accordingly, FRA has determined that preparation of a federalism summary impact statement for this proposed rule is not required.
The Trade Agreement Act of 1979, Public Law 96–39, 93 Stat. 144 (July 26, 1979), prohibits Federal agencies from engaging in any standards or related activities that create unnecessary obstacles to the foreign commerce of the United States. Legitimate domestic objectives, such as safety, are not considered unnecessary obstacles. The statute also requires consideration of international standards and where appropriate, that they be the basis for U.S. standards. This rulemaking is purely domestic in nature and is not expected to affect trade opportunities for U.S. firms doing business overseas or for foreign firms doing business in the United States.
Under the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501,
Organizations and individuals desiring to obtain a copy of the above currently approved collection of information should contact Mr. Robert Brogan or Ms. Kimberly Toone via mail at FRA, 1200 New Jersey Ave. SE., Third Floor, Washington, DC 20590. Copies may also be obtained by telephoning Mr. Brogan at (202) 493–6292 or Ms. Toone at (202) 493–6132. (These numbers are not toll-free). Additionally, copies may be obtained via email by contacting Mr. Brogan or Ms. Toone at the following addresses:
Pursuant to Section 201 of the Unfunded Mandates Reform Act of 1995, Pub. L. 104–4, 2 U.S.C. 1531, each Federal agency “shall, unless otherwise prohibited by law, assess the effects of Federal regulatory actions on State, local, and tribal governments, and the private sector (other than to the extent that such regulations incorporate requirements specifically set forth in law).” Section 202 of the Act,
FRA has evaluated this proposed rule in accordance with its “Procedures for Considering Environmental Impacts” (FRA's Procedures), 64 FR 28545 (May 26, 1999), as required by the National Environmental Policy Act, 42 U.S.C. 4321
In accordance with section 4(c) and (e) of FRA's Procedures, the agency has further concluded that no extraordinary circumstances exist with respect to this regulation that might trigger the need for a more detailed environmental review. As a result, FRA finds that this proposed rule is not a major Federal action significantly affecting the quality of the human environment.
Executive Order 13211 requires Federal agencies to prepare a Statement of Energy Effects for any “significant energy action.”
FRA wishes to inform all potential commenters that anyone is able to search the electronic form of all comments received into any agency docket by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the
Penalties, Railroad safety, Reporting and recordkeeping requirements.
In consideration of the foregoing, FRA proposes to amend part 233 of chapter II, subtitle B of title 49 of the Code of Federal Regulations as follows:
49 U.S.C. 20103, 20107, 20501–20505, 21311; 28 U.S.C. 2461, note; and 49 CFR 1.89.
4. Appendix A is amended by removing and reserving the entry for “§ 233.9 Annual reports”.
The Department of Agriculture has submitted the following information collection requirement(s) to OMB for review and clearance under the Paperwork Reduction Act of 1995, Public Law 104–13. Comments regarding (a) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency's estimate of burden including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility and clarity of the information to be collected; (d) ways to 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 should be addressed to: Desk Officer for Agriculture, Office of Information and Regulatory Affairs, Office of Management and Budget (OMB),
An agency may not conduct or sponsor a collection of information unless the collection of information displays a currently valid OMB control number and the agency informs potential persons who are to respond to the collection of information that such persons are not required to respond to the collection of information unless it displays a currently valid OMB control number.
Natural Resources Conservation Service, USDA.
Notice of Intent (NOI) to adopt final Environmental Assessment (EA).
The United States Department of Agriculture, Natural Resources Conservation Service (NRCS) announces its intent to adopt the Kanab Creek Watershed Vegetation Management Project EA, as prepared by the U.S. Department of Interior's Bureau of Land Management (BLM), under the provisions of the Council on Environmental Quality (CEQ) regulations (40 CFR 1506.3).
NRCS will accept comments received or postmarked concerning the adoption of this EA at the address below until July 19, 2013.
You may submit comments concerning the adoption of the Kanab Creek Watershed Vegetation Management Project EA, request a copy of the EA, or submit comments on actions being taken by NRCS regarding this matter to: Mr. Gary McRae, Resource Conservationist, Natural Resources Conservation Service, 125 South State Street, Room 4010, Salt Lake City, Utah 84138.
Mr. Gary McRae, Resource Conservationist, Natural Resources Conservation Service, 125 South State Street, Room 4010, Salt Lake City, Utah 84138; email at
NRCS announces its intent to adopt the Kanab Creek Watershed Vegetation Management Project EA (UT–040–09–03) prepared by the U.S. Department of Interior's Bureau of Land Management (BLM), Color County District, under the provisions of the Council on Environmental Quality (CEQ) regulations (40 CFR 1506.3). NRCS has reviewed this EA and determined that it adequately addresses the environmental impacts related to the proposed action for the private land vegetation treatment within the watershed.
As described in the EA, the area project is 130,689 acres with up to 52,043 acres proposed for treatment. The NRCS is the lead agency dealing with the small private parcels totaling 31,401 acres within this proposed watershed. A portion of this private land, the acreage is dependent on private landowner's preference, will also participate in vegetation treatment. The proposed action is needed to: (1) Reduce hazardous fuels and risk to life and property from catastrophic wildland fire, (2) restore and improve
Import Administration, International Trade Administration, Department of Commerce.
In response to a request from an interested party, the Department of Commerce initiated a changed circumstances review of the antidumping duty order on diamond sawblades and parts thereof from the People's Republic of China (PRC). We preliminarily determine that Husqvarna (Hebei) Co., Ltd. is the successor-in-interest to Hebei Husqvarna Jikai Diamond Tools Co., Ltd.
Yang Jin Chun AD/CVD Operations, Office 1, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482–5760.
The Department of Commerce (the Department) published the antidumping duty order on diamond sawblades and parts thereof from the PRC on November 4, 2009.
The products covered by the order are all finished circular sawblades, whether slotted or not, with a working part that is comprised of a diamond segment or segments, and parts thereof, regardless of specification or size, except as specifically excluded below. Within the scope of the order are semifinished diamond sawblades, including diamond sawblade cores and diamond sawblade segments. Diamond sawblade cores are circular steel plates, whether or not attached to non-steel plates, with slots. Diamond sawblade cores are manufactured principally, but not exclusively, from alloy steel. A diamond sawblade segment consists of a mixture of diamonds (whether natural or synthetic, and regardless of the quantity of diamonds) and metal powders (including, but not limited to, iron, cobalt, nickel, tungsten carbide) that are formed together into a solid shape (from generally, but not limited to, a heating and pressing process).
Sawblades with diamonds directly attached to the core with a resin or electroplated bond, which thereby do not contain a diamond segment, are not included within the scope of the order. Diamond sawblades and/or sawblade cores with a thickness of less than 0.025 inches, or with a thickness greater than 1.1 inches, are excluded from the scope of the order. Circular steel plates that have a cutting edge of non-diamond material, such as external teeth that protrude from the outer diameter of the plate, whether or not finished, are excluded from the scope of the order. Diamond sawblade cores with a Rockwell C hardness of less than 25 are excluded from the scope of the order. Diamond sawblades and/or diamond segment(s) with diamonds that predominantly have a mesh size number greater than 240 (such as 250 or 260) are excluded from the scope of the order.
Merchandise subject to the order is typically imported under heading 8202.39.00.00 of the Harmonized Tariff Schedule of the United States (HTSUS). When packaged together as a set for retail sale with an item that is separately classified under headings 8202 to 8205 of the HTSUS, diamond sawblades or parts thereof may be imported under heading 8206.00.00.00 of the HTSUS. On October 11, 2011, the Department included the 6804.21.00.00 HTSUS classification number to the customs case reference file, pursuant to a request by U.S. Customs and Border Protection (CBP).
The tariff classification is provided for convenience and customs purposes; however, the written description of the scope of the order is dispositive.
In making a successor-in-interest determination, the Department examines several factors including, but not limited to, changes in management, production facilities, supplier relationships, and customer base.
.
In its submission, Hebei has provided sufficient evidence for us to preliminarily determine that it is the successor-in-interest to Jikai. Hebei states that its management, production facilities, and customer/supplier relationships have not changed as a result of the name change. Hebei provided documents showing that Husqvarna Holding AB, which had previously owned most of Jikai's shares, acquired the remaining shares to become Jikai's sole owner and changed of the company name from Jikai to Hebei. Further, Hebei provided internal documents evidencing that: Jikai's top 10 products remained as Hebei's top 10 products, Jikai's top 10 input suppliers remained as Hebei's top 10 input suppliers providing the same inputs, and Jikai's top 10 customers remained as Hebei's top 10 customers. Hebei also provided a list of members of the management team and supporting documentation indicating that Jikai's managers hold the same position in Hebei and documentation showing only small, insignificant changes to the members of the board of directors.
Based on record evidence, we preliminarily determine that Hebei is the successor-in-interest to Jikai because the name change resulted in no significant changes to management, production facilities, supplier relationships, and customers. As a result, we preliminarily determine that Hebei operates as the same business entity as Jikai. Thus, we preliminarily determine that Hebei should receive the same antidumping duty cash deposit rate with respect to the subject merchandise as Jikai, its predecessor company.
Because cash deposits are only estimates of the amount of antidumping duties that will be due, changes in cash deposit rates are not made retroactive and, therefore, no change will be made to Hebei's cash deposit rate as a result of these preliminary results. If Hebei believes that the deposits paid exceed the actual amount of dumping, it is entitled to request an administrative review during the anniversary month of the publication of the order of those entries,
Pursuant to 19 CFR 351.309(c), interested parties may submit cases briefs not later than 15 days after the date of publication of this notice
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, or to participate if one is requested, must submit a written request to the Assistant Secretary for Import Administration, filed electronically
Consistent with 19 CFR 351.216(e), we will issue the final results of this changed circumstances review no later than 270 days after the date on which this review was initiated, or within 45 days after the publication of the preliminary results if all parties in this review agree to our preliminary results.
We are issuing and publishing this notice in accordance with sections 751(b)(1) and 777(i)(1) of the Tariff Act of 1930, as amended, and 19 CFR 351.216.
Notice of Application to amend the Export Trade Certificate of Review Issued to the Independent Film & Television Alliance, Application no. 89–9A001.
The Office of Competition and Economic Analysis (“OCEA”) of the International Trade Administration, Department of Commerce, has received an application to amend an Export Trade Certificate of Review (“Certificate”). This notice summarizes the proposed amendment and requests comments relevant to whether the amended Certificate should be issued.
Joseph Flynn, Director, Office of Competition and Economic Analysis, International Trade Administration, (202) 482–5131 (this is not a toll-free number) or email at
Title III of the Export Trading Company Act of 1982 (15 U.S.C. 4001–21) authorizes the Secretary of Commerce to issue Export Trade Certificates of Review. An Export Trade Certificate of Review protects the holder and the members identified in the Certificate from State and Federal government antitrust actions and from private treble damage antitrust actions for the export conduct specified in the Certificate and carried out in compliance with its terms and conditions. Section 302(b)(1) of the Export Trading Company Act of 1982 and 15 CFR 325.6(a) require the Secretary to publish a notice in the
Interested parties may submit written comments relevant to the determination whether an amended Certificate should be issued. If the comments include any privileged or confidential business information, it must be clearly marked and a nonconfidential version of the comments (identified as such) should be included. Any comments not marked as privileged or confidential business
An original and five (5) copies, plus two (2) copies of the nonconfidential version, should be submitted no later than 20 days after the date of this notice to: Export Trading Company Affairs, International Trade Administration, U.S. Department of Commerce, Room 7025–X, Washington, DC 20230.
Information submitted by any person is exempt from disclosure under the Freedom of Information Act (5 U.S.C. 552). However, nonconfidential versions of the comments will be made available to the applicant if necessary for determining whether or not to issue the Certificate. Comments should refer to this application as “Export Trade Certificate of Review, application number 87–9A001.”
The Independent Film and Television Alliance original Certificate was issued on April 10, 1987 (52 FR 12578, April 17, 1987). A summary of the current application for an amendment follows.
1. Add the following companies as new Members of IFTA's Certificate: Altitude Film Entertainment Limited (London, United Kingdom), Archstone Distribution, LLC (Los Angeles, CA), Artis Films Romania (Bucharest, Romania), Bos Entertainment, Inc., d/b/a The Exchange (Los Angeles, CA), Callister Technology and Entertainment LLC d/b/a Garden Thieves Pictures (Washington, DC), Corsan NV (Antwerp, Belgium), DARO Film Distribution GmbH (Monte Carlo, Monaco), Embankment Films Limited (London, United Kingdom), EntertainME US LLC (Hollywood, CA), Entertainment One (Toronto, Ontario, Canada), Exclusive Films International, Limited (Beverly Hills, CA), Filmnation Entertainment (Los Angeles, CA), Fortune Star Media Limited (Kowloon, Hong Kong), GFM Films (London, United Kingdom), Global Asylum, The (Burbank, CA), Gold Lion Films (Los Angeles, CA), Hasbro, Inc. (Burbank, CA), HBO Enterprises (New York, NY), Highland Film Group LLC (West Hollywood, CA), Huayi Brothers Media Corporation (Beijing, China), Hyde Park International (Sherman Oaks, CA), KSM GmbH (Wiesbaden, Germany), Lotte Entertainment (Seoul, South Korea), Mega-Vision Pictures Limited (Kowloon, Hong Kong), MICA Entertainment, LLC (Century City, CA), Mission Pictures International, LLC (Van Nuys, CA), Mister Smith Entertainment Limited (London, United Kingdom), MonteCristo International Entertainment, LLC (Los Angeles, CA), Multicom Entertainment Group, Inc. (Los Angeles, CA), Premiere Entertainment Group, LLC (Encino, CA), Protagonist Pictures Limited (London, United Kingdom), Reel One Entertainment, Inc. (Beverly Hills, CA), Regal Media International (Wanchai, Hong Kong), Relativity Media, LLC (Beverly Hills, CA), Shine International (London, United Kingdom), Sierra/Affinity (Los Angeles, CA), Six Sales Entertainment Group S.L. (Madrid, Spain), Studio City Pictures, Inc. (Studio City, CA), Taylor & Dodge, LLC (Los Angeles, CA), uConnect Films Ltd. (London, United Kingdom), and Vision Music, Inc. (Los Angeles, CA).
2. Remove the following companies as Members of ITFA's Certificate: 111 Pictures Ltd., Action Concept Film und Stuntproduction GmbH, Adriana Chiesa Enterprises SRL, Alain Siritzky Productions (ASP), Alpine Pictures, Inc., American World Pictures, Bold Films L.P., Brainstorm Media, Brightlight Pictures Inc., Capitol Films Limited, Cinamour Entertainment, Cinemavault Releasing, Cinesavvy Inc., Continental Entertainment Capital, DeAPlaneta, Essential Entertainment, Fidec, Film Department (The), First California Bank, Fremantle Corporation (The), GreeneStreet Films, HandMade Films International, ICB Entertainment Finance, Icon Entertainment International, IFD Film & Arts, Ltd., Imagi Studios, Insight Film Releasing Ltd., International Keystone Entertainment, ITN Distribution, Inc., Keller Entertainment Group, Inc., Liberation Entertainment, Inc., Maverick Global, a division of Maverick Entertainment Group, Inc., Media 8 Entertainment, Media Luna Entertainment, Neoclassics Films Ltd., NonStop Sales AB, North by Northwest Entertainment, Oasis International, Odd Lot International, Omega Entertainment, Ltd., Paramount Vantage International, Park Entertainment Ltd., Passport International Entertainment, LLC, Peace Arch Entertainment, Promark/Zenpix, Quantum Releasing LLC, Regent Worldwide Sales LLC, Safir Films, Ltd., Sobini Films, Stevens Entertainment Group, Summit Entertainment, Tandem Communications, Taurus Entertainment Company, U.S. Bank, UGC International, Union Bank of California, Wachovia Bank, Yari Film Group, and York International.
3. Change the names of the following members: 2929 International, LLC of Santa Monica, CA is now 2929 International, American Cinema International of Van Nuys, CA is now American Cinema International Inc., UK Film Council of London, United Kingdom is now BFI—British Film Institute, Filmax Pictures of Barcelona, Spain is now Castelao Pictures, CJ Entertainment Inc of Seoul, Korea is now CJ E&M Corporation, Classic Media, Inc. of New York, NY is now Classic Media, LLC, ContentFilm International of London, United Kingdom is now Content Media Corporation International Limited, Crystal Sky Worldwide Sales LLC of Los Angeles, CA is now Crystal Sky LLC, Ealing Studios International of London, United Kingdom is now Ealing Metro International, Echo Bridge Entertainment of Needham, MA is now Echo Bridge Entertainment LLC, Emperor Motion Pictures of Wanchai, Hong Kong is now Emperor Motion Picture Enterprise Limited, Boll AG of Vancouver, British Columbia, Canada is now Event Film Distribution, Fabrication Films of Los Angeles, CA is now Fabrication Films International LLC, Freeway Entertainment Group Ltd of Budapest, Hungary is now Freeway Entertainment Group BV, Fremantlemedia Enterprises of London, United Kingdom is now FremantleMedia Limited, GK Films, LLC of Santa Monica, CA is now GK Films, Telepool GmbH of Munich, Germany is now Global Screen GmbH, Goldcrest Films International Ltd of London, UK is now Goldcrest Films International, Green Communications of Los Angeles, CA is now Green Films, Inc., Hanway Films of London, UK is now Hanway Films Ltd., Intandem Films of London, UK is now Intandem Films Plc, K5 International of Munich, Germany is now K5 Media Group GmbH, MarVista Entertainment of Los Angeles, CA is now Mar Vista Entertainment, LLC, Miramax Films of Santa Monica, CA is now Miramax International, Moonstone Entertainment of Studio City, CA is now Moonstone Entertainment, Inc., the entity d/b/a Mainline Releasing of Santa Monica, CA is now MRG Entertainment, Inc., New Line Cinema of Burbank, CA is now New Line Cinema Corporation, Nu Image of Los Angeles, CA is now Nu Image, Inc., Pueblo Film Group of Zurich, Switzerland is now Pueblo Film Group of Companies, Film Finance Corporation Australia of Woolloomooloo, Australia is now
Notice of Application to amend the Export Trade Certificate of Review Issued to Outdoor Power Equipment Institute, Inc., Application no. 89–4A018.
The Office of Competition and Economic Analysis (“OCEA”) of the International Trade Administration, Department of Commerce, has received an application to amend an Export Trade Certificate of Review (“Certificate”). This notice summarizes the proposed amendment and requests comments relevant to whether the amended Certificate should be issued.
Joseph Flynn, Director, Office of Competition and Economic Analysis, International Trade Administration, (202) 482–5131 (this is not a toll-free number) or email at
Title III of the Export Trading Company Act of 1982 (15 U.S.C. 4001–21) authorizes the Secretary of Commerce to issue Export Trade Certificates of Review. An Export Trade Certificate of Review protects the holder and the members identified in the Certificate from State and Federal government antitrust actions and from private treble damage antitrust actions for the export conduct specified in the Certificate and carried out in compliance with its terms and conditions. Section 302(b)(1) of the Export Trading Company Act of 1982 and 15 CFR 325.6(a) require the Secretary to publish a notice in the
Interested parties may submit written comments relevant to the determination whether an amended Certificate should be issued. If the comments include any privileged or confidential business information, it must be clearly marked and a nonconfidential version of the comments (identified as such) should be included. Any comments not marked as privileged or confidential business information will be deemed to be nonconfidential.
An original and five (5) copies, plus two (2) copies of the nonconfidential version, should be submitted no later than 20 days after the date of this notice to: Export Trading Company Affairs, International Trade Administration, U.S. Department of Commerce, Room 7025–X, Washington, DC 20230.
Information submitted by any person is exempt from disclosure under the Freedom of Information Act (5 U.S.C. 552). However, nonconfidential versions of the comments will be made available to the applicant if necessary for determining whether or not to issue the Certificate. Comments should refer to this application as “Export Trade Certificate of Review, application number 89–4A018.”
The Outdoor Power Equipment Institute, Inc. original Certificate was issued on March 19, 1990 (55 FR 11041, March 26, 1990). A summary of the current application for an amendment follows.
1. Add the following companies as new Members of OPEI's Certificate: Magic Circle Corporation d/b/a Dixie Chopper (Coatesville, IN) and Briggs & Stratton Corporation (Wauwatosa, WI).
2. Amend the definition of Products under OPEI's existing Certificate to clarify that Products covered include: Sand Trap Rakes (NAICS 333111), Aerators (NAICS 333112), Brushcutters (NAICS 333112), Hedge Trimmers (NAICS 333112), Hand-Held Snow Throwers (NAICS 333112), Split-Boom Products (NAICS 333112), Hand-Held Tillers and Cultivators (NAICS 333112).
3. Amend the definition of Products covered by OPEI's existing Certificate by replacing the current descriptive term “
Notice of Application to amend the Export Trade Certificate of Review Issued to California Almond Export Association, Application no. 99–6A002.
The Office of Competition and Economic Analysis (“OCEA”) of the International Trade Administration, Department of Commerce, has received an application to amend an Export Trade Certificate of Review (“Certificate”). This notice summarizes the proposed amendment and requests comments relevant to whether the amended Certificate should be issued.
Joseph Flynn, Director, Office of Competition and Economic Analysis, International Trade Administration, (202) 482–5131 (this is not a toll-free number) or email at
Title III of the Export Trading Company Act of 1982 (15 U.S.C. 4001–21) authorizes the Secretary of Commerce to issue Export Trade Certificates of Review. An Export Trade Certificate of Review protects the holder and the members identified in the Certificate from State and Federal government antitrust actions and from private treble damage antitrust actions for the export conduct specified in the Certificate and carried out in compliance with its terms and conditions. Section 302(b)(1) of the Export Trading Company Act of 1982 and 15 CFR 325.6(a) require the Secretary to publish a notice in the
Interested parties may submit written comments relevant to the determination whether an amended Certificate should be issued. If the comments include any privileged or confidential business information, it must be clearly marked
An original and five (5) copies, plus two (2) copies of the nonconfidential version, should be submitted no later than 20 days after the date of this notice to: Export Trading Company Affairs, International Trade Administration, U.S. Department of Commerce, Room 7025–X, Washington, DC 20230.
Information submitted by any person is exempt from disclosure under the Freedom of Information Act (5 U.S.C. 552). However, nonconfidential versions of the comments will be made available to the applicant if necessary for determining whether or not to issue the Certificate. Comments should refer to this application as “Export Trade Certificate of Review, application number 99–6A002.”
The California Almond Export Association, LLC original Certificate was issued on December 27, 1999 (65 FR 760, January 6, 2000). A summary of the current application for an amendment follows.
1. Delete the following company as a Member of CAEA's Certificate: North Valley Nut, Inc. (Orland, CA).
2. Change the name of the following Member: Roche Brothers International (Escalon, CA) to Roche Brothers International Family Nut Co. (Escalon, CA)
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of scoping meetings.
The Caribbean Fishery Management Council will hold scoping meetings to obtain input from fishers, the general public, and the local agencies representatives on the development of island-specific fishery management plans for Puerto Rico, St. Thomas/St. John, USVI and St. Croix, USVI.
The scoping meetings will be held from July 8, 2013, through July 12, 2013. See
The scoping meetings will be held in Puerto Rico and in the U.S. Virgin Islands. See
Caribbean Fishery Management Council, 270 Muñoz Rivera Avenue, Suite 401, San Juan, Puerto Rico 00918–1903, telephone (787) 766–5926.
A fishery management plan will be developed for each of these areas.
The document entitled “Development of a Comprehensive Fishery Management Plan for the Exclusive Economic Zone of St. Thomas/St. John, USVI,” will consider the following alternative actions:
Action 1: Establish the fishery management units (FMUs) for the comprehensive St. Thomas/St. John fishery management plan (FMP).
Action 2: Revise the species composition of the comprehensive St. Thomas/St. John FMP.
Action 3: Establish management reference points for any new species added to the comprehensive St. Thomas/St. John FMP.
Action 4: Modify or establish additional management measures.
The document entitled “Development of a Comprehensive Fishery Management Plan for the Exclusive Economic Zone of St. Croix, USVI,” will consider the following alternative actions:
Action 1: Establish the fishery management units (FMUs) for the comprehensive St. Croix, USVI fishery management plan (FMP).
Action 2: Revise the species composition of the comprehensive St. Croix FMP.
Action 3: Establish management reference points for any new species added to the comprehensive St. Croix, USVI FMP.
Action 4: Modify or establish additional management measures.
The document entitled “Development of a Comprehensive Fishery Management Plan for the Exclusive Economic Zone of Puerto Rico,” will consider the following alternative actions:
Action 1: Establish the fishery management units (FMUs) for the comprehensive Puerto Rico fishery management plan (FMP).
Action 2: Revise the species composition of the comprehensive Puerto Rico FMP.
Action 3: Establish management reference points for any new species added to the comprehensive Puerto Rico FMP.
Action 4: Modify or establish additional management measures.
The comprehensive plans will incorporate and modify, as needed, federal fishery management measures included in each of the existing species based management plans (Spiny Lobster, Reef Fish, Coral and Queen Conch). The goal is to create management plans tailored to the specific fishery management needs of each area. If approved, these new management plans being developed for each area; St. Thomas/St. John, USVI; St. Croix, USVI, and Puerto Rico, will replace the current species-based plans presently governing commercial and recreational harvest in the U.S. Caribbean federal waters.
The Caribbean Fishery Management Council will hold scoping meetings to receive public input on the management options mentioned above. The complete document is available at:
Written comments can be sent to the Council not later than July 31, 2013, by regular mail to the address below, or via email to
The scoping meetings will be held on the following dates and locations:
July 8, 2013–7 p.m.—Centro de Usos Múltiples de Vieques, Calle Antonio G. Mellado, Vieques, Puerto Rico.
July 9, 2013–7 p.m.—DoubleTree by Hilton San Juan Hotel, De Diego Avenue, San Juan, Puerto Rico.
July 10, 2013–2 p.m.—Holiday Inn Ponce & Tropical Casino, 3315 Ponce By Pass, Ponce, Puerto Rico.
July 10, 2013–7 p.m.—Mayagüez Holiday Inn, 2701 Hostos Avenue, Mayagüez, Puerto Rico.
July 11, 2013–7 p.m.—Asociación de Pescadores Unidos de Playa Hucares de Naguabo, Naguago, Puerto Rico.
July 12, 2013–6 p.m.—Club Náutico de Arecibo, Carr. 681 Km. 1.4, Barrio Islote, Sector Vigía, Arecibo, Puerto Rico.
July 9, 2013–7 p.m.—The Buccaneer Hotel, Estate Shoys, Christiansted, St. Croix, U.S. Virgin Islands.
July 10, 2013–7 p.m.—Windward Passage Hotel, Charlotte Amalie, St. Thomas, U.S. Virgin Islands.
These meetings are physically accessible to people with disabilities. For more information or request for sign language interpretation and other auxiliary aids, please contact Mr. Miguel A. Rolón, Executive Director, Caribbean Fishery Management Council, 270 Muñoz Rivera Avenue, Suite 401, San Juan, Puerto Rico, 00918–1903, telephone (787) 766–5926, at least 5 days prior to the meeting date.
Committee for the Implementation of Textile Agreements.
Directive to the Commissioner of U.S. Customs and Border Protection
The Committee for the Implementation of Textile Agreements (CITA) has determined that certain textile and apparel goods from Benin shall be treated as “folklore articles” and “ethnic printed fabrics” and qualify for preferential treatment under the African Growth and Opportunity Act (“AGOA”). Imports of eligible products from Benin with an appropriate visa will qualify for duty-free treatment.
As of June 14, 2013.
Don Niewiaroski, Jr., International Trade Specialist, Office of Textiles and Apparel, U.S. Department of Commerce, (202) 482–2496.
Sections 112(a) and 112(b)(6) of the African Growth and Opportunity Act (Title I of the Trade and Development Act of 2000, Pub. L. No. 106–200) as amended by Section 7(c) of the AGOA Acceleration Act of 2004 (Pub. L. 108–274) (“AGOA Acceleration Act”) (19 U.S.C. 3721(a) and (b)(6)); Sections 2 and 5 of Executive Order No. 13191 of January 17, 2001; Sections 25–27 and Paras. 13–14 of Presidential Proclamation 7912 of June 29, 2005.
AGOA provides preferential tariff treatment for imports of certain textile and apparel products of beneficiary sub-Saharan African countries, including handloomed, handmade, or folklore articles of a beneficiary country that are certified as such by the competent authority in the beneficiary country. The AGOA Acceleration Act further expanded AGOA by adding ethnic printed fabrics to the list of textile and apparel products made in the beneficiary sub-Saharan African countries that may be eligible for the preferential treatment described in section 112(a) of the AGOA. In Executive Order 13191 (January 17, 2001) and Presidential Proclamation 7912 (June 29, 2005), the President authorized CITA to consult with beneficiary sub-Saharan African countries and to determine which, if any, particular textile and apparel goods shall be treated as being handloomed, handmade, folklore articles, or ethnic printed fabrics.
In a letter to the Commissioner of Customs dated January 18, 2001, the United States Trade Representative directed Customs to require that importers provide an appropriate export visa from a beneficiary sub-Saharan African country to obtain preferential treatment under section 112(a) of the AGOA.
CITA consulted with Benin authorities on November 7, 2012, January 3, 2013, April 11, 2013, and May 29, 2013 and has determined that folklore articles described in Annex A and ethnic printed fabrics described in Annex B, if produced in and exported from Benin, are eligible for preferential tariff treatment under section 112(a) of the AGOA, as amended. After further consultations with Benin authorities, CITA may determine that additional textile and apparel goods shall be treated as handloomed, handmade, folklore articles or ethnic printed fabrics. In the letter published below, CITA directs the Commissioner of U.S. Customs and Border Protection to allow duty-free entry of such products under U.S. Harmonized Tariff Schedule subheading 9819.11.27 if accompanied by an appropriate AGOA visa in grouping “9”.
Dear Commissioner: The Committee for the Implementation of Textiles Agreements (“CITA”), pursuant to Sections 112(a) and (b)(6) of the African Growth and Opportunity Act (Title I of the Trade and Development Act of 2000, Pub. L. 106–200) (“AGOA”), as amended by Section 7(c) of the AGOA Acceleration Act of 2004, (Pub. L. 108–274) (“AGOA Acceleration Act”) (19 U.S.C. 3721(a) and (b)(6)), Executive Order No. 13191 of January 17, 2001, and Presidential Proclamation 7912 of June 29, 2005, has determined, as of June 14, 2013, that the following articles shall be treated as handloomed, handmade, folklore articles, or ethnic printed fabrics under the AGOA: (a) folklore articles described in Annex A to this letter and (b) ethnic printed fabrics described in Annex B, if made in Benin. Such articles are eligible for duty-free treatment only if entered under subheading 9819.11.27 and accompanied by a properly completed visa for product grouping “9”, in accordance with the provisions of the Visa Arrangement between the Government of Benin and the Government of the United States Concerning Textile and Apparel Articles Claiming Preferential Tariff Treatment under Section 112 of the Trade and Development Act of 2000. After further consultations with Benin authorities, CITA may determine that additional textile and apparel goods shall be treated as for handmade, handloomed, folklore articles, or ethnic printed fabrics.
CITA has determined that the following textile and apparel goods shall be treated as folklore articles for purposes of the AGOA if such goods are made in Benin. Articles must be ornamented in characteristic Benin or regional folk style. An article may not include modern features such as zippers, elastic, elasticized fabrics, snaps, or hook-and-pile fasteners (such as velcro© or similar holding fabric). An article may not incorporate patterns that are not traditional or historical to Benin, such as airplanes, buses, cowboys, or cartoon characters and may not incorporate designs referencing holidays or festivals not common to traditional Benin culture, such as Halloween and Thanksgiving. Eligible folklore articles:
(a) Bomba: Made of cotton and/or synthetic fibers. Hand-woven on manually operated looms then hand or machine stitched. There
(b) Barmassou (Daunchiki): Made of cotton and/or synthetic fibers. Bands are hand-woven in manually operated looms then machine stitched together to form a wider substrate. This is a three piece garment for men—hat, loose fitting outer garment that extends from the thorax to the knees, and baggy pants. Patterns can vary but are usually plain weave. Colors are usually white and sometimes black and white.
(c) Boubou (Batik Peulh or Aizo): Made of cotton textile amassed, hand or machine assembled and hand dyed with repetitive patterns. This is a one piece dress for women—it is loose fitting with sleeves going to or a little past the elbow and the bottom of the garment going slightly past the knees. The edges of the sleeves and the bottom usually have fringes. Patterns and colors vary.
(d) Daunchiki: Made of cotton and/or synthetic fibers. Bands are hand-woven in manually operated looms then machine stitched together to form a wider substrate. This is a three piece garment for men—hat, loose fitting outer garment that extends from the thorax to the knees, and baggy pants with a cord that acts as a belt. Patterns are stripes of “fakle issile”. Colors are usually white and sometimes black and white.
(e) King's hat (Daa zaa): Made of cotton. This is a cap for men. It is cylindrical in shape. It has various patterns and designs and colors
(f) Peulh: Made of cotton from manually operated loom. This is a one piece dress/robe for women—it is loose fitting with sleeves ending at the shoulder and the bottom of the dress/robe going to the mid-shin level. This dress also has a slight v-neck. The v-neck can be closed at the top with a loop and bottom. Colors and patterns vary.
(g) Tako: Made of cotton bands hand-woven in manually operated looms then hand and/or machined stitched together to form a wider substrate. This is a three piece garment for men—hat, loose fitting outer garment which extends from the thorax to the feet, and baggy pants. Patterns are a mix of guinea fowl and bakoko. Comes in various colors, usually with vertical strips.
(h) Tako (Grand Baubou): Made of cotton bands hand-woven in manually operated looms then hand and/or machined stitched together to form a wider substrate. This is a three piece garment for men—hat, loose fitting outer garment which extends from the thorax to the feet, and baggy pants. The pattern varies and is usually plain weave. The colors are typically white, black and white.
(i) Tchanka (Cavaliers Pants): Made of cotton fabric hand-woven operated on looms by hand and machine stitched. The colors vary and the pattern is houndstooth then gbangbana. It is a loose fitting pants for men, consisting of baggy from the waist to approximately the knees and then tighter after the knees to the ankles.
(j) Wanwolovo: Made of mix of cotton and synthetic fibers. It is hand-woven from a manually operated loom to form a chain of patterns. This is a three piece garment for women—this consists of a wrap that goes around the body above the breast area and under the arms going down to below the knees; another wrap hangs over one shoulder; the last wrap is wrapped around the head. It has a chain of patterns. These wraps can have fringes on the ends. Colors are blue, red, white but colors can vary.
Each ethnic print must meet all of the criteria listed below:
(A) Selvedge on both edges.
(B) Width of less than 50 inches.
(C) Classifiable under subheading 5208.52.30
(D) Contains designs, symbols, and other characteristics of African prints normally produced for and sold in Africa by the piece.
(E) Made from fabric woven in the U.S. using U.S. yarn or woven in one or more eligible
(F) Printed, including waxed, in one or more eligible sub-Saharan beneficiary countries.
Corporation for National and Community Service.
Notice.
The Corporation for National and Community Service (CNCS) has submitted a public information collection request (ICR) entitled Senior Corps Independent Living Impact Evaluation Study for review and approval in accordance with the Paperwork Reduction Act of 1995, Public Law 104–13, (44 U.S.C. Chapter 35). Copies of this ICR, with applicable supporting documentation, may be obtained by calling the Corporation for National and Community Service, Wanda Carney, at (202) 606–6934 or email to
Comments may be submitted, identified by the title of the information collection activity, to the Office of Information and Regulatory Affairs, Attn: Ms. Sharon Mar, OMB Desk Officer for the Corporation for National and Community Service, by any of the following two methods within 30 days from the date of publication in the
(1) By fax to: (202) 395–6974, Attention: Ms. Sharon Mar, OMB Desk Officer for the Corporation for National and Community Service; or
(2) By email to:
The OMB is particularly interested in comments which:
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of CNCS, 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;
• Propose ways to enhance the quality, utility, and clarity of the information to be collected; and
• Propose ways to 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.
A 60-day public comment Notice was published in the
• Valid estimate of the effect of participating as a Senior Companion client (i.e. “effect size”) that is based on multiple sites;
• precise estimate of the variability among clients regarding key indicators that might be included in a definitive study; and
• valid estimate of the appropriate follow-up time required to measure change in a follow-up study.
Notice.
The Department of Defense has submitted to OMB for clearance, the following proposal for collection of information under the provisions of the Paperwork Reduction Act (44 U.S.C. Chapter 35).
Consideration will be given to all comments received by July 19, 2013.
Written comments and recommendations on the proposed information collection should be sent to Ms. Jasmeet Seehra at the Office of Management and Budget, Desk Officer for DoD, Room 10236, New Executive Office Building, Washington, DC 20503.
You may also submit comments, identified by docket number and title, by the following method:
•
Written requests for copies of the information collection proposal should be sent to Ms. Toppings at WHS/ESD Information Management Division, 4800 Mark Center Drive, East Tower, Suite 02G09, Alexandria, VA 22350–3100.
Director of Administration and Management, DoD.
Notice of Advisory Committee meeting.
Under the provisions of the Federal Advisory Committee Act (FACA) of 1972 (5 U.S.C., Appendix, as amended), the Government in the Sunshine Act of 1976 (5 U.S.C. 552b, as amended), and 41 CFR 102–3.150, the Department of Defense (DoD) announces that the following Federal advisory committee meeting of the National Commission on the Structure of the Air Force (“the Commission”) will take place.
2521 South Clark Street, Suite 200, Crystal City, VA 22202.
Mrs. Marcia Moore, Designated Federal Officer, National Commission on the Structure of the Air Force, 1950 Defense Pentagon, Room 3A874, Washington, DC 20301–1950. Email:
The Designated Federal Officer (DFO) will review all submitted written statements. Written comments should be submitted to Mrs. Marcia Moore, DFO, via facsimile or electronic mail, the preferred modes of submission. Each page of the comment must include the author's name, title or affiliation, address, and daytime phone number. All contact information may be found in
Due to difficulties beyond the control of the Commission or its DFO, this
The National Commission on the Structure of the Air Force was established by the National Defense Authorization Act for Fiscal Year 2013 (Pub. L. 112–239). The Department of Defense sponsor for the Commission is the Director of Administration and Management, Mr. Michael L. Rhodes. The Commission is tasked to submit a report, containing a comprehensive study and recommendations, by February 1, 2014 to the President of the United States and the Congressional defense committees. The report will contain a detailed statement of the findings and conclusions of the Commission, together with its recommendations for such legislation and administrative actions it may consider appropriate in light of the results of the study. The comprehensive study of the structure of the U.S. Air Force will determine whether, and how, the structure should be modified to best fulfill current and anticipated mission requirements for the U.S. Air Force in a manner consistent with available resources.
Notice of Meeting of the Air University Board of Visitors.
Under the provisions of the Federal Advisory Committee Act of 1972 (5 U.S.C., Appendix, as amended), the Government in the Sunshine Act of 1976 (5 U.S.C. 552b, as amended), and 41 CFR 102–3.150, the Department of Defense announces that the Air University Board of Visitors' meeting will take place on Wednesday, 10 July 2013, from 1:00 p.m. to approximately 4:00 p.m. The meeting will be a conference call meeting. Please contact Mrs. Diana Bunch, Designated Federal Officer, at (334) 953–1303, for further information to access the conference call. The purpose and agenda of this meeting is to provide independent advice and recommendations on matters pertaining to the educational policies and programs of Air University and for the AFIT Subcommittee to discuss their recent subcommittee meeting.
In addition, the Air University Board of Visitors' fall meeting will take place on Monday, November 18th, 2013, from 8:00 a.m. to 4:00 p.m. and Tuesday, November 19th, 2013, from 8:00 a.m. to 4:00 p.m. The meeting will be held in the Air University Commander's Conference Room located in building 800 at Maxwell Air Force Base, AL. The purpose of this meeting is to provide independent advice and recommendations on matters pertaining to the educational, doctrinal, and research policies and activities of Air University. The agenda will include topics relating to the policies, programs, and initiatives of Air University educational programs and will include an outbrief from the Academic Affairs Subcommittee and the Air Force Institute of Technology Subcommittee.
Pursuant to 5 U.S.C. 552b, as amended, and 41 CFR 102–3.155 all sessions of the Air University Board of Visitors' meeting will be open to the public. Any member of the public wishing to provide input to the Air University Board of Visitors should submit a written statement in accordance with 41 CFR 102–3.140(c) and section 10(a)(3) of the Federal Advisory Committee Act and the procedures described in this paragraph. Written statements can be submitted to the Designated Federal Officer at the address detailed below at any time. Statements being submitted in response to the agenda mentioned in this notice must be received by the Designated Federal Officer at the address listed below at least five calendar days prior to the meeting which is the subject of this notice. Written statements received after this date may not be provided to or considered by the Air University Board of Visitors until its next meeting. The Designated Federal Officer will review all timely submissions with the Air University Board of Visitors' Board Chairperson and ensure they are provided to members of the Board before the meeting that is the subject of this notice. Additionally, any member of the public wishing to attend this meeting should contact either person listed below at least five calendar days prior to the meeting for information on base entry passes.
Mrs. Diana Bunch, Designated Federal Officer, Air University Headquarters, 55 LeMay Plaza South, Maxwell Air Force
Department of the Army, DoD.
Notice.
In compliance with Section 3506(c)(2)(A) of the
Consideration will be given to all comments received by August 19, 2013.
You may submit comments, identified by docket number and title, by any of the following methods:
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•
Any associated form(s) for this collection may be located within this same electronic docket and downloaded for review/testing. Follow the instructions at
To request more information on this proposed information collection or to obtain a copy of the proposal and associated collection instruments, please write to the U.S. Army Corps of Engineers, 441 G Street NW., Washington, DC 20314–1000,
The Corps of Engineers is required by three federal laws, passed by Congress, to regulate construction-related activities in waters of the United States. This is accomplished through the review of applications for permits to do this work.
Department of the Army, U.S. Army Corps of Engineers, DoD.
Notice of Study Initiation.
The Congressional response to the devastation in the wake of Hurricane Sandy included a mandate to collaborate with federal, state, tribal and local government agencies to regionally address the vulnerability of coastal populations at risk within the boundaries of the U.S. Army Corps of Engineers (USACE) North Atlantic Division. The goals of the North Atlantic Coast Comprehensive Study authorized under the Disaster Relief Appropriations Act, Public Law 113–2, are to (1) reduce flood risk to vulnerable coastal populations, and (2) promote coastal resilient communities to ensure a sustainable and robust coastal landscape system, considering future sea-level rise and climate change scenarios. In addition, the Comprehensive Study will identify activities warranting further analysis and institutional barriers to comprehensive implementation. A draft of the North Atlantic Coast Comprehensive Study will be available for public review and comment in early 2014 and a final report is due to Congress in January 2015. The study will identify those areas warranting more detailed evaluations; however, USACE is not authorized to develop designs or implement such projects at this time. Although potential environmental impacts will be generally evaluated, National Environmental Policy Act (NEPA) compliance processes will not be completed due to the scale of the study. Full NEPA and other environmental compliance would be required as part of future detailed evaluations before any actions could be implemented.
For media contacts please contact Mr. Justin Ward, U.S. Army Corps of Engineers, Public Affairs, 302 General Lee Avenue, Brooklyn, NY 11252, at
Mr. Justin Ward, U.S. Army Corps of Engineers, Public Affairs.
The North Atlantic Coast Comprehensive Study will include a coastal risk reduction framework, by State, including a range of structural, non-structural and programmatic measures for
Department of Education (ED), Office of the Secretary/Office of the Deputy Secretary (OS)
Notice.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 3501
Interested persons are invited to submit comments on or before July 19, 2013.
Comments submitted in response to this notice should be submitted electronically through the Federal eRulemaking Portal at
Electronically mail
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Department of Education (ED), Institute of Education Sciences/National Center for Education Statistics (IES).
Notice.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 3501
Interested persons are invited to submit comments on or before July 19, 2013.
Comments submitted in response to this notice should be submitted electronically through the Federal eRulemaking Portal at
Electronically mail
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general
Office of Special Education and Rehabilitative Services, Department of Education.
Notice.
National Institute on Disability and Rehabilitation Research (NIDRR)—Disability and Rehabilitation Research Projects and Centers Program—Rehabilitation Engineering Research Centers (RERCs)—Technologies to Support Successful Aging with Disability.
Notice inviting applications for new awards for fiscal year (FY) 2013.
The purpose of NIDRR's RERCs program, which is funded through the Disability and Rehabilitation Research Projects and Centers Program, is to improve the effectiveness of services authorized under the Rehabilitation Act. It does so by conducting advanced engineering research, developing and evaluating innovative technologies, facilitating service delivery system changes, stimulating the production and distribution of new technologies and equipment in the private sector, and providing training opportunities. RERCs seek to solve rehabilitation problems and remove environmental barriers to improvements in employment, community living and participation, and health and function outcomes of individuals with disabilities.
This priority is:
The full text of this priority is included in the pertinent notice of final priority published in this issue of the
29 U.S.C. 762(g) and 764(b)(3).
The regulations in 34 CFR part 86 apply to institutions of higher education (IHEs) only.
The Department is not bound by any estimates in this notice.
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You can contact ED Pubs at its Web site, also:
If you request an application from ED Pubs, be sure to identify this competition as follows: CFDA number 84.133E.
Individuals with disabilities can obtain a copy of the application package in an accessible format (e.g., braille, large print, audiotape, or compact disc) by contacting the person or team listed under
2.
Page Limit: The application narrative (Part III of the application) is where you, the applicant, address the selection criteria that reviewers use to evaluate your application. We recommend that you limit Part III to the equivalent of no more than 100 pages, using the following standards:
• A “page” is 8.5″ x 11″, on one side only, with 1″ margins at the top, bottom, and both sides.
• Double space (no more than three lines per vertical inch) all text in the application narrative, including titles, headings, footnotes, quotations, references, and captions, as well as all text in charts, tables, figures, and graphs.
• Use a font that is either 12 point or larger or no smaller than 10 pitch (characters per inch).
• Use one of the following fonts: Times New Roman, Courier, Courier New, or Arial. An application submitted in any other font (including Times Roman or Arial Narrow) will not be accepted.
The recommended page limit does not apply to Part I, the cover sheet; Part II, the budget section, including the narrative budget justification; Part IV, the assurances and certifications; or the one-page abstract, the resumes, the bibliography, or the letters of support. However, the recommended page limit does apply to all of the application narrative section (Part III).
An applicant should consult NIDRR's currently approved Long-Range Plan for Fiscal Years 2013–2017 (Plan) when preparing its application. The Plan, which was published in the
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Applications for grants under this competition must be submitted electronically using the Grants.gov Apply site (Grants.gov). For information (including dates and times) about how to submit your application electronically, or in paper format by mail or hand delivery if you qualify for an exception to the electronic submission requirement, please refer to section IV. 7.
We do not consider an application that does not comply with the deadline requirements.
Individuals with disabilities who need an accommodation or auxiliary aid in connection with the application process should contact the person listed under
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a. Have a Data Universal Numbering System (DUNS) number and a Taxpayer Identification Number (TIN);
b. Register both your DUNS number and TIN with the System for Award Management (SAM) (formerly the Central Contractor Registry (CCR)), the Government's primary registrant database;
c. Provide your DUNS number and TIN on your application; and
d. Maintain an active SAM registration with current information while your application is under review by the Department and, if you are awarded a grant, during the project period.
You can obtain a DUNS number from DUN and Bradstreet. A DUNS number can be created within one business day.
If you are a corporate entity, agency, institution, or organization, you can obtain a TIN from the Internal Revenue Service. If you are an individual, you can obtain a TIN from the Internal Revenue Service or the Social Security Administration. If you need a new TIN, please allow 2–5 weeks for your TIN to become active.
The SAM registration process may take seven or more business days to complete. If you are currently registered with the SAM, you may not need to make any changes. However, please make certain that the TIN associated with your DUNS number is correct. Also note that you will need to update your registration annually. This may take three or more business days to complete. Information about SAM is available at SAM.gov.
In addition, if you are submitting your application via Grants.gov, you must (1) be designated by your organization as an Authorized Organization Representative (AOR); and (2) register yourself with Grants.gov as an AOR. Details on these steps are outlined at the following Grants.gov Web page:
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Applications for grants under the RERC on Technologies to Support Successful Aging with Disability program, CFDA Number 84.133E–3, must be submitted electronically using the Governmentwide Grants.gov Apply site at
We will reject your application if you submit it in paper format unless, as described elsewhere in this section, you qualify for one of the exceptions to the electronic submission requirement
You may access the electronic grant application for the RERC program at www.Grants.gov. You must search for the downloadable application package for this program by the CFDA number. Do not include the CFDA number's alpha suffix in your search (e.g., search for 84.133, not 84.133E).
Please note the following:
• When you enter the Grants.gov site, you will find information about submitting an application electronically through the site, as well as the hours of operation.
• Applications received by Grants.gov are date and time stamped. Your application must be fully uploaded and submitted and must be date and time stamped by the Grants.gov system no later than 4:30:00 p.m., Washington, DC time, on the application deadline date. Except as otherwise noted in this section, we will not accept your application if it is received—that is, date and time stamped by the Grants.gov system—after 4:30:00 p.m., Washington, DC time, on the application deadline date. We do not consider an application that does not comply with the deadline requirements. When we retrieve your application from Grants.gov, we will notify you if we are rejecting your application because it was date and time stamped by the Grants.gov system after 4:30:00 p.m., Washington, DC time, on the application deadline date.
• The amount of time it can take to upload an application will vary depending on a variety of factors, including the size of the application and the speed of your Internet connection. Therefore, we strongly recommend that you do not wait until the application deadline date to begin the submission process through Grants.gov.
• You should review and follow the Education Submission Procedures for submitting an application through Grants.gov that are included in the application package for this competition to ensure that you submit your application in a timely manner to the Grants.gov system. You can also find the Education Submission Procedures pertaining to Grants.gov under News and Events on the Department's G5 system home page at
• You will not receive additional point value because you submit your application in electronic format, nor will we penalize you if you qualify for an exception to the electronic submission requirement, as described elsewhere in this section, and submit your application in paper format.
• You must submit all documents electronically, including all information you typically provide on the following forms: the Application for Federal Assistance (SF 424), the Department of Education Supplemental Information for SF 424, Budget Information—Non-Construction Programs (ED 524), and all necessary assurances and certifications.
• You must upload any narrative sections and all other attachments to your application as files in a PDF (Portable Document) read-only, non-modifiable format. Do not upload an interactive or fillable PDF file. If you upload a file type other than a read-only, non-modifiable PDF or submit a password-protected file, we will not review that material.
• Your electronic application must comply with any page-limit requirements described in this notice.
• After you electronically submit your application, you will receive from Grants.gov an automatic notification of receipt that contains a Grants.gov tracking number. (This notification indicates receipt by Grants.gov only, not receipt by the Department.) The Department then will retrieve your application from Grants.gov and send a second notification to you by email. This second notification indicates that the Department has received your application and has assigned your application a PR/Award number (a Department-specified identifying number unique to your application).
• We may request that you provide us original signatures on forms at a later date.
If you are prevented from electronically submitting your application on the application deadline date because of technical problems with the Grants.gov system, we will grant you an extension until 4:30:00 p.m., Washington, DC time, the following business day to enable you to transmit your application electronically or by hand delivery. You also may mail your application by following the mailing instructions described elsewhere in this notice.
If you submit an application after 4:30:00 p.m., Washington, DC time, on the application deadline date, please contact the person listed under
The extensions to which we refer in this section apply only to the unavailability of, or technical problems with, the Grants.gov system. We will not grant you an extension if you failed to fully register to submit your application to Grants.gov before the application deadline date and time or if the technical problem you experienced is unrelated to the Grants.gov system.
• You do not have access to the Internet; or
• You do not have the capacity to upload large documents to the Grants.gov system;
• No later than two weeks before the application deadline date (14 calendar days or, if the fourteenth calendar day before the application deadline date falls on a Federal holiday, the next business day following the Federal holiday), you mail or fax a written statement to the Department, explaining which of the two grounds for an exception prevents you from using the Internet to submit your application.
If you mail your written statement to the Department, it must be postmarked no later than two weeks before the application deadline date. If you fax your written statement to the Department, we must receive the faxed statement no later than two weeks before the application deadline date.
Address and mail or fax your statement to: Marlene Spencer, U.S. Department of Education, 400 Maryland Avenue SW., Room 5133, PCP, Washington, DC 20202–2700. FAX: (202) 245–7323.
Your paper application must be submitted in accordance with the mail or hand delivery instructions described in this notice.
b.
If you qualify for an exception to the electronic submission requirement, you may mail (through the U.S. Postal Service or a commercial carrier) your application to the Department. You must mail the original and two copies of your application, on or before the application deadline date, to the Department at the following address: U.S. Department of Education, Application Control Center, Attention: (CFDA Number 84.133E–3), LBJ Basement Level 1, 400 Maryland Avenue SW., Washington, DC 20202–4260.
You must show proof of mailing consisting of one of the following:
(1) A legibly dated U.S. Postal Service postmark.
(2) A legible mail receipt with the date of mailing stamped by the U.S. Postal Service.
(3) A dated shipping label, invoice, or receipt from a commercial carrier.
(4) Any other proof of mailing acceptable to the Secretary of the U.S. Department of Education.
If you mail your application through the U.S. Postal Service, we do not accept either of the following as proof of mailing:
(1) A private metered postmark.
(2) A mail receipt that is not dated by the U.S. Postal Service.
If your application is postmarked after the application deadline date, we will not consider your application.
The U.S. Postal Service does not uniformly provide a dated postmark. Before relying on this method, you should check with your local post office.
c.
If you qualify for an exception to the electronic submission requirement, you (or a courier service) may deliver your paper application to the Department by hand. You must deliver the original and two copies of your application by hand, on or before the application deadline date, to the Department at the following address: U.S. Department of Education, Application Control Center, Attention: (CFDA Number 84.133E–3), 550 12th Street SW., Room 7041, Potomac Center Plaza, Washington, DC 20202–4260.
The Application Control Center accepts hand deliveries daily between 8:00 a.m. and 4:30:00 p.m., Washington, DC time, except Saturdays, Sundays, and Federal holidays.
If you mail or hand deliver your application to the Department—
(1) You must indicate on the envelope and—if not provided by the Department—in Item 11 of the SF 424 the CFDA number, including suffix letter, if any, of the competition under which you are submitting your application; and
(2) The Application Control Center will mail to you a notification of receipt of your grant application. If you do not receive this notification within 15 business days from the application deadline date, you should call the U.S. Department of Education Application Control Center at (202) 245–6288.
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In addition, in making a competitive grant award, the Secretary also requires various assurances including those applicable to Federal civil rights laws that prohibit discrimination in programs or activities receiving Federal financial assistance from the Department of Education (34 CFR 100.4, 104.5, 106.4, 108.8, and 110.23).
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If your application is not evaluated or not selected for funding, we notify you.
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We reference the regulations outlining the terms and conditions of an award in the
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(b) At the end of your project period, you must submit a final performance report, including financial information, as directed by the Secretary. If you receive a multi-year award, you must submit an annual performance report that provides the most current performance and financial expenditure information as directed by the Secretary under 34 CFR 75.118. The Secretary may also require more frequent performance reports under 34 CFR 75.720(c). For specific requirements on reporting, please go to
4.
• The number of products (e.g., new or improved tools, methods, discoveries, standards, interventions, programs, or devices) developed or tested with NIDRR funding that have been judged by expert panels to be of high quality and to advance the field.
• The average number of publications per award based on NIDRR-funded research and development activities in refereed journals.
• The percentage of new NIDRR grants that assess the effectiveness of interventions, programs, and devices using rigorous methods.
• The number of new or improved NIDRR-funded assistive and universally designed technologies, products, and devices transferred to industry for potential commercialization.
NIDRR uses information submitted by grantees as part of their Annual Performance Reports for these reviews.
Department of Education program performance reports, which include information on NIDRR programs, are available on the Department's Web site:
5.
Marlene Spencer, U.S. Department of Education, 400 Maryland Avenue SW., Room 5133, PCP, Washington, DC 20202–2700. Telephone: (202) 245–7532 or by email:
If you use a TDD or a TTY call the Federal Relay Service (FRS), toll free, at 1–800–877–8339.
You may also access documents of the Department published in the
Office of Postsecondary Education, Department of Education.
Notice.
The Secretary intends to use the grant slate developed in FY 2012 for the GAANN Program authorized by Section 711 of the Higher Education Act of 1965, as amended (HEA), to make new grant awards in FY 2013. The Secretary takes this action because a significant number of high-quality applications remain on the FY 2012 grant slate and limited funding is available for new grant awards in FY 2013. We expect to use an estimated $3,674,000 for new awards in FY 2013.
Rebecca Ell, U.S. Department of Education, 1990 K Street NW., Room 7105, Washington, DC 20006–8510. Telephone: (202) 502–7779 or via Internet:
If you use a telecommunications device for the deaf (TDD) or a text telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1–800–877–8339.
Individuals with disabilities can obtain this document in an accessible format (e.g., braille, large print, audiotape, or compact disc) on request to the contact person listed under
On December 15, 2011, the Department of Education published a notice in the
In response to that notice, we received a significant number of high-quality applications, and many applications that received high scores by peer reviewers were not selected for funding.
To conserve funding that would be required for a peer review of new grant applications submitted under this program and instead use those funds to support grant activities, we will select grantees in FY 2013 from the existing slate of applicants developed during the FY 2012 competition using the priority, selection criteria, and application requirements referenced in the December 2011 notice.
20 U.S.C. 1135.
You may also access documents of the Department published in the
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Notice of Petition for Waiver, Granting of Application for Interim Waiver, and Request for Public Comments.
This notice announces receipt of and publishes the BSH Home Appliances Corporation (BSH) petition for waiver from specified portions of the U.S. Department of Energy (DOE) test procedure for determining the energy consumption of residential clothes dryers. The waiver request pertains to BSH's specified models of condensing residential clothes dryers. The existing test procedure does not apply to condensing clothes dryers. In addition, today's notice grants BSH an interim waiver from the DOE test procedure applicable to residential clothes dryers. DOE solicits comments, data, and information concerning BSH's petition.
DOE will accept comments, data, and information with respect to BSH's Petition until July 19, 2013.
You may submit comments, identified by case number CD–007, by any of the following methods:
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Title III, Part B of the Energy Policy and Conservation Act of 1975 (EPCA), Public Law 94–163 (42 U.S.C. 6291–6309, as codified), established the Energy Conservation Program for Consumer Products Other Than Automobiles, a program covering most major household appliances, which includes the residential clothes dryers that are the focus of this notice.
DOE's regulations set forth in 10 CFR 430.27 contain provisions that enable a person to seek a waiver from the test procedure requirements for covered consumer products. A waiver will be granted by the Assistant Secretary for Energy Efficiency and Renewable Energy (the Assistant Secretary) if it is determined that the basic model for which the petition for waiver was submitted contains one or more design characteristics that prevents testing of the basic model according to the prescribed test procedures, or if the prescribed test procedures may evaluate the basic model in a manner so unrepresentative of its true energy consumption characteristics as to provide materially inaccurate comparative data. 10 CFR 430.27(a)(1). Petitioners must include in their petition any alternate test procedures known to the petitioner to evaluate the basic model in a manner representative of its energy consumption. 10 CFR 430.27(b)(1)(iii). The Assistant Secretary may grant the waiver subject to conditions, including adherence to alternate test procedures. 10 CFR 430.27(l). Waivers remain in effect pursuant to the provisions of 10 CFR 430.27(m).
The waiver process also allows the Assistant Secretary to grant an interim waiver from test procedure requirements to manufacturers that have petitioned DOE for a waiver of such prescribed test procedures if it is determined that the applicant will experience economic hardship if the
Please note that on January 6, 2011, DOE published a test procedure final rule (76 FR 1032) to include provisions for testing ventless clothes dryers. The rule became effective on February 7, 2011, and requires compliance on or after January 1, 2015. Ventless clothes dryers manufactured on or after January 1, 2015, must be tested with the new DOE test procedure.
On May 10, 2013, BSH filed a petition for waiver and an application for interim waiver from the test procedure applicable to residential clothes dryers set forth in 10 CFR part 430, subpart B, appendix D. BSH seeks a waiver from the applicable test procedure for its Bosch WTB86200UC, WTB86201UC, and WTB86202UC condensing clothes dryers because, BSH asserts, design characteristics of these models prevent testing in accordance with the currently prescribed test procedure, as described in greater detail in the following paragraph. DOE has already granted BSH a similar waiver pertaining to their condensing clothes dryers.
In support of its petition, BSH claims that the current clothes dryer test procedure applies only to vented clothes dryers because the test procedure requires the use of an exhaust restrictor on the exhaust port of the clothes dryer during testing. Because condensing clothes dryers operate by blowing air through the wet clothes, condensing the water vapor in the airstream, and pumping the collected water into either a drain line or an in-unit container, these products do not use an exhaust port like a vented dryer does. BSH plans to market its condensing clothes dryers for situations in which a conventional vented clothes dryer cannot be used, such as high-rise apartments and other buildings where exhaust venting is not practical or is cost prohibitive.
The BSH Petition requests that DOE grant a waiver from the existing test procedure to allow for the sale of three new models (Bosch WTB86200UC, WTB86201UC, and WTB86202UC) until DOE prescribes final test procedures and minimum energy conservation standards appropriate to condensing clothes dryers. Similar to the other manufacturers of condensing clothes dryers, BSH did not include an alternate test procedure in its petition.
BSH also requests an interim waiver from the existing DOE test procedure for immediate relief. Under 10 CFR 430.27(b)(2), each application for interim waiver “shall demonstrate likely success of the Petition for Waiver and shall address what economic hardship and/or competitive disadvantage is likely to result absent a favorable determination on the Application for Interim Waiver.” An interim waiver may be granted if it is determined that the applicant will experience economic hardship if the application for interim waiver is denied, if it appears likely that the petition for waiver will be granted, and/or if the Assistant Secretary determines that it would be desirable for public policy reasons to grant immediate relief pending a determination of the petition for waiver. 10 CFR 430.27(g).
DOE has determined that BSH's application for interim waiver does not provide sufficient market, equipment price, shipments, and other manufacturer impact information to permit DOE to evaluate the economic hardship BSH might experience absent a favorable determination on its application for interim waiver. DOE understands, however, that the BSH condensing clothes dryers have a feature that prevents testing them according to the existing DOE test procedure. In addition, as stated in the previous section, DOE has previously granted waivers to Miele, LG, Whirlpool and GE for similar products. It is in the public interest to have similar products tested and rated for energy consumption on a comparable basis, where possible. Further, DOE has determined that BSH is likely to succeed on the merits of its petition for waiver and that it is desirable for policy reasons to grant immediate relief.
For the reasons stated above, DOE grants BSH's application for interim waiver from testing of its condensing clothes dryer product line. Therefore,
The application for interim waiver filed by BSH is hereby granted for BSH's Bosch WTB86200UC, WTB86201UC, and WTB86202UC condensing clothes dryers. Until a final decision is made on its petition for waiver, BSH shall not be required to test its Bosch WTB86200UC, WTB86201UC, and WTB86202UC condensing clothes dryers on the basis of the test procedure under 10 CFR Part 430 subpart B, appendix D.
DOE makes decisions on waivers and interim waivers for only those models specifically set out in the petition, not future models that may or may not be manufactured by the petitioner. BSH may submit a new or amended petition for waiver and request for grant of interim waiver, as appropriate, for additional models of clothes dryers for which it seeks a waiver from the DOE test procedure. In addition, DOE notes that grant of an interim waiver or waiver does not release a petitioner from the certification requirements set forth at 10 CFR 430.62.
Further, this interim waiver is conditioned upon the presumed validity of statements, representations, and documents provided by the petitioner. DOE may revoke or modify this interim waiver at any time upon a determination that the factual basis underlying the petition for waiver is incorrect, or upon a determination that the results from the alternate test procedure are unrepresentative of the basic models' true energy consumption characteristics.
Through today's notice, DOE grants BSH an interim waiver from the specified portions of the test procedure applicable to BSH's Bosch WTB86200UC, WTB86201UC, and WTB86202UC condensing clothes dryers and announces receipt of BSH's petition for waiver from those same portions of the test procedure. DOE publishes BSH's petition for waiver in its entirety pursuant to 10 CFR 430.27(b)(1)(iv). The petition contains no confidential information.
DOE solicits comments from interested parties on all aspects of the
According to 10 CFR 1004.11, any person submitting information that he or she believes to be confidential and exempt by law from public disclosure should submit two copies to DOE: one copy of the document including all the information believed to be confidential and one copy of the document with the information believed to be confidential deleted. DOE will make its own determination about the confidential status of the information and treat it according to its determination.
Dear Assistant Secretary Danielson:
BSH Home Appliances Corporation (“BSH”) hereby submits this Petition for Waiver and Application for Interim Waiver, pursuant to 10 CFR 430.27, for additional models of its condenser type clothes dryers.
BSH is the manufacturer of household appliances bearing the brand names of Bosch, Thermador, and Gaggenau. Its appliances include washing machines, clothes dryers, dishwashers, ovens, refrigerator-freezers, microwave ovens, and vacuum cleaners, and are sold worldwide, including in the United States. BSH's United States operations are headquartered in Irvine, California.
This petition and application are based on the following major points:
1. BSH's petition for new condenser clothes dryers introduced in the calendar year 2013 are for models WTB86200UC, WTB86201UC, WTB86202UC
2. DOE's previously granted waiver covering BSH's current models WTC82100US and WTE86300US. Case No. CD–006, dated June 8, 2011 FR Vol. 76, No. 110, pg 33271.
3. BSH's new condenser dryers for calendar year 2013 and current models (waivered) have exactly the same drying concept and principles in relation to the applicable test procedures contained in 10 CFR part 430, subpart B, appendix D—Uniform Test Method for Measuring the Energy Consumption of Clothes Dryers.
BSH request the same waiver be granted for the new models (WTB86200UC, WTB86201UC, WTB86202UC) as was granted for the current comparable products (WTC82100US and WTE86300US).
Additional supplementary and background information is attached and can be reviewed at the end of this petition and application.
The grounds for the previous and this petition and application are:
a. BHS condenser type clothes dryers do not vent exhaust air to the outside (exterior of house or apartment) as a conventional dryer does.
b. Having no exhaust vent this type product is suited for installations where exhaust venting is not practical or is cost prohibitive. It thus benefits those dwellers of high-rise apartments and others who in many cases have no way to vent to the outside or at least not without considerable remodeling/construction expense.
c. DOE's test procedure “10 CFR part 430, subpart B, appendix D—Uniform Test Method for Measuring the Energy Consumption of Clothes Dryers” does not provide any definition or means for testing dryers without an exhaust vent (condenser clothes dryers) and does not take into account the complex differences of energy usage between vented and non-vented clothes dryers.
d. BSH is not aware of any alternative test procedure to evaluate in a manner representative of the energy consumption characteristics of condenser clothes dryers.
e. Lack of relief will impose economic hardship on BSH:
○ The product would be subject to a set of regulations that DOE already acknowledges is not applicable to such a product and cannot be complied with. Proven by existing waiver for current BSH dryers.
○ BSH dryers are intended to be sold as a pair with BSH washing machines; an inability to sell the clothes dryer will harm sales of the washing machine as well.
The above clearly warrants a waiver. 10 CFR 430.27 provides for waiver of DOE test procedures on the grounds that design characteristics that either prevent testing according to the prescribed test procedure or produce data so unrepresentative that true energy consumption characteristics provide materially inaccurate comparative data. BSH condenser dryers contain a design characteristic—lack of an exhaust—that meet both these requirements. A waiver should therefore be granted that provides that BSH is not required to test its condenser clothes dryers and the existing minimum energy conservation standard for clothes dryers also should not apply to these BSH condenser clothes dryers.
BSH also requests immediate relief by grant of an interim waiver.
We would be pleased to discuss this request with DOE and provide further information as needed.
BSH will notify all clothes dryer manufacturers of domestically marketed units known to BSH of this petition and application by letter.
Sincerely,
i. From DOE's decision June 8, 2011:
Decision and Order.
The U.S. Department of Energy (DOE) gives notice of the decision and order (Case No. CD–006) that grants to BSH Home Appliances Corporation (BSH) a waiver from the DOE clothes dryer test procedure. The waiver pertains to the specified models of condensing residential clothes dryer specified in BSH's petition. Condensing clothes dryers cannot be tested using the currently applicable DOE test procedure. Under today's decision and order, BSH shall be not be required to test and rate its specified models of
This Decision and Order is effective June 8, 2011.
In accordance with Title 10 of the Code of Federal Regulations (10 CFR), Section 430.27(l), DOE gives notice of the issuance of its decision and order as set forth below. The decision and order grants BSH a waiver from the applicable residential clothes dryer test procedure at 10 CFR Part 430 subpart B, appendix D, for the two models of condensing clothes dryer specified it its petition.
ii. Excerpts from previous BSH petition for waiver
a. DOE's existing test procedure for clothes dryers requires the use of an exhaust restrictor to simulate the backpressure effects of a vent tube in an installed condition. And the test procedure does not provide any definition or mention of condenser clothes dryers. Since BSH's condenser clothes dryers do not have an exhaust vent and the DOE test procedure does not provide any definition or mention of condenser clothes dryers, the products cannot be tested in accordance with the test procedure. Thus, the test procedure does not apply to them. Consequently, the DOE energy conservation standard for clothes dryers does not apply to BSH condenser dryers since the DOE standard must be “determined in accordance with test procedures prescribed under section 6293 of this title.” 42 U.S.C. 6291(6).
b. Further, the test procedure does not provide any definition or mention of condenser clothes dryers. The waiver should remain in effect until DOE prescribes final test procedures and minimum energy conservation standards appropriate to BSH's condenser clothes dryers.
c. A warranted waiver is borne out by the fact that DOE has granted a waiver to Miele for the same type of product. 60 FR 9330 (Feb. 17, 1995). DOE stated: “The Department agrees with Miele and AHAM that the condenser clothes dryer offers the consumer additional utility, and is justified to consume more energy (lower energy factor) versus non-condenser clothes dryers. Furthermore, the Department believes that the existing clothes dryer test procedure is not applicable to the Miele condenser clothes dryers. This assertion is based on the fact that the existing test procedure requires the use of an exhaust restrictor and does not provide any definition or mention of condenser clothes dryers. The Department agrees with Miele that the current clothes dryer minimum energy conservation standard does not apply to Miele's condenser clothes dryers. Today's Decision and Order exempts Miele from testing its condenser clothes dryer and determining an Energy Factor. The Department is not publishing an amended test procedure for Miele at this time because there is not any reason to. The existing minimum energy conservation standard for clothes dryers is not applicable to the Miele condenser clothes dryer. Furthermore, the FTC does not have a labeling program for clothes dryers, therefore, Miele is not required to test its condenser clothes dryers.”
d. The basic purpose of the Energy Policy and Conservation Act, as amended by the National Appliance Energy Conservation Act, is to foster purchase of energy-efficient appliances, not hinder such purchases. The BSH condenser clothes dryer makes a dryer available to households where for physical, structural reasons a vented dryer could otherwise not be installed. BSH condenser clothes dryers thus offer benefits in the public interest. To encourage and foster the availability of these products is in the public interest. Standards programs should not be used as a means to block innovative, improved designs.
e. Granting the interim waiver and waiver would also eliminate a non-tariff trade barrier. In addition, grant of relief would help enhance economic development and employment, including not only BSH's operations in California, North Carolina, and Tennessee, but also at major national retailers and regional dealers that carry BSH products. Furthermore, continued employment creation and ongoing investments in its marketing, sales and servicing activities will be fostered by approval of the interim waiver. Conversely, denial of the requested relief would harm the company and would be anticompetitive.
Take notice that the Commission received the following exempt wholesale generator filings:
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following electric securities filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following exempt wholesale generator filings:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following electric rate filings:
Description: Updated Market Power Analysis for the Southwest Region of Merrill Lynch Commodities, Inc.
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission received the following electric corporate filings:
Description: Application of Chestnut Flats Wind, LLC and Chestnut Flats Lessee, LLC for Authorization under Section 203 of the Federal Power Act and Requests for Waivers, Confidential Treatment and Expedited Consideration.
Take notice that the Commission received the following exempt wholesale generator filings:
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following electric securities filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
In accordance with the National Environmental Policy Act of 1969 and the Federal Energy Regulatory Commission's (Commission or FERC) regulations, 18 Code of Federal Regulations (CFR) Part 380 (Order No. 486, 52 FR 47897), the Office of Energy Projects has reviewed Red River Hydro LLC's application for an original license for the Overton Lock and Dam Hydroelectric Project (FERC Project No. 13160–004) and has prepared a draft environmental assessment (draft EA). The project would be located on the Red River in Rapides Parish, Louisiana, at an
In the draft EA, Commission staff analyzes the potential environmental effects of licensing the project and concludes that licensing the project, with appropriate environmental protective measures, would not constitute a major federal action that would significantly affect the quality of the human environment.
A copy of the draft EA is available for review at the Commission in the Public Reference Room or may be viewed on the Commission's Web site at
You may also register online at
Any comments should be filed within 30 days from the date of this notice. Comments may be filed electronically via the Internet. See 18 CFR 385.2001(a)(1)(iii) and the instructions on the Commission's Web site at
Lesley Kordella by telephone at 202–502–6406 or by email at
This is a supplemental notice in the above-referenced proceeding, of Electron Hydro, LLC's application for market-based rate authority, with an accompanying rate schedule, noting that such application includes a request for blanket authorization, under 18 CFR Part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR Part 34, of future issuances of securities and assumptions of liability is July 3, 2013.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426.
The filings in the above-referenced proceeding(s) are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the Web site that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
This is a supplemental notice in the above-referenced proceeding, of Battery Utility of Ohio, LLC's application for market-based rate authority, with an accompanying rate schedule, noting that such application includes a request for blanket authorization, under 18 CFR Part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR Part 34, of future issuances of securities and assumptions of liability is July 3, 2013.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426.
The filings in the above-referenced proceeding(s) are accessible in the Commission's eLibrary system by
This is a supplemental notice in the above-referenced proceeding, of EDF Industrial Power Services (OH), LLC's application for market-based rate authority, with an accompanying rate schedule, noting that such application includes a request for blanket authorization, under 18 CFR Part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR Part 34, of future issuances of securities and assumptions of liability is July 3, 2013.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426.
The filings in the above-referenced proceeding(s) are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the Web site that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
This is a supplemental notice in the above-referenced proceeding, of Chestnut Flats Lessee, LLC's application for market-based rate authority, with an accompanying rate schedule, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability is June 27, 2013.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426.
The filings in the above-referenced proceeding(s) are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the Web site that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
Take notice that on June 6, 2013, pursuant to Rule 207(a)(2) of the Commission's Rules of Practices and Procedure, 18 CFR 385.207(a)(2), Rockies Express Pipeline LLC, filed a petition seeking a declaratory order ruling that the “most favored nations” or “MFN” provisions contained in Rockies Express' negotiated rate agreements with its Foundation and Anchor Shippers will not be triggered by certain potential transactions, as more fully explained in the petition.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Take that on May 31, 2013, ANR Pipeline Company (ANR), 717 Texas Street, Houston, Texas 77002–2761, filed in Docket No. CP13–488–000, a Prior Notice request pursuant to Sections 157.205, and 157.216 (b) of the Commission's Regulations under the Natural Gas Act, and ANR's blanket certificate issued in Docket No. CP82–480, for authorization to abandon four wells in the Lincoln-Freeman Storage Field in Clare County, Michigan. Specifically, ANR proposes to abandon the Buccanning 51, Callihan 52, and Frackelton 56 injection/withdrawal wells, the Lincoln 106 observation well, and related laterals and appurtenances in order to remediate mechanical integrity concerns at the wells, all as more fully set forth in the application which is on file with the Commission and open to public inspection. The filing may also be viewed on the web at
Any questions regarding this Application should be directed to Linda Farquhar, Manager, Project Determinations & Regulatory Administration, ANR Pipeline Company, 717 Texas Street, Houston, Texas, 77002–2761, at (832) 320–5685 or fax (832) 320–5705 or
Any person may, within 60 days after the issuance of the instant notice by the Commission, file pursuant to Rule 214 of the Commission's Procedural Rules (18 CFR 385.214) a motion to intervene or notice of intervention. Any person filing to intervene or the Commission's staff may, pursuant to section 157.205 of the Commission's Regulations under the NGA (18 CFR 157.205) file a protest to the request. If no protest is filed within the time allowed therefore, the proposed activity shall be deemed to be authorized effective the day after the time allowed for protest. If a protest is filed and not withdrawn within 30 days after the time allowed for filing a protest, the instant request shall be treated as an application for authorization pursuant to section 7 of the NGA.
Persons who wish to comment only on the environmental review of this project should submit an original and two copies of their comments to the Secretary of the Commission. Environmental commenter's will be placed on the Commission's environmental mailing list, will receive copies of the environmental documents, and will be notified of meetings associated with he Commission's environmental review process. Environmental commenter's will not be required to serve copies of filed documents on all other parties. However, the non-party commentary, will not receive copies of all documents filed by other parties or issued by the Commission (except for the mailing of environmental documents issued by the Commission) and ill not have the right to seek court review of the Commission's final order.
The Commission strongly encourages electronic filings of comments, protests, and interventions via the internet in lieu of paper. See 18 CFR 385.2001(a) (1) (iii) and the instructions on the Commission's Web site (
The Federal Energy Regulatory Commission (Commission) hereby gives notice that members of the Commission's staff may attend the following stakeholder meeting related to the transmission planning activities of PJM Interconnection, L.L.C.; Midcontinent Independent System Operator; New York Independent System Operator, Inc.; and the Southeastern Regional Transmission Planning regions.
The above-referenced meeting will be held over conference call.
The above-referenced meeting is open to stakeholders.
Further information may be found at
The discussions at the meeting described above may address matters at issue in the following proceedings:
Environmental Protection Agency (EPA).
Notice.
In compliance with the Paperwork Reduction Act (44 U.S.C. 3501
Additional comments may be submitted on or before July 19, 2013.
Submit your comments, referencing docket ID number EPA–HQ–OECA–2012–0654, to: (1) EPA online, using
Learia Williams, Monitoring, Assistance, and Media Programs Division, Office of Compliance, Mail Code 2227A, Environmental Protection Agency, 1200 Pennsylvania Avenue NW., Washington, DC 20460; telephone number: (202) 564–4113; fax number: (202) 564–0050; email address:
EPA has submitted the following ICR to OMB for review and approval according to the procedures prescribed in 5 CFR 1320.12. On October 17, 2012 (77
EPA has established a public docket for this ICR under docket ID number EPA–HQ–OECA–2012–0654, which is available for either public viewing online at
Use EPA's electronic docket and comment system at
This ICR corrects a mathematical error in calculating the number of responses. Furthermore, we corrected the number of sources that are required to maintain continuous monitoring system (CMS) in Table 1, line item 5. This ICR assumes that all sources incur costs associated with CMS and data management systems, which is consistent with the methodology used in calculating O&M costs. These changes also contribute to an increase in the number of total responses, as well as an increase in labor hours and costs.
Environmental Protection Agency (EPA).
Notice.
In compliance with the Paperwork Reduction Act (44 U.S.C. 3501
Additional comments may be submitted on or before July 19, 2013.
Submit your comments, referencing docket ID number EPA–HQ–OECA–2012–0656, to: (1) EPA online, using
Learia Williams, Compliance Assessment and Media Programs Division, Office of Compliance, Mail Code 2227A, Environmental Protection Agency, 1200 Pennsylvania Avenue NW., Washington, DC 20460; telephone number: (202) 564–4113; fax number: (202) 564–0050; email address:
EPA has submitted the following ICR to OMB for review and approval according to the procedures prescribed in 5 CFR 1320.12. On October 17, 2012 (77
EPA has established a public docket for this ICR under docket ID number EPA–HQ–OECA–2012–0656, which is available for either public viewing online at
Use EPA's electronic docket and comment system at
There is a slight decrease in the annual O&M cost from the previous ICR due to mathematical rounding. The previous ICR estimated an O&M cost of $11,700, but rounded the figure to the nearest thousand, or $12,000. This ICR presents a more accurate cost figure.
Environmental Protection Agency (EPA).
Notice.
In compliance with the Paperwork Reduction Act (44 U.S.C. 3501
Additional comments may be submitted on or before July 19, 2013.
Submit your comments, referencing docket ID number EPA–HQ–OECA–2012–0668, to: (1) EPA online using
Learia Williams, Office of Compliance, Mail Code 2227A, Environmental Protection Agency, 1200 Pennsylvania Avenue NW., Washington, DC 20460; telephone number: (202) 564–4113; fax number: (202) 564–0050; email address:
EPA has submitted the following ICR to OMB for review and approval according to the procedures prescribed in 5 CFR 1320.12. On October 17, 2012 (77
EPA has established a public docket for this ICR under docket ID number EPA–HQ–OECA–2012–0668, which is available for either public viewing online at
Use EPA's electronic docket and comment system at
Environmental Protection Agency (EPA).
Notice.
In compliance with the Paperwork Reduction Act (PRA), this document announces that EPA is planning to submit an Information Collection Request (ICR) to the Office of Management and Budget (OMB). The ICR, entitled, “Pesticide Registration Fees Program” and identified by EPA ICR No. 2330.02 and OMB Control No. 2070–0179, represents a renewal of an existing ICR that is scheduled to expire on February 28, 2014. Before submitting the ICR to OMB for review and approval, EPA is soliciting comments on specific aspects of the proposed information collection that is summarized in this document. The ICR and accompanying material are available in the docket for public review and comment.
Comments must be received on or before August 19, 2013.
Submit your comments, identified by docket identification (ID) number EPA–HQ–OPP–2013–0287, by one of the following methods:
•
•
•
Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at
Cameo Smoot, Field and External Affairs Division (7506P), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460–0001; telephone number: (703) 305–5454; fax number: (703) 305–5884; email address:
Pursuant to PRA section 3506(c)(2)(A) (44 U.S.C. 3506(c)(2)(A)), EPA specifically solicits comments and information to enable it 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 estimates of the burden of the proposed collection of information, including the validity of the methodology and assumptions used.
3. Enhance the quality, utility, and clarity of the information to be collected.
4. 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. In particular, EPA is requesting comments from very small businesses (those that employ less than 25) on examples of specific additional efforts that EPA could make to reduce the paperwork burden for very small businesses affected by this collection.
The ICR, which is available in the docket along with other related materials, provides a detailed explanation of the collection activities and the burden estimate that is only briefly summarized here:
The total annual respondent burden increased by 342 hours for the Pesticide Product Maintenance fees program and also increased 303 hours for the Pesticide Registration Service Fee waivers compared with that identified in the ICR currently approved by OMB. This increase reflects a slight increase in the number of requests submitted to the agency. This change is an adjustment.
EPA will consider the comments received and amend the ICR as appropriate. The final ICR package will then be submitted to OMB for review
Environmental protection, Reporting and recordkeeping requirements.
Environmental Protection Agency (EPA).
Notice.
In compliance with the Paperwork Reduction Act (44 U.S.C. 3501
Additional comments may be submitted on or before July 19, 2013.
Submit your comments, referencing docket ID number EPA–HQ–OECA–2012–0660, to: (1) EPA online, using
Learia Williams, Monitoring, Assistance, and Media Programs Division, Office of Compliance, Mail Code 2227A, Environmental Protection Agency, 1200 Pennsylvania Avenue NW., Washington, DC 20460; telephone number: (202) 564–4113; fax number: (202) 564–0050; email address:
EPA has submitted the following ICR to OMB for review and approval according to the procedures prescribed in 5 CFR 1320.12. On October 17, 2012 (77
EPA has established a public docket for this ICR under docket ID number EPA–HQ–OECA–2012–0660, which is available for either public viewing online at
Use EPA's electronic docket and comment system at
Owners or operators of the affected facilities must submit initial notification, performance tests, and periodic reports and results. Owners or operators are also required to maintain records of the occurrence and duration of any startup, shutdown, or malfunction in the operation of an affected facility, or any period during which the monitoring system is inoperative. Reports are required semiannually at a minimum.
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency has submitted an information collection request (ICR), “NESHAP for Oil and Natural Gas Production (40 CFR Part 63, Subpart HH) (Renewal)” (EPA ICR No. 1788.10, OMB Control No. 2060–0417) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act (44 U.S.C. 3501
Additional comments may be submitted on or before July 19, 2013.
Submit your comments, referencing Docket ID Number EPA–HQ–OECA–2012–0669, to: (1) EPA online using www.regulations.gov (our preferred method), by email to:
EPA's policy is that all comments received will be included in the public docket without change, including any personal information provided, unless the comment includes profanity, threats, information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute.
Learia Williams, Monitoring, Assistance, and Media Programs Division, Office of Compliance, Mail Code 2227A, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460; telephone number: (202) 564–4113; fax number: (202) 564–0050; email address:
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 at www.regulations.gov or 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, visit
Several changes were made to this ICR: (1) A correction in the estimated number of respondents based on recent data obtained during development of the 2012 rule amendment; (2) Inclusion of requirements associated with the 2012 amendment, including affirmative defense; and (3) Update to labor rates used in calculating burden estimates. The changes result in an overall decrease in the labor hours and costs and an increase in the total capital and O&M costs as currently identified in the OMB Inventory of Approved Burdens. The current OMB Inventory adds the burden from EPA ICR Numbers 1788.09 and 2440.02, double-counting the burden associated with several requirements. This ICR has been updated to remove any duplicates and to reflect the revised standard correctly.
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency is planning to submit an information collection request (ICR), “Emission Control System Performance Warranty Regulations and Voluntary Aftermarket Part Certification Program (Renewal)” (EPA ICR No. 0116.10, OMB Control No. 2060–0060) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act (44 U.S.C. 3501
Comments must be submitted on or before August 19, 2013.
Submit your comments, referencing Docket ID No. EPA–HQ–OAR–2013–0437, online using
EPA's policy is that all comments received will be included in the public docket without change including any personal information provided, unless the comment includes profanity, threats, information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute.
Lynn Sohacki, Compliance Division, Office of Transportation and Air Quality, U.S. Environmental Protection Agency, 2000 Traverwood, Ann Arbor, Michigan 48105; telephone number: 734–214–4851; fax number 734–214–4869; email address:
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 at
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 another
Environmental Protection Agency (EPA).
Notice.
In compliance with the Paperwork Reduction Act (44 U.S.C. 3501
Additional comments may be submitted on or before July 19, 2013.
Submit your comments, referencing docket ID number EPA–HQ–OECA–2012–0676, to: (1) EPA online, using
Learia Williams, Office of Compliance, Mail Code 2227A, Environmental Protection Agency, 1200 Pennsylvania Avenue NW., Washington, DC 20460; telephone number: (202) 564–4113; fax number: (202) 564–0050; email address:
EPA has submitted the following ICR to OMB for review and approval according to the procedures prescribed in 5 CFR 1320.12.
EPA has established a public docket for this ICR under docket ID number EPA–HQ–OECA–2012–0676, which is available for either public viewing online at
Use EPA's electronic docket and comment system at
Additionally, there is a decrease in the estimated number of responses due to a correction. The previous ICR assumed that each respondent would have to submit annual, semiannual, and quarterly reports, or a total of seven reports per year, which is inconsistent with the assumptions used to calculate respondent reporting burden. This ICR corrects the number of responses and clarifies that quarterly reports are only required if there are excess emissions.
Environmental Protection Agency (EPA).
Notice.
Pursuant to the Federal Advisory Committee Act, the Environmental Protection Agency's (EPA's) Office of Pesticide Programs (OPP) is giving notice that a public meeting of the Pesticide Program Dialogue Committee (PPDC) is being planned for July 10–11, 2013. A draft agenda is under development and will be posted by July 2, 2013. On July 9, 2013, OPP will hold a Stakeholder Workshop titled “Where Vision Meets Action: Practical Application of 21st Century Methods.” This 1-day non-technical workshop is intended to provide an opportunity for stakeholder discussion on how OPP envisions applying new science to change the way pesticide risks are evaluated, and to examine the challenges and benefits of making this transition. Also, on July 10, 2013, four PPDC workgroup meetings are scheduled to meet as follows: PPDC Work Group on Pollinator Protection; PPDC Work Group on Integrated Pest Management; PPDC Work Group on Comparative Safety Statements; and PPDC Work Group on 21st Century Toxicology. All meetings are free, open to the public, and no advance registration is required.
The PPDC meeting will be held on Wednesday, July 10, 2013, from 1 p.m. to 5 p.m., and Thursday, July 11, 2013, from 9 a.m. to 4 p.m. The PPDC meeting, Stakeholder Workshop, and all PPDC Work Group meetings will be held at 1 Potomac Yard South, 2777 S. Crystal Drive, Arlington, VA. The PPDC meeting will be held in the lobby-level Conference Center.
On Tuesday, July 9, 2013, a Stakeholder Workshop will be held from 8:30 a.m. to 4:45 p.m., titled “Where Vision Meets Action: Practical Application of 21st Century Methods.” This Workshop will be held in the lobby-level Conference Center.
On Wednesday, July 10, 2013, PPDC work group meetings are scheduled as follows: Pollinator Protection Work Group, 8:30 a.m. to 11:30 a.m. in the lobby-level Conference Center; Integrated Pest Management Work Group, 9:30 a.m. to noon in Conference Room S–4370–80; Comparative Safety Statements Work Group from 9 a.m. to 11:30 p.m. in Conference Room S–12100; and 21st Century Toxicology/Integrated Testing Strategies Work Group from 8:30 a.m. to 9:30 a.m. in Conference Room N–4850. Information regarding PPDC Work Groups is available on EPA's Web site at
To request accommodation of a disability, please contact the person listed under
The PPDC Meeting, PPDC Work Group meetings, and the 21st Century Methods Stakeholder Workshop, will be held at EPA's location at 1 Potomac Yard South, 2777 S. Crystal Drive, Arlington, VA. The PPDC meeting will be held in the lobby-level Conference Center. EPA's Potomac Yard South building is approximately 1 mile from the Crystal City Metro Station.
Margie Fehrenbach, Office of Pesticide Programs (7501P), Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460–0001; telephone number: (703) 308–4775; fax number: (703) 308–4776; email address:
This action is directed to the public in general, and may be of particular interest to persons who work in agricultural settings or persons who are concerned about implementation of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA); the Federal Food, Drug, and Cosmetic Act (FFDCA); the amendments to both of these major pesticide laws by the Food Quality Protection Act (FQPA) of 1996; and the Pesticide Registration Improvement Act. Potentially affected entities may include, but are not limited to: Agricultural workers and farmers; pesticide industry and trade associations; environmental, consumer, and farm worker groups; pesticide users and growers; animal rights groups; pest consultants; State, local, and tribal governments; academia; public health organizations; and the public. If you have questions regarding the applicability of this action to a particular entity, consult the person listed under
The docket for this action, identified by docket identification (ID) number EPA–HQ–OPP–2013–0452, is available at
OPP is entrusted with the responsibility to help ensure the safety of the American food supply, the education and protection from unreasonable risk of those who apply or are exposed to pesticides occupationally or through use of products, and general protection of the environment and special ecosystems from potential risks posed by pesticides.
The Charter for EPA's Pesticide Program Dialogue Committee (PPDC) was established under the Federal Advisory Committee Act (FACA), Public Law 92–463, in September 1995, and has been renewed every 2 years since that time. PPDC's Charter was renewed October 28, 2011, for another 2-year period. The purpose of PPDC is to provide advice and recommendations to the EPA Administrator on issues associated with pesticide regulatory development and reform initiatives, evolving public policy and program implementation issues, and science issues associated with evaluating and reducing risks from use of pesticides. It is determined that PPDC is in the public interest in connection with the performance of duties imposed on the Agency by law. The following sectors are represented on the current PPDC: Environmental/public interest and animal rights groups; farm worker organizations; pesticide industry and trade associations; pesticide user, grower, and commodity groups; Federal and State/local/tribal governments; the general public; public health organizations; and those who promote safe and effective use of pesticides through education and training.
Copies of the PPDC Charter are filed with appropriate committees of Congress and the Library of Congress and are available upon request.
PPDC meetings are open to the public and seating is available on a first-come basis. Persons interested in attending do not need to register in advance of the meeting. Comments may be made during the public comment session of each meeting or in writing to the address listed under
Environmental protection, Agricultural workers, Agriculture, Chemicals, Endangered species, Foods, Integrated pest management, Pesticide labels, Pesticides and pests, Public health, Spray drift, 21st Century toxicology.
Notice of a Partially Open Meeting of the Board of Directors of the Export-Import Bank of the United States.
Thursday, June 27, 2013 at 9:00 a.m. The meeting will be held at Ex-Im Bank in Room 321, 811 Vermont Avenue NW., Washington, DC 20571.
Item No. 1: Ex-Im Bank's Environmental Procedures and Guidelines.
The meeting will be open to public observation for Item No. 1 only.
Members of the public who wish to attend the meeting should call Joyce Stone, Office of the Secretary, 811 Vermont Avenue NW., Washington, DC 20571 (202) 565–3336 by close of business Tuesday, June 25, 2013.
Federal Deposit Insurance Corporation (FDIC).
Notice and request for comment.
In accordance with the requirements of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. chapter 35), the FDIC may not conduct
Comments must be submitted on or before August 19, 2013.
Interested parties are invited to submit written comments to the FDIC by any of the following methods:
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•
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All comments should reference “Information Collection for Qualitative Research.” A copy of the comments may also be submitted to the OMB desk officer for the FDIC: Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Washington, DC 20503.
Leneta Gregorie, at the FDIC address above.
Qualitative type research does not seek to measure or quantify results. Instead, it will allow the FDIC to explore in more depth consumers' attitudes and behaviors toward financial services that can inform FDIC's consumer protection, economic inclusion, and asset building strategies, as well as other consumer financial research topics. These qualitative methods will also provide an opportunity to identify specific financial services and terminology used by these consumers that will improve FDIC's periodic economic inclusion survey instruments (OMB Control Nos. 3064–0158 and 3064–0167). Interviews of financial services providers will help to improve the FDIC's general knowledge of the financial services industry.
Participation in this information collection will be voluntary and conducted in person, by phone, or using other methods, such as virtual technology. The FDIC plans to retain an experienced contractor(s) to recommend the most appropriate collection method based on the objectives of each qualitative research effort. It is likely that each qualitative research effort will include a short intake form (1 or 2 pages long). The FDIC will consult with OMB regarding each specific information collection during the approval period. This voluntary collection of information will put a slight burden on a very small percentage of the public. The FDIC estimates that, over the three-year clearance period of this request, approximately 150 focus groups and 120 one-on-one interviews will be conducted for a variety of projects associated with financial services. Including travel time, this represents a total burden of approximately 5,250 hours or 1,750 hours per year for three years (3.25 hours per participant, including travel time and intake form × 500 participants) + (2.5 hour per participant, including travel time × 50 participants).
Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the FDIC's functions, including whether the information has practical utility; (b) the accuracy of the estimates of the burden of the information collection, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the information collection on respondents, including through the use of automated collection techniques or other forms of information technology. All comments will become a matter of public record.
Federal Deposit Insurance Corporation (FDIC).
Notice and request for comment.
In accordance with the requirements of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. chapter 35), the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The FDIC hereby gives notice that it is seeking comment on renewal of its
Comments must be submitted on or before August 19, 2013.
Interested parties are invited to submit written comments to the FDIC by any of the following methods:
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•
•
•
Leneta Gregorie, at the FDIC address above.
Proposal to renew the following currently approved collections of information:
Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the FDIC's functions, including whether the information has practical utility; (b) the accuracy of the estimates of the burden of the information collection, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the information collection on respondents, including through the use of automated collection techniques or other forms of information technology. All comments will become a matter of public record.
The Commission hereby gives notice of the filing of the following agreements under the Shipping Act of 1984. Interested parties may submit comments on the agreements to the Secretary, Federal Maritime Commission, Washington, DC 20573, within ten days of the date this notice appears in the
By Order of the Federal Maritime Commission.
The notificants listed below have applied under the Change in Bank Control Act (12 U.S.C. 1817(j)) and § 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the notices are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The notices are available for immediate inspection at the Federal Reserve Bank indicated. The notices also will be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing to the Reserve Bank indicated for that notice or to the offices of the Board of Governors. Comments must be received not later than July 3, 2013.
A. Federal Reserve Bank of Chicago (Colette A. Fried, Assistant Vice President) 230 South LaSalle Street, Chicago, Illinois 60690–1414:
1.
The companies listed in this notice have applied to the Board for approval, pursuant to the Home Owners' Loan Act (12 U.S.C. 1461
The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The application also will be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the HOLA (12 U.S.C. 1467a(e)). If the proposal also involves the acquisition of a nonbanking company, the review also includes whether the acquisition of the nonbanking company complies with the standards in section 10(c)(4)(B) of the HOLA (12 U.S.C. 1467a(c)(4)(B)). Unless otherwise noted, nonbanking activities will be conducted throughout the United States.
Unless otherwise noted, comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than July 15, 2013.
A. Federal Reserve Bank of Philadelphia (William Lang, Senior Vice President) 100 North 6th Street, Philadelphia, Pennsylvania 19105–1521:
B. Federal Reserve Bank of Chicago (Colette A. Fried, Assistant Vice President) 230 South LaSalle Street, Chicago, Illinois 60690–1414:
Office of the Secretary, HHS.
Notice.
In compliance with section 3507(a)(1)(D) of the Paperwork Reduction Act of 1995, the Office of the Assistant Secretary for Planning and Evaluation (ASPE), Department of Health and Human Services, has submitted an Information Collection Request (ICR), described below, to the Office of Management and Budget (OMB) for review and approval. The ICR is for a new collection. Comments submitted during the first public review of this ICR will be provided to OMB. OMB will accept further comments from the public on this ICR during the review and approval period.
Comments on the ICR must be received on or before July 19, 2013.
Submit your comments to
Information Collection Clearance staff,
When submitting comments or requesting information, please include the Information Collection Request Title and document identifier HHS–ASPE–18774–30D for reference.
Burden Statement: Burden in this context means the time expended by persons to generate, maintain, retain, disclose or provide the information requested. This includes the time needed to review instructions, to develop, acquire, install and utilize technology and systems for the purpose of collecting, validating and verifying information, processing and maintaining information, and disclosing and providing information, to train personnel and to be able to respond to a collection of information, to search data sources, to complete and review the collection of information, and to transmit or otherwise disclose the information. The total annual burden hours estimated for this ICR are summarized in the table below.
Office of Minority Health, Office of the Secretary, Department of Health and Human Services.
Notice of meeting.
As stipulated by the Federal Advisory Committee Act, the Department of Health and Human Services (DHHS) is hereby giving notice that the Advisory Committee on Minority Health (ACMH) will hold a meeting. This meeting will be open to the public. Preregistration is required for both public attendance and comment. Any individual who wishes to attend the meetings and/or participate in the public comment session should email
The meeting will be held on Tuesday, July 9, 2013, from 9:00 a.m. to 5:00 p.m. (EST) and Wednesday, July 10, 2013, from 9:00 a.m. to 1:00 p.m. (EST).
The meeting will be held at the Doubletree Hotel, 1515 Rhode Island Avenue NW., Washington, DC 20005.
Ms. Monica A. Baltimore, Tower Building, 1101 Wootton Parkway, Suite 600, Rockville, Maryland 20852. Phone: 240–453–2882, Fax: 240–453–2883.
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.
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 fourteen (14) 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 Monday, July 1, 2013.
Office of the Assistant Secretary for Health, Office of the Secretary, Department of Health and Human Services.
Notice.
Pursuant to Section 10(a) of the Federal Advisory Committee Act, U.S.C. Appendix 2, notice is hereby given that the Secretary's Advisory Committee on Human Research Protections (SACHRP) will hold a meeting that will be open to the public. Information about SACHRP and the full meeting agenda will be posted on the SACHRP Web site at:
The meeting will be held on Wednesday, July 10, 2013 from 8:30 a.m. until 5:00 p.m. and Thursday, July 11, 2013 from 8:30 a.m. until 4:30 p.m.
U.S. Department of Health and Human Services, 200 Independence Avenue SW., Hubert H. Humphrey Building, Room 800, Washington, DC 20201.
Jerry Menikoff, M.D., J.D., Director, Office for Human Research Protections (OHRP), or Julia Gorey, J.D., Executive Director, SACHRP; U.S. Department of Health and Human Services, 1101 Wootton Parkway, Suite 200, Rockville, Maryland 20852; 240–453–8141; fax: 240–453–6909; email address:
Under the authority of 42 U.S.C. 217a, Section 222 of the Public Health Service Act, as amended, SACHRP was established to provide expert advice and recommendations to the Secretary of Health and Human Services through the Assistant Secretary for Health, on issues and topics pertaining to or associated with the protection of human research subjects.
The meeting will open to the public at 8:30 a.m., Wednesday, July 10. Following opening remarks from Dr. Jerry Menikoff, OHRP Director, and Dr. Jeffrey Botkin, SACHRP Chair, the Subcommittee on Harmonization (SOH) will give their report. SOH was established by SACHRP at its July 2009 meeting and is charged with identifying and prioritizing areas in which regulations and/or guidelines for human subjects research adopted by various agencies or offices within HHS would benefit from harmonization, consistency, clarity, simplification and/or coordination. The SOH report will be followed by an expert panel discussion
Following opening remarks on the morning of July 11, the Subpart A Subcommittee (SAS) will give their report. This will be followed by a discussion of the concept of engagement in human subjects research. SAS is charged with developing recommendations for consideration by SACHRP regarding the application of subpart A of 45 CFR part 46 in the current research environment; this Subcommittee was established by SACHRP in October 2006. The day will conclude with a panel discussion of issues surrounding electronic informed consent.
Public attendance at the meeting is limited to space available. Individuals who plan to attend the meeting and need special assistance, such as sign language interpretation or other reasonable accommodations, should notify the designated contact persons. Members of the public will have the opportunity to provide comments on both days of the meeting. Public comment will be limited to five minutes per speaker. Any members of the public who wish to have printed materials distributed to SACHRP members for this scheduled meeting should submit materials to the Executive Director, SACHRP, prior to the close of business July 5, 2013.
National Institute for Occupational Safety and Health (NIOSH) of the Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Proposed NIOSH Survey of Nanomaterial Risk Management Practices; Notice of Public Meeting and Request for Comments.
The National Institute for Occupational Safety and Health (NIOSH) of the Centers for Disease Control and Prevention (CDC) announces a public meeting and opportunity for comment on a proposed NIOSH survey. The primary purpose of the survey is to evaluate the use of NIOSH guidelines and risk mitigation practices for safe handling of engineered nanomaterials (ENMs) in the workplace. Information collected from the survey will be useful in future revisions of the guidelines. The public is invited to comment on the proposed survey through a public docket and/or participation in a one-day public meeting.
To view the notice and related materials, visit
Registration to attend the meeting must be received by July 17, 2013 and will be accepted on a first come first served basis. See the
The public meeting will be held at the NIOSH Alice Hamilton building, 5555 Ridge Avenue, Cincinnati, OH 45213. The public meeting will be held on July 31, 2013, from 8 a.m. to 3:00 p.m. EDT.
This information will be transmitted to the CDC Security Office for approval. Visitors will be notified as soon as approval has been obtained.
You may submit comments, identified by CDC–2013–0010 and Docket Number NIOSH–265, by either of the following two methods:
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A draft questionnaire is available for review at
(1) Apart from a survey, what alternative methods should be considered to gather this information?
(2) What resources are available that can be used to identify nanomaterial producers, distributors, end-users, and R&D laboratories for inclusion in a sampling frame?
(3) A web-based survey is being proposed primarily because it is cost-efficient and can be easy to administer. Should any other modes (telephone, mail) be considered?
(4) In small and medium-sized establishments, who would be the person best suited to respond to questions addressing risk management practices for ENMs?
(5) What should be the maximum amount of time needed to complete the survey?
(6) Is benchmarking adherence to safe use guidelines of value to your organization?
(7) What guidelines are being used by your organization to minimize worker exposure to ENMs?
(8) Are there any questions in the draft survey that should be excluded? Are there any questions not included in the draft survey that should be included?
Jim
The meeting announced below concerns Centers for Disease Control and Prevention Public Health Preparedness and Response Research to Aid Recovery from Hurricane Sandy, Request for Application (RFA) TP13–001, initial review.
The Director, Management Analysis and Services Office, has been delegated the authority to sign
DOL revised Part B to conform with changes to the currently approved Part A and is seeking a three year approval from OMB. To avoid burdening the State child support enforcement agencies with potential reprogramming at varying times due to future changes in either Part A or Part B, ACF is resubmitting an unchanged information collection package and requesting an extension to the current OMB approval of NMSN Part A to synchronize the expiration date with NMSN Part B.
Estimated Total Annual Burden Hours: 897,574.50.
Copies of the proposed collection may be obtained by writing to the Administration for Children and Families, Office of Planning, Research and Evaluation, 370 L'Enfant Promenade, SW., Washington, DC 20447, Attn: ACF Reports Clearance Officer. All requests should be identified by the title of the information collection. Email address:
OMB is required to make a decision concerning the collection of information between 30 and 60 days after publication of this document in the
Office of Management and Budget, Paperwork Reduction Project, Fax: 202–395–7285, Email:
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing the availability of grant funds for the support of a sole source award to the University of North Carolina. The goal of the award is to identify what component(s) of the complex heparin mixtures have the propensity to cause heparin induced thrombocytopenia (HIT) to improve the safety of heparin drug products. The FDA seeks to identify the components of the heparin mixture that are associated with HIT so that actions may be taken to reduce these events and improve patient outcomes with this widely used drug.
Important dates are as follows:
1. The application due date is July 15, 2013.
2. The anticipated start date is August, 2013.
3. The opening date is the date this announcement is published in the
4. The expiration date is July 16, 2013.
Submit the paper application to: Gladys Melendez at the Food and Drug Administration, Grants Management (HFA–500), 5630 Fishers Lane, Rockville, MD 20857. For more information, see section III of the
David Keire, Center for Drug Evaluation and Research, Food and Drug Administration, 1114 Market St., rm. 1002, St Louis, MO, 63130, 314–539–3850; or Gladys Melendez, Office of Acquisition Support and Grant Services, Food and Drug Administration, 5630 Fishers Lane, Rockville, MD 20857, 301–827–7175, email:
For more information on this funding opportunity announcement (FOA) and to obtain detailed requirements, please contact
[Catalog of Federal Domestic Assistance: 93.103]
The goal of this Research Project is to identify which components of heparin drug mixtures have the propensity to cause heparin induced thrombocytopenia (HIT) in order to improve the safety profile of this widely used anticoagulant. Heparin is a heterogeneous mixture of polysaccharides of varying length, sulfation pattern, acylation and conformation that has been in clinical use since the 1930s. HIT is a drug-dependent immune disorder caused by antibodies to complexes formed between platelet factor 4 (PF4) and heparin which can occur in patients who undergo major trauma (e.g. broken bones and cardiovascular surgery) and receive heparin. The condition leads to formation of abnormal blood clots and concomitant complications associated with clots. PF4-heparin antibodies are observed in all patients with HIT. In addition, low molecular weight heparins or the synthetic pentasaccharide (fondaparinux) have also been shown to cause HIT antibody formation although these smaller chain length heparins are much less likely to lead to clinical HIT symptoms.
The major limitation in the available reagents for studies aimed at identifying the components of heparin that lead to the pathogenesis of HIT is the lack of pure component heparin standards. Therefore, this collaboration brings together the following capabilities and laboratories: (1) Synthesis of heparin chains of the same length, sulfation pattern and conformation (Dr. Liu at the University of North Carolina and Dr. Linhardt at Rensselaer Polytechnical Institute), (2) synthesis and physicochemical characterization of heparin and heparin-PF4 complexes (Keire FDA/DPA St Louis) and (3) a HIT-immunogenicity animal model (Dr. Arepally at Duke University). FDA believes that this combination of skills and expertise has the potential to make pure standards, fully characterize the standards, create and characterize PF4-heparin standard aggregates and assess their propensity to elicit an immune response in an animal model. This research is unique and not otherwise available. The ability to make pure heparin standards in gram quantities and fully characterize their properties is only available from the Liu and Linhardt laboratories. Furthermore, Dr. Arepally's mouse model of HIT immunogenicity is not available in any other laboratory. When completed the study will identify heparin components that enhance HIT propensity and which could potentially be minimized in heparin manufacturing, leading to safer heparin drugs with better patient outcomes.
The research objective is to identify the components of the heparin mixture that have the propensity to lead to HIT pathogenesis.
This is a sole source RFA because the investigators identified in this document have unique skills and expertise necessary to perform the proposed work.
Only one award will be available to the University of North Carolina in the amount of $250,000 (Total Cost) in the first year.
Depending on research progress and subject to the availability of funds additional funds may be awarded under this grant for up to a five year project period reflecting $250,000 Total Cost per year.
To submit a paper application in response to this FOA, applicants should first review the full announcement. Persons interested in applying for a grant may obtain an application at
For all paper application submissions, the following steps are required:
• Step 1: Obtain a Dun and Bradstreet (DUNS) Number
• Step 2: Register With Central Contractor Registration
• Step 3: Register With Electronic Research Administration (eRA) Commons
Steps 1 and 2, in detail, can be found at
Food and Drug Administration, HHS.
Notice.
This notice announces a forthcoming meeting of a public advisory committee of the Food and Drug Administration (FDA). The meeting will be open to the public.
FDA intends to make background material available to the public no later than 2 business days before the meeting. If FDA is unable to post the background material on its Web site prior to the meeting, the background material will be made publicly available at the location of the advisory committee meeting, and the background material will be posted on FDA's Web site after the meeting. Background material is available at
Persons attending FDA's advisory committee meetings are advised that the Agency is not responsible for providing access to electrical outlets.
FDA welcomes the attendance of the public at its advisory committee meetings and will make every effort to accommodate persons with physical disabilities or special needs. If you require special accommodations due to a disability, please contact Kristina Toliver at least 7 days in advance of the meeting.
FDA is committed to the orderly conduct of its advisory committee meetings. Please visit our Web site at
Notice of this meeting is given under the Federal Advisory Committee Act (5 U.S.C. app. 2).
Food and Drug Administration, HHS.
Notice of public workshop.
The Food and Drug Administration (FDA), the Cardiac Safety Research Consortium, and the International Life Sciences Institute's Health and Environmental Sciences Institute (HESI) will cosponsor a public workshop entitled “Rechanneling the Current Cardiac Risk Paradigm: Arrhythmia Risk Assessment During Drug Development Without the Thorough QT Study.” The workshop will introduce for discussion a new
This workshop will introduce for discussion a new nonclinical paradigm for assessing TdP risk and explore the parameters for an appropriate, strong, nonclinical proarrthymia screening method as an alternative to clinical Thorough QT studies. The workshop, which will seek input from all attendees, is intended to provide a forum for stakeholders, including experts and opinion leaders from academia, industry, and regulatory agencies in the United States, the European Union, Canada, and Asian countries, to discuss what a new framework might look like, the benefits and limitations of the current guidelines, and the importance of a uniform assay schema.
A description of the planned activities for the workshop can be found at:
Registration for FDA attendees is also online, at the following address:
The registration deadline for paying attendees is July 15, 2013. With the exception of FDA employees and a limited number of speakers or organizers, registrants must pay a registration fee covering the cost of facilities, materials, and food. The registration fees for different categories of attendee are as follows:
Seats are limited, and conference space will be filled in the order in which registrations are received. Attendees are responsible for their own accommodations.
If you need special accommodations due to a disability, please contact Devi Kozeli (see
Written comments and/or suggestions from the public and affected agencies are invited on one or more of the following points: (1) Whether the proposed collection of information is necessary for the proper performance of the function of the agency, including whether the information will have practical utility; (2) 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; (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 those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
OMB approval is requested for one year. There are no costs to respondents other than their time. The total estimated annualized burden hours are 1,334.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Coast Guard, DHS.
Request for applications.
The Coast Guard seeks applications for membership on the Commercial Fishing Safety Advisory Committee (CFSAC). The CFSAC provides advice and makes recommendations to the Coast Guard and the Department of Homeland Security on matters relating to the safe operation of commercial fishing industry vessels.
Applicants must submit a cover letter and resume in time to reach the Designated Federal Officer (DFO) on or before July 26, 2013.
Send your cover letter and resume indicating the membership category for which you are applying via one of the following methods:
•
• By fax to 202–372–1917.
• By email to
Mr. Jack Kemerer, Alternate Designated Federal Officer (ADFO), telephone at 202–372–1249, fax 202–372–1917, or email at
CFSAC was authorized in Title 46, United States Code section 4508, as amended by section 604 of the Coast Guard Authorization Act of 2010 (Pub. L. 111–281) and chartered under the provisions of the Federal Advisory Committee Act (FACA) to provide advice and recommendations to the United States Coast Guard and the Department of Homeland Security (DHS) on matters relating to the safety of commercial fishing industry vessels.
CFSAC meets at least once each calendar year. It may also meet for other extraordinary purposes. Its subcommittees or working groups may communicate throughout the year to prepare for meetings or develop proposals for the committee as a whole to address specific tasks.
The Coast Guard will consider applications for five positions that expire or become vacant in October 2013 in the following categories: (a) Commercial Fishing Industry representatives (
CFSAC, as established, consists of 18 members with particular expertise, knowledge, and experience regarding commercial fishing industry as follows:
(a) Ten members who shall represent the commercial fishing industry and who—(1) reflect a regional and representational balance; and (2) have experience in the operation of vessels to which Chapter 45 of Title 46, U.S.C. applies, or as crew member or processing line worker on a fish processing vessel;
(b) Three members who shall represent the general public, including, whenever possible—(1) an independent expert or consultant in maritime safety; (2) a marine surveyor who provides services to vessels to which Chapter 45 of Title 46, U.S.C. applies; and (3) a person familiar with issues affecting fishing communities and families of fishermen;
(c) One member each of whom shall represent—(1) naval architects and marine engineers; (2) manufacturers of equipment for vessels to which Chapter 45 of Title 46, U.S.C. applies; (3) education or training professionals related to fishing vessel, fish processing vessel, fish tender vessel safety or personnel qualifications; (4) underwriters that insure vessels to which Chapter 45 of Title 46, U.S.C. applies; and (5) owners of vessels to which Chapter 45 of title 46, U.S.C. applies.
Each member serves for a term of three years. An individual may be appointed to more than one term. All members serve at their own expense and receive no salary from the Federal Government, although travel reimbursement and per diem may be provided for called meetings. Registered lobbyists are not eligible to serve on Federal Advisory Committees. Registered lobbyists are lobbyists required to comply with provisions contained in the
The Department of Homeland Security (DHS) does not discriminate in employment on the basis of race, color, religion, sex, national origin, political affiliation, sexual orientation, gender identity, marital status, disability and genetic information, age, membership in an employee organization, or other non-merit factor. DHS strives to achieve a widely diverse candidate pool for all of its recruitment actions.
If you are selected as a member from the general public category, you will be appointed and serve as a Special Government Employee (SGE) as defined in Section 202(a) of Title 18, United States Code. As a candidate for appointment as SGE, applicants are required to complete a Confidential Financial Disclosure Report (OGE Form 450). DHS may not release the reports or the information in them to the public except under an order issued by a Federal court or as otherwise provided under the
If you are interested in applying to become a member of the Committee, send your application materials to Mr. Jack Kemerer, CFSAC ADFO via one of the transmittal methods provided above. Indicate the position you wish to fill and specify your area of expertise, knowledge and experience that qualifies you to serve on CFSAC. Note that during the pre-selection vetting process, applicants may be asked to provide date of birth and social security number.
To visit our online docket, go to
United States International Trade Commission.
Notice.
The Commission hereby gives notice of the scheduling of the final phase for antidumping and countervailing duty investigations Nos. 701–TA–490 and 731–TA–1204 (Final) under sections 705(b) and 735(b) of the Tariff Act of 1930 (19 U.S.C. 1671d(b) and 1673d(b)) (the Act) to determine whether an industry in the United States is materially injured or threatened with material injury, or the establishment of an industry in the United States is materially retarded, by reason of imports from China of hardwood plywood, provided for in subheadings 4412.10; 4412.31; 4412.32; 4412.39; 4412.94; and 4412.99 of the Harmonized Tariff Schedule of the United States, that are sold in the United States at less than fair value and subsidized by the Government of China.
All hardwood and decorative plywood is included within the scope of this investigation, without regard to dimension (overall thickness, thickness of face veneer, thickness of back veneer, thickness of core, thickness of inner veneers, width, or length). However, the most common panel sizes of hardwood and decorative plywood are 1219 × 1829 mm (48 × 72 inches), 1219 × 2438 mm (48 × 96 inches), and 1219 × 3048 mm (48 × 120 inches).
A “veneer” is a thin slice of wood which is rotary cut, sliced or sawed from a log, bolt or flitch. The face veneer is the exposed veneer of a hardwood and decorative plywood product which is of a superior grade than that of the back veneer, which is the other exposed veneer of the product (i.e., as opposed to the inner veneers). When the two exposed veneers are of equal grade, either one can be considered the face or back veneer. For products that are entirely composed of veneer, such as Veneer Core Platforms, the exposed veneers are to be considered the face and back veneers, in accordance with the descriptions above. The core of hardwood and decorative plywood consists of the layer or layers of one or more material(s) that are situated between the face and back veneers.
The core may be composed of a range of materials, including but not limited to veneers, particleboard, and medium-density fiberboard (“MDF”).
All hardwood and decorative plywood is included within the scope of this investigation regardless of whether or not the face and/or back veneers are surface coated, unless the surface coating obscures the grain, texture or markings of the wood. Examples of surface coatings which may not obscure the grain, texture or markings of the wood include, but are not limited to, ultra-violet light cured polyurethanes, oil or oil-modified or water based polyurethanes, wax, epoxy-ester finishes, and moisture-cured urethanes. Hardwood and decorative plywood that has face and/or back veneers which have an opaque surface coating which obscures the grain, texture or markings of the wood, are not included within the scope of this investigation. Examples of surface coatings which may obscure the grain, texture or markings of wood include, but are not limited to, paper, aluminum, high pressure laminate (“HPL”), MDF, medium density overlay (“MDO”), and phenolic film). Additionally, the face veneer of hardwood and decorative plywood may be sanded, smoothed or given a “distressed” appearance through such methods as hand-scraping or wire brushing. The face veneer may be stained.
The scope of the investigation excludes the following items: (1) Structural plywood (also known as “industrial plywood” or “industrial panels”) that is manufactured and stamped to meet U.S. Products Standard PS 1–09 for Structural Plywood (including any revisions to that standard or any substantially equivalent international standard intended for structural plywood), including but not limited to the “bond performance” requirements set forth at paragraph 5.8.6.4 of that Standard and the performance criteria detailed at Table 4 through 10 of that Standard; (2) products which have a face and back veneer of cork; (3) multilayered wood flooring, as described in the antidumping duty and countervailing duty orders on Multilayered Wood Flooring from the People's Republic of China, Import Administration, International Trade Administration, U.S. Department of Commerce Investigation Nos. A–570–970 and C–570–971 (published December 8, 2011); (4) plywood which has a shape or design other than a flat panel.
Imports of the subject merchandise are provided for under the following subheadings of the Harmonized Tariff Schedule of the United States (“HTSUS”): 4412.10.0500; 4412.31.0520; 4412.31.0540; 4412.31.0560; 4412.31.2510; 4412.31.2520; 4412.31.4040; 4412.31.4050; 4412.31.4060; 4412.31.4070; 4412.31.5135; 4412.31.5155; 4412.31.5165; 4412.31.5175; 4412.31.6000; 4412.31.9100; 4412.32.0520; 4412.32.0540; 4412.32.0560; 4412.32.2510; 4412.32.2520; 4412.32.3135; 4412.32.3155; 4412.32.3165; 4412.32.3175; 4412.32.3185; 4412.32.5600; 4412.39.1000; 4412.39.3000; 4412.39.4011; 4412.39.4012; 4412.39.4019; 4412.39.4031; 4412.39.4032; 4412.39.4039; 4412.39.4051; 4412.39.4052; 4412.39.4059; 4412.39.4061; 4412.39.4062; 4412.39.4069; 4412.39.5010; 4412.39.5030; 4412.39.5050; 4412.94.1030; 4412.94.1050; 4412.94.3111; 4412.94.3121; 4412.94.3131; 4412.94.3141; 4412.94.3160; 4412.94.3171; 4412.94.4100; 4412.94.6000; 4412.94.7000; 4412.94.8000; 4412.94.9000; 4412.99.0600; 4412.99.1020; 4412.99.1030; 4412.99.1040; 4412.99.3110; 4412.99.3120; 4412.99.3130; 4412.99.3140; 4412.99.3150; 4412.99.3160; 4412.99.3170; 4412.99.4100; 4412.99.5710; 4412.99.6000; 4412.99.7000; 4412.99.8000; 4412.99.9000; 4412.10.9000; 4412.31.4080; 4412.32.0570; 4412.32.2530; 4412.94.5100; 4412.94.9500; 4412.99.5115; and 4412.99.9500. While HTSUS subheadings are provided for convenience and customs purposes, the written description of the subject merchandise as set forth herein is dispositive.” 78FR 25946, May 3, 2013.
For further information concerning the conduct of this phase of the investigations, hearing procedures, and rules of general application, consult the Commission's Rules of Practice and Procedure, part 201, subparts A through E (19 CFR part 201), and part 207, subparts A and C (19 CFR part 207).
Effective June 11, 2013.
Fred Ruggles (202–205–3187 or
Additional written submissions to the Commission, including requests pursuant to section 201.12 of the Commissions rules, shall not be accepted unless good cause is shown for accepting such submissions, or unless the submission is pursuant to a specific request by a Commissioner or Commission staff.
In accordance with sections 201.16(c) and 207.3 of the Commissions rules, each document filed by a party to the investigations must be served on all other parties to the investigations (as identified by either the public or BPI service list), and a certificate of service must be timely filed. The Secretary will not accept a document for filing without a certificate of service.
These investigations are being conducted under authority of title VII of the Tariff Act of 1930; this notice is published pursuant to section 207.21 of the Commissions rules.
By order of the Commission.
Notice is hereby given that, on May 23, 2013, pursuant to Section 6(a) of the National Cooperative Research and Production Act of 1993, 15 U.S.C. 4301
Pursuant to Section 6(b) of the Act, the identities of the parties to the venture are: Ford Motor Company, Dearborn, MI; and General Motors Holding LLC, Detroit, MI. The general area of Ford and GM's planned activity is the research, development, and production of fuel efficient automatic transmissions.
National Aeronautics and Space Administration.
Notice of Intent to Grant Exclusive License.
This notice is issued in accordance with 35 U.S.C. 209(e) and 37 CFR 404.7(a)(1)(i). NASA hereby gives notice of its intent to grant an exclusive license in the United States to practice the invention described and claimed in U.S. Patent No. 7,781,492; NASA Case No. KSC–12848 entitled “Foam/Aerogel Composite Materials for Thermal and Acoustic Insulation and Cryogen Storage,” to XTherm LP, having its principal place of business at 1325 White Drive, Titusville, FL 32780. The patent rights in this invention have been assigned to the United States of America as represented by the Administrator of the National Aeronautics and Space Administration. The prospective exclusive license will comply with the terms and conditions of 35 U.S.C. 209 and 37 CFR 404.7.
The prospective exclusive license may be granted unless, within fifteen (15) days from the date of this published notice, NASA receives written objections including evidence and argument that establish that the grant of the license would not be consistent with the requirements of 35 U.S.C. 209 and 37 CFR 404.7. Competing applications completed and received by NASA within fifteen (15) days of the date of this published notice will also be treated as objections to the grant of the contemplated exclusive license.
Objections submitted in response to this notice will not be made available to the public for inspection and, to the extent permitted by law, will not be released under the Freedom of Information Act, 5 U.S.C. 552.
Objections relating to the prospective license may be submitted to Patent Counsel, Office of the Chief Counsel, Mail Code CC–A, NASA John F. Kennedy Space Center, Kennedy Space Center, FL 32899. Telephone: 321–867–2076; Facsimile: 321–867–1817.
Shelley Ford, Patent Attorney, Office of the Chief Counsel, Mail Code CC–A, NASA John F. Kennedy Space Center, Kennedy Space Center, FL 32899. Telephone: 321–867–2076; Facsimile: 321–867–1817. Information about other NASA inventions available for licensing can be found online at
National Aeronautics and Space Administration.
Notice of Intent to Grant Exclusive License.
This notice is issued in accordance with 35 U.S.C. 209(e) and 37 CFR 404.7(a)(1)(i). NASA hereby gives notice of its intent to grant an exclusive license in the United States to practice the invention described and claimed in U.S. Patent No. 6,967,051; NASA Case No. KSC–12092 entitled “Thermal Insulation Systems,” and U.S. Patent Application No. 61/776,639; NASA Case No. KSC–13777 entitled “Layered Composite Thermal Insulation System for Non-Vacuum Applications,” to XTherm LP, having its principal place of business at 1325 White Drive, Titusville, FL 32780. The patent rights in this invention have been assigned to the United States of America as represented by the Administrator of the National Aeronautics and Space Administration. The prospective exclusive license will comply with the terms and conditions of 35 U.S.C. 209 and 37 CFR 404.7.
The prospective exclusive license may be granted unless, within fifteen (15) days from the date of this published notice, NASA receives written objections including evidence and argument that establish that the grant of the license would not be consistent with the requirements of 35 U.S.C. 209 and 37 CFR 404.7. Competing applications completed and received by NASA within fifteen (15) days of the date of this published notice will also be treated as objections to the grant of the contemplated exclusive license.
Objections submitted in response to this notice will not be made available to the public for inspection and, to the extent permitted by law, will not be released under the Freedom of Information Act, 5 U.S.C. 552.
Objections relating to the prospective license may be submitted to Patent Counsel, Office of the Chief Counsel, Mail Code CC–A, NASA John F. Kennedy Space Center, Kennedy Space Center, FL 32899. Telephone: 321–867–2076; Facsimile: 321–867–1817.
Shelley Ford, Patent Attorney, Office of the Chief Counsel, Mail Code CC–A, NASA John F. Kennedy Space Center, Kennedy Space Center, FL 32899. Telephone: 321–867–2076; Facsimile: 321–867–1817. Information about other NASA inventions available for licensing can be found online at
National Aeronautics and Space Administration (NASA).
Notice of meeting.
In accordance with the Federal Advisory Committee Act, Public Law 92–463, as amended, the National Aeronautics and Space Administration announce a forthcoming meeting of the Aerospace Safety Advisory Panel (ASAP).
Friday, July 12, 2013, 09:00–10:00 a.m., Local Time.
NASA's Marshall Space Flight Center, Educator Resource Center, U.S. Space & Rocket Center, Room 206, One Tranquility Base, Huntsville, AL 35805
Ms. Harmony Myers, Aerospace Safety Advisory Panel Executive Director, National Aeronautics and Space Administration, Washington, DC 20546, (202) 358–1857.
The Aerospace Safety Advisory Panel will hold its Third Quarterly Meeting for 2013. This discussion is pursuant to carrying out its statutory duties for which the Panel reviews, identifies, evaluates, and advises on those program activities, systems, procedures, and management activities that can contribute to program risk. Priority is given to those programs that involve the safety of human flight. The agenda will include:
• Explorations Systems Development
• Commercial Crew Program
• International Space Station
• Mars Program Technologies and Asteroid Mission Overview
The meeting will be open to the public up to the seating capacity of the room. Seating will be on a first-come basis. Visitors will be requested to sign a visitor's register. Photographs will
At the beginning of the meeting, members of the public may make a verbal presentation to the Panel on the subject of safety at NASA, not to exceed 5 minutes in length. To do so, members of the public must contact Ms. Harmony Myers at
9:30 a.m., Tuesday, June 25, 2013.
999 North Capitol St NE., Suite 900, Gramlich Boardroom, Washington, DC 20002.
Open.
Erica Hall, Assistant Corporate Secretary (202) 220–2376;
Peace Corps.
60-Day notice and request for comments.
The Peace Corps will submit the following information collection request to the Office of Management and Budget (OMB) for approval. The purpose of this notice is to allow 60 days for public comment in the
Submit comments on or before August 19, 2013.
Comments should be addressed to Denora Miller, Freedom of Information Act Officer. Denora Miller can be contacted by telephone at 202–692–1236 or email at
Denora Miller at Peace Corps address above.
Pension Benefit Guaranty Corporation.
Notice of request for extension of OMB approval.
The Pension Benefit Guaranty Corporation (PBGC) is requesting that the Office of Management and Budget (OMB) extend approval, under the Paperwork Reduction Act, of a collection of information under its regulation on Rules for Administrative Review of Agency Decisions (OMB control number 1212–0063, expires July 31, 2013). This notice informs the public of PBGC's request and solicits public comment on the collection of information.
Comments should be submitted by July 19, 2013.
Comments should be sent to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for Pension Benefit Guaranty Corporation, via electronic mail at
Donald F. McCabe, Attorney, Regulatory Affairs Group, Office of the General
PBGC's regulation on Rules for Administrative Review of Agency Decisions (29 CFR part 4003) prescribes rules governing the issuance of initial determinations by PBGC and the procedures for requesting and obtaining administrative review of initial determinations through reconsideration or appeal. Subpart A of the regulation specifies which initial determinations are subject to reconsideration. Subpart C prescribes rules on who may request reconsideration, when to make such a request, where to submit it, form and content of reconsideration requests, and other matters relating to reconsiderations.
Any person aggrieved by an initial determination of PBGC under § 4003.1(b)(1) (determinations that a plan is covered by section 4021 of ERISA), § 4003.1(b)(2) (determinations concerning premiums, interest, and late payment penalties under section 4007 of ERISA), § 4003.1(b)(3) (determinations concerning voluntary terminations), or § 4003.1(b)(4) (determinations concerning allocation of assets under section 4044 of ERISA) may request reconsideration of the initial determination. Requests for reconsideration must be in writing, be clearly designated as requests for reconsideration, contain a statement of the grounds for reconsideration and the relief sought, and contain or reference all pertinent information. OMB has approved the administrative appeals collection of information under control number 1212–0063 through July 31, 2013. PBGC is requesting that OMB extend its approval of this collection of information for three years. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
PBGC estimates that an average of 700 filers per year will respond to this collection of information. PBGC further estimates that the annual burden of this collection of information per filer is about one-half hour and about $500, with an average total annual burden of about 240 hours and about $380,000.
Postal Regulatory Commission.
Notice
The Commission is noticing a recently filed Postal Service request to add a Priority Mail Contract 59 to the competitive product list. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
Stephen L. Sharfman, General Counsel, at 202–789–6820.
I. Introduction
II. Notice of Filings
III. Ordering Paragraphs
In accordance with 39 U.S.C. 3642 and 39 CFR 3020.30
The Postal Service contemporaneously filed a redacted contract related to the proposed new product under 39 U.S.C. 3632(b)(3) and 39 CFR 3015.5.
• Attachment A—a redacted copy of Governors' Decision No. 11–6, authorizing the new product;
• Attachment B—a redacted copy of the contract;
• Attachment C—proposed changes to the Mail Classification Schedule competitive product list with the addition underlined;
• Attachment D—a Statement of Supporting Justification as required by 39 CFR 3020.32;
• Attachment E—a certification of compliance with 39 U.S.C. 3633(a); and
• Attachment F—an application for non-public treatment of materials to maintain redacted portions of the contract and related financial information under seal.
In the Statement of Supporting Justification, Dennis R. Nicoski, Manager, Field Sales Strategy and Contracts, asserts that the contract will cover its attributable costs, make a positive contribution to covering institutional costs, and increase contribution toward the requisite 5.5 percent of the Postal Service's total institutional costs.
The Postal Service filed much of the supporting materials, including the related contract, under seal.
The Commission establishes Docket Nos. MC2013–52 and CP2013–66 to consider the Request pertaining to the proposed Priority Mail Contract 59 product and the related contract, respectively.
Interested persons may submit comments on whether the Postal Service's filings in the captioned dockets are consistent with the policies of 39 U.S.C. 3632, 3633, or 3642, 39 CFR 3015.5, and 39 CFR part 3020, subpart B. Comments are due no later than June 20, 2013. The public portions of these filings can be accessed via the Commission's Web site (
The Commission appoints Lyudmila Y. Bzhilyanskaya to serve as Public Representative in these dockets.
It is ordered:
1. The Commission establishes Docket Nos. MC2013–52 and CP2013–66 to consider the matters raised in each docket.
2. Pursuant to 39 U.S.C. 505, Lyudmila Y. Bzhilyanskaya is appointed to serve as an officer of the Commission (Public Representative) to represent the interests of the general public in these proceedings.
3. Comments by interested persons in these proceedings are due no later than June 20, 2013.
4. The Secretary shall arrange for publication of this order in the
Postal Regulatory Commission.
Notice
The Commission is amending an existing Express Mail negotiated service agreement. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
Stephen L. Sharfman, General Counsel, at 202–789–6820.
On June 12, 2013, the Postal Service filed notice that it has agreed to an amendment to the existing Express Mail Contract 13 (Amendment), which was added to the competitive product list in this docket.
The Postal Service asserts that the Amendment will become effective one day after the day that the Commission completes its review.
The Amendment changes the annual adjustment mechanism for the second and third years of the contract.
In Order No. 1640, the Commission conditionally approved the contract's 3-year term on the Postal Service's representations that the standard annual adjustment provision was inadvertently excluded from the contract and an amendment to the contract would be filed to remedy the exclusion.
Interested persons may submit comments on whether the changes presented in the Postal Service's Notice are consistent with the policies of 39 U.S.C. 3632, 3633, or 3642, 39 CFR 3015.5, and 39 CFR part 3020, subpart B. Comments are due no later than June 20, 2013. The public portions of these filings can be accessed via the Commission's Web site (
Lawrence Fenster will continue to serve as Public Representative in this docket.
1. The Commission shall reopen Docket No. CP2013–41 to consider the amendment to Express Mail Contract 13.
2. Pursuant to 39 U.S.C. 505, Lawrence Fenster is appointed to continue to serve as an officer of the Commission (Public Representative) to represent the interests of the general public in these proceedings.
3. Comments by interested persons in these proceedings are due no later than June 20, 2013.
4. The Secretary shall arrange for publication of this order in the
By the Commission.
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service
Elizabeth A. Reed, 202–268–3179.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on June 12, 2013, it filed with the Postal Regulatory Commission a
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Section 6 of the Act
The respondents to the collection of information are futures markets.
The Commission estimates that the total annual burden for all respondents to provide ad hoc amendments
Compliance with Rule 6a–4 is mandatory. Information received in response to Rule 6a–4 shall not be kept confidential; the information collected is public information.
Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
Please direct your written comments to: Thomas Bayer, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 6432 General Green Way, Alexandria, VA 22312 or send an email to:
On April 15, 2013, the Fixed Income Clearing Corporation (“FICC”) filed with the Securities and Exchange Commission (“Commission”), pursuant
Section 19(b)(2)(A) of the Act
As noted, the proposed rule change would allow FICC to include options on interest rate futures contracts with maturities not longer than two years in the one-pot cross-margining program between the GSD and NYPC. In the proposed rule change, FICC acknowledged that it will have to alter its risk management framework to account for the non-linear risks presented by options on interest rate futures.
Accordingly, pursuant to Section 19(b)(2)(A)(ii)(I) of the Act,
For the Commission by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes changes to its schedule of fees and rebates for execution of orders for securities priced at $1 or more under Rule 7018. These amendments are effective upon filing, and the Exchange has designated the proposed amendments to be operative on June 3, 2013. The text of the proposed rule change is also available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange charges a reduced fee for members providing liquidity if they meet the criteria of a “Qualified Liquidity Provider.” These criteria include requirements that the member access and provide volumes of liquidity in excess of certain levels, expressed as a percentage of Consolidated Volume.
Trading volumes on the date of the Russell Reconstitution are generally far in excess of volumes on other days during the month. As a result, the trading activity of members that are regular daily participants in BX, expressed as a percentage of Consolidated Volume, is likely to be lower than their percentage of Consolidated Volume on other days during the month. Including the date of the Russell Reconstitution in calculations of Consolidated Volume is therefore likely to make it more difficult for members to achieve particular volume levels during the month. Accordingly, excluding the date of the Russell Reconstitution from these calculations will diminish the likelihood of a
BX believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
BX does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. BX notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, BX must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, BX believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. In this instance, the change will make it easier for members to achieve a certain percentage of Consolidated Volume during the month of the Russell Reconstitution, and therefore it is designed to protect members from the possibility of a
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On April 24, 2013, The NASDAQ Stock Market LLC (“Exchange” or “NASDAQ”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
NASDAQ Rule 2160(a) prohibits the Exchange or any entity with which it is affiliated from, directly or indirectly, acquiring or maintaining an ownership interest in, or engaging in a business venture with, an Exchange member or an affiliate of an Exchange member in the absence of an effective filing under Section 19(b) of the Act.
On May 15, 2012, the Exchange filed a proposed rule change for NOM to accept inbound options orders routed by NOS from BX on a one year pilot basis in connection with the establishment of a new options market by BX.
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
Recognizing that the Commission has previously expressed concern regarding the potential for conflicts of interest in instances where a member firm is affiliated with an exchange to which it is routing orders, the Exchange proposed the following limitations and conditions to NOS's affiliation with the Exchange to permit the Exchange to accept inbound options orders that NOS routes in its capacity as a facility of BX on a pilot basis.
• First, the Exchange and the Financial Industry Regulatory Authority (“FINRA”) will maintain a Regulatory Contract, as well as an agreement pursuant to Rule 17d–2 under the Act (“17d–2 Agreement”).
• Second, FINRA will monitor NOS for compliance with NASDAQ's trading rules, and will collect and maintain certain related information.
• Third, FINRA will provide a report to the Exchange's chief regulatory officer (“CRO”), on a quarterly basis, that: (i) quantifies all alerts (of which the Exchange or FINRA is aware) that identify NOS as a participant that has potentially violated Commission or Exchange rules, and (ii) lists all investigations that identify NOS as a participant that has potentially violated Commission or NASDAQ rules.
• Fourth, the Exchange has in place NASDAQ Rule 2160(c), which requires NASDAQ OMX, as the holding company owning both the Exchange and NOS, to establish and maintain procedures and internal controls reasonably designed to ensure that NOS does not develop or implement changes to its system, based on non-public information obtained regarding planned changes to the Exchange's systems as a result of its affiliation with the Exchange, until such information is available generally to similarly situated Exchange members, in connection with the provision of inbound order routing to the Exchange.
The Exchange stated that it has met all the above-listed conditions. By meeting such conditions, the Exchange believes that it has set up mechanisms that protect the independence of the Exchange's regulatory responsibility with respect to NOS, and has demonstrated that NOS cannot use any information advantage it may have because of its affiliation with the Exchange.
The Exchange has proposed four ongoing conditions applicable to NOS's routing activities, which are enumerated above. The Commission believes that these conditions will mitigate its concerns about potential conflicts of interest and unfair competitive advantage. In particular, the Commission believes that FINRA's oversight of NOS,
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
NASDAQ is proposing to make minor modifications to pricing incentive programs under Rule 7014 and NASDAQ's schedule of fees and credits applicable to execution and routing of orders in securities priced at $1 or more per share under Rule 7018, and to make a conforming change to the fee schedule under Rule 7015. The changes pursuant to this proposal are effective upon filing, and the Exchange will implement the proposed rule changes on June 3, 2013.
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
NASDAQ Rule 7014 contains a number of pricing incentive programs that are designed to encourage participation in NASDAQ by members representing retail investors and to increase the extent to which members offer to provide liquidity at the national best bid and/or national best offer (“NBBO”). NASDAQ is proposing to make a minor modification to reduce the costs of the programs in a period of persistent low trading volumes without materially diminishing the incentives offered by these programs.
Under the NBBO Setter Incentive program, NASDAQ provides an enhanced liquidity provider rebate with respect to displayed liquidity-providing orders that set the NBBO or cause NASDAQ to join another trading center with a protected quotation at the NBBO. Under the Qualified Market Maker (“QMM”) Program, a member may be designated as a QMM with respect to one or more of its market participant identifiers (“MPIDs”) if (i) the member is not assessed any “Excess Order Fee” under Rule 7018 during the month;
At present, if a member is a participant in both the QMM program and the ISP, it may receive a supplemental credit of $0.00005, $0.0001, or $0.0002 per share executed for displayed liquidity-providing orders that qualify for the ISP,
In addition to the NBBO Setter Incentive credit described above, QMMs are also eligible to receive a discount on fees for ports used by the QMM for entering orders under the program. Effective April 1, 2013, NASDAQ reduced the applicable discount from (i) 25%, up to a total discount of $10,000 per MPID per month, to (ii) the lesser of the QMM's total fees for such ports or $5,000.
Currently, NASDAQ pays a credit of $0.0020 per share executed for midpoint pegged and midpoint post-only orders (“midpoint orders”) if a member provides an average daily volume of more than 5 million shares through midpoint orders during the month and the member's average daily volume of liquidity provided through midpoint orders during the month is at least 2 million shares more than in April 2013. NASDAQ pays a credit of $0.0017 per share executed for midpoint orders if the member provides an average daily volume of 3 million or more shares through midpoint orders during the month (but does not qualify for the $0.0020 tier), and a credit of $0.0015 per share executed for midpoint orders if the member provides an average daily volume of less than 3 million shares through midpoint orders during the month. NASDAQ is proposing to increase the requirement for the $0.0017 per share executed tier to an average daily volume of 5 million or more shares through midpoint orders (but without the requirement for an increase in volume over April 2013 applicable to the $0.0020 per share rebate). In addition, NASDAQ proposes to reduce the midpoint order rebate for members not reaching these tiers (
Finally, under both Rule 7014 and Rule 7018, various pricing tiers depend upon the extent of a member's trading activity, expressed as a percentage of, or a ratio to, Consolidated Volume.
Trading volumes on the date of the Russell Reconstitution are generally far in excess of volumes on other days during the month, and members that are not otherwise active on NASDAQ to a great extent often participate in the NASDAQ Closing Cross on that date. As a result, the trading activity of members that are regular daily participants in NASDAQ, expressed as a percentage of Consolidated Volume, is likely to be lower than their percentage of Consolidated Volume on other days during the month. Including the date of the Russell Reconstitution in calculations of Consolidated Volume is therefore likely to make it more difficult for members to achieve particular pricing tiers during the month. Accordingly, excluding the date of the Russell Reconstitution from these calculations will diminish the likelihood of a
NASDAQ believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
NASDAQ believes that the proposed change to provide that members participating in both the QMM program and the ISP may not receive both an ISP credit and an NBBO Setter Incentive credit with respect to the same order (but rather would receive the higher of the two credits), is reasonable because such members will continue to receive an enhanced rebate of $0.0002 or $0.0005 per share executed with respect to such orders. NASDAQ does not believe, however, that it is reasonable to pay an added credit with respect to ISP-qualified orders that set or join the NBBO, since a member entering retail or institutional orders is not in a position to influence their pricing. NASDAQ further believes that the change is consistent with an equitable allocation of fees because NASDAQ will continue to pay the higher of the two credits to reflect the fact that such orders improve NASDAQ's market quality by setting or allowing NASDAQ to join the NBBO. NASDAQ further believes that the change is not unfairly discriminatory because the change will eliminate an instance in which members may receive credits that are high in relation to those paid to other members while still paying credits that reflect the value of applicable orders as both retail or institutional orders and orders that set or join the NBBO. Finally, the change does not unfairly burden competition because it does not disadvantage affected members in a manner that would impair their ability to compete, in that they will continue to receive enhanced rebates. The change with respect to the text of Rule 7015 is reasonable, consistent with an equitable allocation, not unfairly discriminatory, and does not burden competition, in that is designed merely to ensure that the fee language of Rule 7015 reflects a change that was made to Rule 7014 in April 2013. As such, it is not a substantive change.
The changes to increase the required threshold for a rebate of $0.0017 per share executed for midpoint orders and to reduce the rebate for midpoint orders for members not reaching this tier from $0.0015 to $0.0014 per share executed are reasonable, consistent with an equitable allocation, not unfairly discriminatory, and do not burden competition. Specifically, the change in the threshold is reasonable because it provides an incentive for members that wish to receive a higher rebate to increase their levels of liquidity provision, while continuing to provide a rebate for midpoint orders, whether or not a member reaches the tier threshold, that is higher than the rebate for other non-displayed orders. The change to the threshold is consistent with an equitable allocation of fees and not unfairly discriminatory because although it will affect only a small number of market participants, it is designed to incentivize all market participants that use midpoint orders to increase their volumes of liquidity provision in order to achieve a higher rebate for such orders, or, in the alternative, to increase use of displayed orders to receive a still higher rebate. Thus, the change is consistent with NASDAQ's longstanding policy of encouraging the use of displayed orders, which promote price discovery, while nevertheless favoring midpoint orders over other non-displayed orders due to the price improvement they offer. The change does not burden competition since affected members may readily adjust trading behavior to maintain or increase their rebates, and will therefore not be disadvantaged in their ability to compete.
The change in the applicable rebate for midpoint orders to which a pricing tier does not apply is reasonable because it reflects a reduction of only $0.0001 to the applicable rebate. The change is consistent with an equitable allocation of fees and not unfairly discriminatory because it provides further incentives for members to
NASDAQ believes that the proposed change to exclude the date of the Russell Reconstitution from calculations of Consolidated Volume under Rules 7014 and 7018 is reasonable because it will diminish the likelihood of a
NASDAQ does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. NASDAQ notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, NASDAQ must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, NASDAQ believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. In this instance, although certain of the proposed changes have the effect of reducing certain rebates or limiting their availability, the rebates in question remain in place and are themselves reflective of the need for exchanges to offer significant financial incentives to attract order flow. Moreover, if the changes are unattractive to market participants, it is likely that NASDAQ will lose market share as a result. In addition, the change with respect to the Russell Reconstitution is designed to protect members from the possibility of a
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange proposes to amend its Fees Schedule. The text of the proposed rule change is available on the Exchange's Web site (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend its Fees Schedule. In 2002, the Exchange added to its Fees Schedule a rebate for duplicate fees related to manual data entry (“keypunch”) errors.
On occasion, options transactions are matched and cleared as a result of certain keypunch errors and Trading Permit Holders are forced to execute subsequent transactions to achieve the originally intended results. A qualifying error is any error that is inadvertent and creates a duplicate fee or fees to be charged in the matching and clearing of corrective options trades. Only those transactions that require a minimum of 500 contracts to correct the error or errors shall be eligible for this rebate. The CBOE shall have the discretion to rebate any duplicate transaction fees incurred in the course of correcting such errors. A written request with all supporting documentation (trade date, options class, executing firm and broker, opposite firm and broker, premium, and quantity) and a summary of the reasons for the error must be submitted within 60 days after the last day of the month in which the error occurred.
In a recent overall review of the Fees Schedule, the Exchange reviewed the “Keypunch Error” rebate program and has determined to modify the rebate. The term “keypunch” is open to interpretation and could be read to include a variety of types of errors that involve the erroneous entry of any type of trade information (beyond just the wrong clearing firm). As such, the Exchange proposes to delete the current language associated with the keypunch error rebate program, re-title it “Clearing Trading Permit Holder Position Re-Assignment” and add the following language: CBOE will rebate assessed transaction fees to a Clearing Trading Permit Holder who, as a result of a trade adjustment on any business day following the original trade, re-assigns a position established by the initial trade to a different Clearing Trading Permit Holder. In such a circumstance, the Exchange will rebate, for the party for whom the position is being re-assigned, that party's transaction fees from the original transaction as well as the transaction in which the position is re-assigned. In all other circumstances, including corrective transactions, in which a transaction is adjusted on any day after the original trade date, regular Exchange fees will be assessed.
If a market participant makes an error that requires a corrective transaction, the Exchange believes that the market participant should be responsible for the fees involved in correcting that transaction (as the Exchange must expend resources in order to process such transactions). However, when a Clearing Trading Permit Holder is required to re-assign a position, that Clearing Trading Permit Holder may have been assigned that position by another market participant and therefore the Exchange does not wish to assess fees for such re-assignment to the Clearing Trading Permit Holder. The reason that the rebate is limited to a business day following the original trade is because if an error is discovered on the day it occurs, it can be corrected prior to clearing and accurate fees will be assessed. The Exchange determined to eliminate the stipulation that, in order to qualify for the rebate, a transaction be of a minimum of 500 contracts because the Exchange believes that any transaction, regardless of size, should be eligible for the rebate, and a
Because the Exchange may not always be able to automatically identify these situations, in order to receive a rebate, a written request with all supporting documentation (trade detail regarding both the original and re-assigning
The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
The Exchange also believes the proposed rule change is consistent with Section 6(b)(4) of the Act,
CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. CBOE does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because the situation in which a Clearing Trading Permit Holder is reported as being party to a trade to which it is not a party and thereby forced to take a position only applies to Clearing Trading Permit Holders. Further, the proposed change will apply to all Clearing Trading Permit Holders. CBOE does not believe that the proposed rule change will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed change applies to trading on CBOE only. Further, to the extent that the proposed change may make CBOE a more attractive market for market participants on other exchanges, such market participants may determine to become CBOE market participants.
The Exchange neither solicited nor received comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to introduce a Market Maker Peg Order (“MMPO”) for use on NASDAQ OMX PSX (“PSX”). The Exchange proposes to implement the change on a date that is on, or shortly after, the expiration of the 30-day operative delay provided for under Rule 19b–4(f)(6)(iii).
The text of the proposed rule change is below. Proposed deletions are in brackets; proposed additions are in italics.
The following definitions apply to the Rule 3200 and 3300 Series for the trading of securities on PSX.
(a)–(e) No change.
(f) The term “Order Type” shall mean the unique processing prescribed for designated orders that are eligible for entry into the System, and shall include:
(1)–(11) No change.
(g)–(i) No change.
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange is proposing to introduce a Market Maker Peg Order (“MMPO”) for use on PSX by registered PSX Market Makers. The MMPO, which is currently available for use on The NASDAQ Stock Market (“NASDAQ”), is an order type that provides a means by which a market maker may comply with its market making obligations under applicable Exchange rules.
PSX Rule 3213 requires a member organization registered as a Market
PSX Market Makers must also adhere to certain pricing obligations established by Rule 3213, which are premised on entering quotation prices that are not more than a “Designated Percentage”
For bid quotations, at the time of entry of bid interest satisfying the Two-Sided Obligation, the price of the bid interest may not be more than the applicable Designated Percentage away from the then current National Best Bid, or if no National Best Bid, not more than the Designated Percentage away from the last reported sale from the responsible single plan securities information processor. In the event that the National Best Bid (or if no National Best Bid, the last reported sale) increases to a level that would cause the bid interest of the Two-Sided Obligation to be more than the Defined Limit away from the National Best Bid (or if no National Best Bid, the last reported sale), or if the bid is executed or cancelled, the Market Maker must enter new bid interest at a price not more than the Designated Percentage away from the then current National Best Bid (or if no National Best Bid, the last reported sale), or identify to the Exchange current resting interest that satisfies the Two-Sided Obligation. Similarly, for offer quotations, at the time of entry of offer interest satisfying the Two-Sided Obligation, the price of the offer interest may not be more than the Designated Percentage away from the then current National Best Offer, or if no National Best Offer, not more than the Designated Percentage away from the last reported sale received from the responsible single plan securities information processor. In the event that the National Best Offer (or if no National Best Offer, the last reported sale) decreases to a level that would cause the offer interest of the Two-Sided Obligation to be more than the Defined Limit away from the National Best Offer (or if no National Best Offer, the last reported sale), or if the offer is executed or cancelled, the Market Maker must enter new offer interest at a price not more than the Designated Percentage away from the then current National Best Offer (or if no National Best Offer, the last reported sale), or identify to the Exchange current resting interest that satisfies the Two-Sided Obligation.
The MMPO is designed to assist Market Makers in complying with these requirements by having its price adjusted in accordance with the parameters required by Rule 3213. Thus, use of the order will allow market makers to make liquidity available at prices reasonably related to the National Best Bid and National Best Offer, even in circumstances where they are not themselves quoting at the best price or have more limited liquidity available at the best price. The Exchange believes that use of the order may therefore serve to dampen volatility and minimize the extent to which transactions on PSX result in the imposition of limit-up, limit-down restrictions or trading pauses under Rule 3100 and related rules of other exchanges.
Specifically, the MMPO is a limit order that, upon entry, is automatically priced by the PSX System at the Designated Percentage away from the then current National Best Bid and National Best Offer, or if no National Best Bid or National Best Offer, at the Designated Percentage away from the last reported sale from the responsible single plan processor in order. For example, if the National Best Bid was $10 in a Tier 1 Security, the Designated Percentage would be 8%, an MMPO to buy entered between 9:45 a.m. and 3:45 p.m. would be priced at $9.20.
Upon reaching the Defined Limit, the price of an MMPO will be adjusted by the System to the Designated Percentage away from the then current National Best Bid and National Best Offer, or, if no National Best Bid or National Best Offer, to the Designated Percentage away from the last reported sale from the responsible single plan processor. Thus, if the National Best Bid in the above example increased to $10.17, the MMPO priced at $9.20 would now be more than 9.5%, the Defined Limit, away from the National Best Bid, and would be repriced to $9.35, the Designated Percentage away from $10.17.
If the market moves such that the price of an MMPO is within 4
For a given MMPO, a Market Maker may designate a more aggressive offset from the National Best Bid or National Best Offer than the given Designated Percentage.
If an MMPO is entered or on the book at a time when there is no National Best Bid or National Best Offer (as applicable) and no last reported sale, the order will be cancelled or rejected. If an MMPO is priced based on the consolidated last sale because there is no National Best Bid or National Best Offer, and the MMPO itself establishes the National Best Bid or National Best Offer, the order will not be subsequently adjusted until either there is a new consolidated last sale, or a new National Best Bid or new National Best Offer is established. Thus, if the last sale price on the consolidated tape was $10 and an MMPO to buy is priced at $9.20 and establishes the National Best Bid, the order will not then be repriced to maintain an offset from itself. Rather, the order will be repriced only once there is an independent basis pricing the order. In the event of an execution against an MMPO that reduces the size of the order below one round lot, the Market Maker would need to enter a new order (after performing required regulatory checks, as discussed below) to satisfy its obligations under Rule 3213.
MMPOs are not eligible for routing pursuant to Rule 3315 and are always displayed on PSX. Notwithstanding the availability of MMPO functionality, a Market Maker remains responsible for entering, monitoring, and resubmitting, as applicable, quotations that meet the requirements of Rule 3213. A new timestamp is created for an MMPO each time that its price is automatically adjusted. At a particular price, the order would be processed in regular price/time priority, with better priced interest being executed prior to the MMPO and with the MMPO being executed behind similarly priced orders entered before the MMPO had its price adjusted.
Although Rule 3213 does not govern the pre-market trading session before 9:30 a.m. and the post-market trading session after 4:00 p.m., a Market Maker may enter an MMPO during such periods. In that case, the Designated Percentage and Defined Limit applicable to the MMPO will be the same as for the periods from 9:30 a.m. through 9:45 a.m., as described in Rule 3213.
Because use of the MMPO would not be inconsistent with Market Makers having the capacity to control order origination, as required by SEC Rule 15c3–5 (the “Market Access Rule”),
Phlx believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
The methodology for repricing an MMPO is consistent with the requirements of the Act because it will ensure that the price of the order bears
The Exchange also believes that although the order may be used only by Market Makers, this restriction is not unfairly discriminatory because only Market Makers are subject to the requirements of Rule 3312; accordingly, the order is not needed to assist other market participants in fulfilling regulatory obligations. To the extent that a market participant wishes to maintain an order at a price that deviates from the inside market by a particular amount, however, it may use the Primary Peg Order to achieve this purpose. Accordingly, an alternative to the MMPO is already available to market participants.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Specifically, the Exchange believes that the proposal will enhance PSX's competitiveness by providing Market Makers on PSX with a means to offer liquidity at prices reasonably related to the inside market. The Exchange believes that this functionality will be appealing to potential Market Makers, and therefore will make it more likely that market participants will choose to become active on PSX. This may, in turn, increase the extent of liquidity available on PSX and increase its ability to compete with other execution venues to attract orders that are seeking liquidity. The Exchange further believes that the introduction of the MMPO will not impair in any manner the ability of market participants or other execution venues to compete.
No written comments were either solicited or received.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On April 23, 2013, NASDAQ OMX PHLX LLC (“Exchange” or “PHLX”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
PHLX Rule 985(b) prohibits the Exchange or any entity with which it is affiliated from, directly or indirectly, acquiring or maintaining an ownership interest in, or engaging in a business venture with, an Exchange member or an affiliate of an Exchange member in the absence of an effective filing under Section 19(b) of the Act.
On May 15, 2012, PHLX filed a proposed rule change for the Exchange to accept inbound orders routed from BX on a pilot basis subject to certain limitations and conditions.
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
Recognizing that the Commission has expressed concern regarding the potential for conflicts of interest in instances where a member firm is affiliated with an exchange to which it is routing orders, the Exchange previously implemented limitations and conditions to NOS's affiliation with the Exchange to permit the Exchange to accept inbound orders that NOS routes in its capacity as a facility of BX on a pilot basis.
• First, the Exchange and the Financial Industry Regulatory Authority (“FINRA”) will maintain a Regulatory Contract, as well as an agreement pursuant to Rule 17d–2 under the Act (“17d–2 Agreement”).
• Second, FINRA will monitor NOS for compliance with PHLX's trading rules, and will collect and maintain certain related information.
• Third, FINRA will provide a report to the Exchange's chief regulatory officer (“CRO”), on a quarterly basis, that: (i) Quantifies all alerts (of which the Exchange or FINRA is aware) that identify NOS as a participant that has potentially violated Commission or Exchange rules, and (ii) lists all investigations that identify NOS as a participant that has potentially violated Commission or PHLX rules.
• Fourth, the Exchange has in place PHLX Rule 985, which requires NASDAQ OMX, as the holding company owning both the Exchange and NOS, to establish and maintain procedures and internal controls reasonably designed to ensure that NOS does not develop or implement changes to its system, based on non-public information obtained regarding planned changes to the Exchange's systems as a
The Exchange stated that it has met all the above-listed conditions. By meeting such conditions, the Exchange believes that it has set up mechanisms that protect the independence of the Exchange's regulatory responsibility with respect to NOS, and has demonstrated that NOS cannot use any information advantage it may have because of its affiliation with the Exchange.
In the past, the Commission has expressed concern that the affiliation of an exchange with one of its members raises potential conflicts of interest, and the potential for unfair competitive advantage.
The Exchange has proposed four ongoing conditions applicable to NOS's routing activities, which are enumerated above. The Commission believes that these conditions will mitigate its concerns about potential conflicts of interest and unfair competitive advantage. In particular, the Commission believes that FINRA's oversight of NOS,
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The ISE proposes to amend its Schedule of Fees. The text of the proposed rule change is available on the Exchange's Web site (
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements.
The purpose of this proposed rule change is to amend certain fees for regular orders in Non-Select Symbols
For regular orders in Non-Select Symbols, the Exchange currently charges an execution fee of: i) $0.18 per
For regular orders in FX Options, the Exchange currently charges an execution fee of: (i) $0.18 per contract for Market Maker and Priority Customer orders; (ii) $0.20 per contract for Market Maker orders (for orders sent by Electronic Access Members); (iii) $0.30 per contract for Firm Proprietary/Broker-Dealer and Professional Customer orders; (iv) $0.45 per contract for Non-ISE Market Maker orders; (v) $0.40 per contract for Priority Customer orders in Early Adopter FX Option Symbols; and (vi) $0.00 per contract for Early Adopter Market Maker orders. The Exchange now proposes to lower the execution fee for regular Firm Proprietary/Broker-Dealer and Professional Customer orders, from $0.30 per contract to $0.20 per contract, when these market participants provide liquidity in FX Options. The Exchange is not proposing any change to the execution fee for other market participants.
Finally, the Exchange proposes to remove a reference to a number of index options that previously traded on ISE pursuant to a license agreement and that have now been delisted by the Exchange. Specifically, ISE is removing reference to the following index options in Section VI. B. of the Schedule of Fees: the Russell 2000® Index (“RUT”), the Russell 1000® Index (“RUI”), the Mini Russell 2000® Index (“RMN”), the Morgan Stanley Retail Index (“MVR”), the Morgan Stanley High Tech Index (“MSH”), the KBW Mortgage Finance Index “(MFX”), the S&P® MidCap 400 Index (“MID”), and the S&P® SmallCap 600 Index (“SML”).
The Exchange believes that its proposal to amend its Schedule of Fees is consistent with Section 6(b) of the Securities and Exchange Act of 1934 (the “Act”)
The Exchange believes that its proposal to assess a $0.20 per contract fee for regular Firm Proprietary/Broker-Dealer and regular Professional Customer orders in Non-Select Symbols and in FX Options when they provide liquidity is reasonable and equitably allocated because the fee is within the range of fees assessed by other exchanges employing similar pricing schemes. For example, NASDAQ Options Market (“NOM”) currently charges a fee of $0.45 per contract for similar orders in non-Penny Pilot options that provide liquidity in its regular order book,
The Exchange believes its proposal to decrease the execution fee for regular Firm Proprietary/Broker-Dealer and regular Professional Customer orders in Non-Select Symbols and in FX Options when they provide liquidity is not unfairly discriminatory because the lower fee would apply uniformly to all regular Firm Proprietary/Broker-Dealer and Professional Customer orders in the same manner.
The Exchange has determined to charge fees for regular orders in mini options at a rate that is
The Exchange believes that the price differentiation between the various market participants is justified. As for Priority Customers, for the most part, the Exchange does not charge Priority Customers a fee (Priority Customers have traditionally traded options on the Exchange without a fee) and to the extent they pay a transaction fee, those fees are lower than or the same as fees charged to other market participants. The Exchange believes charging lower fees, or no fees, to Priority Customer orders attracts that order flow to the Exchange and thereby creates liquidity to the benefit of all market participants who trade on the Exchange. With respect to fees to Non-ISE Market Maker orders, the Exchange believes that charging Non-ISE Market Maker orders a higher rate than the fee charged to Market Maker, Firm Proprietary/Broker-Dealer and Professional Customer regular orders is appropriate and not unfairly discriminatory because Non-ISE Market Makers are not subject to many of the non-transaction based fees that these other categories of membership are subject to, e.g., membership fees, access fees, API/
Moreover, the Exchange believes that the proposed fees are fair, equitable and not unfairly discriminatory because the proposed fees are consistent with price differentiation that exists today at other options exchanges. Additionally, the Exchange believes it remains an attractive venue for market participants to direct their order flow in the symbols that are subject to this proposed rule change as its fees are competitive with those charged by other exchanges for similar trading strategies. The Exchange operates in a highly competitive market in which market participants can readily direct order flow to another exchange if they deem fee levels at a particular exchange to be excessive. For the reasons noted above, the Exchange believes that the proposed fees are fair, equitable and not unfairly discriminatory.
Finally, the Exchange's proposal to remove references to RUT, RUI, RMN, MVR, MSH, MFX, MID, and SML in Section VI.B. of the Schedule of Fees is reasonable, equitable and not unfairly discriminatory because the Exchange has delisted these products and these products no longer trade on the Exchange. The reference to a license surcharge on the Exchange's Schedule of Fees for these products is therefore unnecessary.
ISE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes the proposed fee change does not impose a burden on competition because the proposed fee is consistent with fees charged by other exchanges. The proposed fee change for regular orders in Non-Select Symbols, which the Exchange believes is lower than fees charged by its competitors for similar orders, will encourage competition and attract additional order flow in these symbols to ISE. The Exchange believes that the proposed fee change for regular orders in FX Options will not impose any unnecessary burden on competition because even though these options are solely listed on ISE, the Exchange operates in a highly competitive market, comprised of eleven exchanges, any of which can determine to trade similar products. At least one other exchange currently trades foreign currency options.
The Exchange also believes the proposed fee for regular orders in Non-Select Symbols and in FX Options does not impose a burden on competition because it sets the same rate and therefore, will apply uniformly to all regular Firm Proprietary/Broker-Dealer and Professional Customer orders in Non-Select Symbols and in FX Options traded on the Exchange.
The Exchange notes that it operates in a highly competitive market in which market participants can readily direct their order flow to competing venues. In such an environment, the Exchange must continually review, and consider adjusting, its fees and rebates to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed fee change reflects this competitive environment.
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice of request for public comment and submission to OMB of proposed collection of information.
The Department of State has submitted the information collection described below to the Office of Management and Budget (OMB) for approval. In accordance with the Paperwork Reduction Act of 1995 we are requesting comments on this collection from all interested individuals and organizations. The purpose of this Notice is to allow 30 days for public comment.
Submit comments directly to the Office of Management and Budget (OMB) up to July 19, 2013.
Direct comments to the Department of State Desk Officer in the Office of Information and Regulatory Affairs at the Office of Management and Budget (OMB). You may submit comments by the following methods:
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Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents, to PPT Forms Officer, U.S. Department of State, 2100 Pennsylvania Avenue., NW., Room 3030, Washington, DC 20037, who may be reached on (202) 663–2457 or at
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We are soliciting public comments to permit the Department to:
• Evaluate whether the proposed information collection is necessary for the proper functions of the Department.
• Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used.
• Enhance the quality, utility, and clarity of the information to be collected.
• Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Please note that comments submitted in response to this Notice are public record. Before including any detailed personal information, you should be aware that your comments as submitted, including your personal information, will be available for public review.
The information collected on the DS–3053, “Statement of Consent: Issuance of a U.S. Passport to a Minor under Age 16”, is used in conjunction with the DS–11, “Application for a U.S. Passport”. When a minor under the age 16 applies for a passport and one of the minor's parents or legal guardians is unavailable at the time the passport application is executed, a completed and notarized DS–3053 can be used as the statement of consent. If the required statement is not submitted, the minor may not receive a U.S. passport, unless certain exceptions apply. The required statement may be submitted in other formats provided they meet statutory and regulatory requirements.
The legal authority permitting this information collection assists the Department of State to administer the regulations in 22 CFR 51.28 requiring that both parents and/or any guardian consent to the issuance of a passport to a minor under age 16, except where one parent has sole custody or other exceptions apply. This regulation was mandated by Section 236 of the Admiral James W. Nance and Meg Donovan Foreign Relations authorization Act, Fiscal Year 2000 and 2001 (enacted by Pub, L, 106–113, Div. B, Section 1000 (a)(7)), and helps to prevent international parental child abduction, as well as child trafficking and other forms of passport fraud.
Passport Services collects information from U.S. citizens and non-citizen nationals when they complete and submit the DS–3053, “Statement of Consent: Issuance of a U.S. Passport to a Minor under Age 16”. Passport applicants can either download the DS–3053 from the internet or obtain the form from an Acceptance Facility/Passport Agency. The form must be completed, signed, and submitted along with the applicant's DS–11, “Application for a U.S. Passport”.
Under the currently approved OMB collection 1405–0129, the DS–3053 collects both the Statement of Consent and the Statement of Exigent/Special Family Circumstances. However, the proposed collection will request this information using two separate forms to ensure that we more clearly communicate to the public what is and what is not a special family circumstance. Separating out the forms also allows the passport specialist to more clearly control and adjudicate those cases that do not qualify as a special family circumstance:
• DS–3053, “Statement of Consent: Issuance of a Passport to a Minor under Age 16,” and
• DS–5525, “Statement of Exigent/Special Family Circumstances for Issuance of a Passport to a Minor under Age 16.”
The Office of the Assistant Legal Adviser for Private International Law, Department of State, hereby gives notice of a public meeting of the Study Group on Family Law to discuss Part V of a questionnaire on private international law issues surrounding the status of children, including issues arising from international surrogacy arrangements. The questionnaire, which was prepared by the Permanent Bureau of the Hague Conference on Private International Law, is available at
Data from the public is requested pursuant to Pub.L. 99–399 (Omnibus Diplomatic Security and Antiterrorism Act of 1986), as amended; Pub.L. 107–56 (USA PATRIOT Act); and Executive Order 13356. The purpose of the collection is to validate the identity of individuals who enter Department facilities. The data will be entered into the Visitor Access Control System (VACS–D) database. Please see the Security Records System of Records Notice (State-36) at
Federal Aviation Administration (FAA), DOT.
Notice of petition for exemption received.
This notice contains a summary of a petition seeking relief from specified requirements of 14 CFR. The purpose of this notice is to improve the public's awareness of, and participation in, this aspect of FAA's regulatory activities. Neither publication of this notice nor the inclusion or omission of information in the summary is intended to affect the legal status of the petition or its final disposition.
Comments on this petition must identify the petition docket number involved and must be received on or before July 9, 2013.
You may send comments identified by Docket Number FAA–2013–0078 using any of the following methods:
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Tyneka Thomas ARM–105, (202) 267–7626, FAA, Office of Rulemaking, 800 Independence Ave. SW., Washington, DC 20591. This notice is published pursuant to 14 CFR 11.85.
Federal Aviation Administration (FAA), DOT.
Notice of petition for exemption received.
This notice contains a summary of a petition seeking relief from specified requirements of 14 CFR. The purpose of this notice is to improve the public's awareness of, and participation in, this aspect of FAA's regulatory activities. Neither publication of this notice nor the inclusion or omission of information in the summary is intended to affect the legal status of the petition or its final disposition.
Comments on this petition must identify the petition docket number and must be received on or before July 9, 2013.
You may send comments identified by Docket Number FAA–2012–1342 using any of the following methods:
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Keira Jones (202) 267–4024, Office of Rulemaking, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591.
This notice is published pursuant to 14 CFR 11.85.
Federal Railroad Administration, DOT.
Notice and Request for Comments.
In compliance with the Paperwork Reduction Act of 1995, this notice announces that the Information Collection Requirements (ICRs) abstracted below have been forwarded to the Office of Management and Budget (OMB) for review and comment. The ICRs describes the nature of the information collections and their expected burdens. The
Comments must be submitted on or before July 19, 2013.
Mr. Robert Brogan, Office of Planning and Evaluation Division, RRS–21, Federal Railroad Administration, 1200 New Jersey Ave. SE., Mail Stop 25, Washington, DC 20590 (Telephone: (202) 493–6292), or Ms. Kimberly Toone, Office of Information Technology, RAD–20, Federal Railroad Administration, 1200 New Jersey Ave. SE., Mail Stop 35, Washington, DC 20590 (Telephone: (202) 493–6132). (These telephone numbers are not toll-free.)
The Paperwork Reduction Act of 1995 (PRA), Public Law 104–13, § 2, 109 Stat. 163 (1995) (codified as revised at 44 U.S.C. 3501–3520), and its implementing regulations, 5 CFR Part 1320, require Federal agencies to issue two notices seeking public comment on information collection activities before OMB may approve paperwork packages. 44 U.S.C. 3506, 3507; 5 CFR 1320.5, 1320.8(d)(1), 1320.12. On March 27, 2013, FRA published a 60-day notice in the
Before OMB decides whether to approve these proposed collections of information, it must provide 30 days for public comment. 44 U.S.C. 3507(b); 5 CFR 1320.12(d). Federal law requires OMB to approve or disapprove paperwork packages between 30 and 60 days after the 30 day notice is published. 44 U.S.C. 3507 (b)–(c); 5 CFR 1320.12(d);
The summary below describes the nature of the information collection requirements (ICRs) and the expected burden. The revised requirements are
A comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication of this notice in the
44 U.S.C. 3501–3520.
Pipeline and Hazardous Materials Safety Administration (PHMSA), DOT.
List of Applications for Modification of Special Permits.
In accordance with the procedures governing the application for, and the processing of, special permits from the Department of Transportation's Hazardous Material Regulations (49 CFR part 107, subpart B), notice is hereby given that the Office of Hazardous Materials Safety has received the applications described herein. This notice is abbreviated to expedite docketing and public notice. Because the sections affected, modes of transportation, and the nature of application have been shown in earlier
Comments must be received on or before July 5, 2013.
Record Center, Pipeline and Hazardous Materials Safety Administration, U.S. Department of Transportation, Washington, DC 20590.
Comments should refer to the application number and be submitted in triplicate. If confirmation of receipt of comments is desired, include a self-addressed stamped postcard showing the special permit number.
Copies of the applications are available for inspection in the Records Center, East Building, PHH–30, 1200 New Jersey Avenue Southeast, Washington DC or at
This notice of receipt of applications for modification of special permit is published in accordance with Part 107 of the Federal hazardous materials transportation law (49 U.S.C. 5117(b); 49 CFR 1.53(b)).
Pipeline and Hazardous Materials Safety Administration (PHMSA), DOT.
List of applications delayed more than 180 days.
In accordance with the requirements of 49 U.S.C. 5117(c), PHMSA is publishing the following list of special permit applications that have been in process for 180 days or more. The reason(s) for delay and the expected completion date for action on each application is provided in association with each identified application.
Ryan Paquet, Director, Office of Hazardous Materials Special Permits and Approvals, Pipeline and Hazardous Materials Safety Administration, U.S. Department of Transportation, East Building, PHH–30, 1200 New Jersey Avenue SE., Washington, DC 20590–0001, (202) 366–4535.
Pipeline and Hazardous Materials Safety Administration (PHMSA), DOT.
List of Applications for Special Permits.
In accordance with the procedures governing the application for, and the processing of, special permits from the Department of Transportation's Hazardous Material Regulations (49 CFR part 107, subpart B), notice is hereby given that the Office of Hazardous Materials Safety has received the application described herein. Each mode of transportation for which a particular special permit is requested is indicated by a number in the “Nature of Application” portion of the table below as follows: 1—Motor vehicle, 2—Rail freight, 3—Cargo vessel, 4—Cargo aircraft only, 5—Passenger-carrying aircraft
Comments must be received on or before July 19, 2013.
Comments should refer to the application number and be submitted in triplicate. If confirmation of receipt of comments is desired, include a self-addressed stamped postcard showing the special permit number.
Copies of the applications are available for inspection in the Records Center, East Building, PHH–30, 1200 New Jersey Avenue Southeast, Washington DC or at
This notice of receipt of applications for special permit is published in accordance with Part 107 of the Federal hazardous materials transportation law (49 U.S.C. 5117(b); 49 CFR 1.53(b)).
Pipeline And Hazardous Materials Safety Administration (PHMSA), DOT.
Notice of actions on Special Permit Applications.
In accordance with the procedures governing the application for, and the processing of, special permits from the Department of Transportation's Hazardous Material Regulations (49 CFR Part 107, Subpart B), notice is hereby given of the actions on special permits applications in (May to May 2013). The mode of transportation involved are identified by a number in the “Nature of Application” portion of the table below as follows: 1—Motor vehicle, 2—Rail freight, 3—Cargo vessel, 4—Cargo aircraft only, 5—Passenger-carrying aircraft. Application numbers prefixed by the letters EE represent applications for Emergency Special Permits. It should be noted that some of the sections cited were those in effect at the time certain special permits were issued.
Surface Transportation Board, DOT.
Notice of construction exemption.
The Board is granting an exemption under 49 U.S.C. 10502 from the prior approval requirements of 49 U.S.C. 10901 for the California High-Speed Rail Authority (Authority) to construct an approximately 65-mile high-speed passenger rail line between Merced and Fresno, California (the Project). The Project would be the first section of the statewide California High-Speed Train System. This exemption is subject to environmental mitigation conditions and the condition that the Authority build the route designated as environmentally preferable.
The exemption will be effective on June 28, 2013; petitions to reopen must be filed by July 3, 2013.
An original and ten copies of all pleadings, referring to Docket No. FD 35724, must be filed with the Surface Transportation Board, 395 E Street SW., Washington, DC 20423–0001. In addition, one copy of each filing in this proceeding must be served on the Authority's representative: Linda J. Morgan, Nossaman LLP, 1666 K Street NW., Suite 500, Washington, DC 20006.
Scott M. Zimmerman, (202) 245–0386. [Assistance for the hearing impaired is available through the Federal Information Relay Service (FIRS) at: 1–800–877–8339].
Copies of written filings will be available for viewing and self-copying at the Board's Public Docket Room, Room 131, and will be posted to the Board's Web site.
Additional information is contained in the Board's decision. Board decisions and notices are available on our Web site at
By the Board, Chairman Elliott, Vice Chairman Begeman, and Commissioner Mulvey. Vice Chairman Begeman concurred in part and dissented in part with a separate expression. Commissioner Mulvey concurred with a separate expression.
Office of the Comptroller of the Currency (OCC), Treasury; Board of Governors of the Federal Reserve System (Board); and Federal Deposit Insurance Corporation (FDIC).
Notice of information collection to be submitted to OMB for review and approval under the Paperwork Reduction Act of 1995.
In accordance with the requirements of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. chapter 35), the OCC, the Board, and the FDIC (the agencies) may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number.
On January 29, 2013, the agencies, under the auspices of the Federal Financial Institutions Examination Council (FFIEC), published a notice in the
Comments must be submitted on or before July 19, 2013.
Interested parties are invited to submit written comments to any or all of the agencies. All comments, which should refer to the OMB control number, will be shared among the agencies.
All comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not enclose any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure.
Agency Web site:
All public comments are available from the Board's Web site at
Additionally, commenters may send a copy of their comments to the OMB desk officer for the agencies by mail to the Office of Information and Regulatory Affairs, U.S. Office of Management and Budget, New Executive Office Building, Room 10235, 725 17th Street NW., Washington, DC 20503, by email to
Additional information or a copy of the collections may be requested from:
The agencies are proposing to revise and extend for three years the FFIEC 009 and FFIEC 009a, which are currently approved collections of information for each agency. The burden estimates presented below are for the FFIEC 009 and FFIEC 009a as they are proposed to be revised effective September 30, 2013, for current respondents and March 31, 2014, for SLHC respondents.
Proposal to extend for three years, with revision, the following currently approved collections of information:
The Country Exposure Report (FFIEC 009) is filed quarterly with the agencies and provides information on international claims of U.S. banks, savings associations, bank holding companies, and savings and loan holding companies that is used for supervisory and analytical purposes. The information is used to monitor the foreign country exposures of reporting institutions, determine the degree of risk in their portfolios, and assess the potential risk of loss. The Country Exposure Information Report (FFIEC 009a) is a supplement to the FFIEC 009 and provides publicly available information on material foreign country exposures (all exposures to a country in excess of 1 percent of total assets or 20 percent of capital, whichever is less) of U.S. banks, savings associations, and holding companies that file the FFIEC 009 report. As part of the Country Exposure Information Report, reporting institutions also must furnish a list of countries in which they have lending exposures above 0.75 percent of total assets or 15 percent of total capital, whichever is less.
On January 29, 2013, the agencies published an initial PRA notice in the
In broad terms, the proposed revisions to the FFIEC 009 report would increase the number of counterparty categories, add additional information on the type of claim being reported, provide details on a limited number of risk mitigants to help provide perspective to currently reported gross exposure numbers, add more detailed reporting of credit derivatives, add the United States as a country row to facilitate the analysis of domestic and foreign exposures and comply with enhancements to International Banking Statistics proposed by the Bank for International Settlements, and expand the entities that must report to include SLHCs.
The FFIEC 009 report, as proposed to be revised, would serve an important purpose by ensuring consistency of reporting across institutions for a number of important components of
As a form of banker outreach, the agencies conducted a conference call on February 20, 2013, with various interested outside parties (approximately 230 bank representatives and accountants), primarily those that would be subject to the proposed revisions to the country exposure reporting requirements. The purpose of the call was to provide clarification on certain elements of the initial PRA notice and respond to questions from interested parties on procedures and technical issues arising from the proposed reporting changes. The agencies began by providing a summary of the initial PRA notice, which included identifying changes from the current FFIEC 009 reporting requirements. Following this background, the agencies addressed questions received from interested parties on the call. The questions received mostly concerned the technicalities of completing line items on the proposed FFIEC 009 and 009a reporting forms and definitions for terms included in the instructions for the forms.
All seven commenters expressed concern over the proposed June 30, 2013, effective date for the implementation of the revised reports and requested a postponement of the effective date to allow more time to implement necessary system changes, update procedures, and train staff. In addition, two commenters indicated that because SLHCs will be required to file for the first time, the proposed effective date would not provide sufficient time to design and implement the systems to capture the needed data. In response to these concerns, the agencies would postpone the effective date for the revisions to the September 30, 2013, report date. In addition, for SLHCs that would be required to begin submitting the Country Exposure Reports as a result of the proposed expansion in scope of entities that must file these reports, the initial report date would be March 31, 2014.
Two of the banking organizations commented that the inclusion of the United States country row would create a significant reporting burden and that guidance for how to properly reconcile the FFIEC 009 to the Consolidated Financial Statements for Bank Holding Companies (FR Y–9C; OMB No. 7100–0128) should be provided. In addition, the banking associations requested the agencies conduct further industry outreach because they asserted that the addition of the United States country row as a reconciliation tool would not enhance the analysis of cross-border exposures and that existing processes used by their member institutions are sufficient to ensure consistent reporting across regulatory reports. Although the agencies recognize the additional burden of reporting exposures for the United States, this information will enhance the agencies' ability to conduct effective analysis of foreign and domestic exposures. In addition, the inclusion of the United States will allow the agencies to comply with enhancements to International Banking Statistics proposed by the Bank for International Settlements. The reconciliation of the FFIEC 009 to the FR Y–9C report (or, if appropriate, to the Consolidated Reports of Condition and Income; OMB No. 1557–0081 for the OCC, OMB No. 7100–0036 for the Board, and OMB No. 3064–0052 for the FDIC) is not required; however, it is recommended as a best practice. Because the agencies' proposed inclusion of a country row for the United States was not primarily for reconciliation purposes, the agencies are not planning to publish guidance regarding reconciliation between these reports. After considering comments received and feedback from outreach conducted prior to the publication of the proposed revisions, the agencies plan to proceed with the addition of the United States as a country row.
The banking associations also recommended that the year-end due date for the Country Exposure Reports be delayed five days to provide an opportunity to reconcile data with the FR Y–9C report (for which the year-end due date is currently five days later than the due date for the report in the other three calendar quarters). After consideration of this comment, the agencies agree with this recommendation and plan to delay the year-end due date for the Country Exposure Reports by five days. This would make the difference between the year-end due dates of the Country Exposure Reports and the FR Y–9C report consistent with the difference between the due dates for these reports in the other quarters and would allow institutions the opportunity for further internal review between these reports.
A banking organization and the banking associations requested that clarification of definitions and instructions be provided for certain terms, such as the definitions of the “household” sector, “country of residence,” “country of legal residence,” and the “country of incorporation.” In addition, the banking associations provided thirteen questions requesting reporting clarifications. The agencies have clarified the instructions to provide guidance on the reporting and definitional issues noted, and have posted a “Fact Sheet” on the FFIEC Web site outlining the reporting clarifications for the questions raised and referencing the updated instructions, as appropriate.
The banking associations also suggested that the list of countries included on the FFIEC 009 report should be consistent with the Treasury International Capital (“TIC”) reports
One banking organization commented that the data needed to report credit default swap (CDS) contracts on a basket, index, or portfolio of securities by component countries is not readily available and would require a significant effort to capture. The organization requested the ability to continue to report by geographic region. Although the agencies understand the effort required to report CDS contracts
Finally, a banking organization stated that the elimination of “Net Foreign Office Claims on Local Residents” on the FFIEC 009a will result in it no longer reporting the voluntary local-office claims and liabilities on derivative contracts items on the FFIEC 009 report. After consideration of this comment and the voluntary nature of these data items, the agencies plan to eliminate Columns 6 and 7 of proposed Schedule D for the reporting of such local office data.
These information collections are mandatory under the following statutes: 12 U.S.C. 161 and 1817 (national banks), 12 U.S.C. 1464 (federal savings associations), 12 U.S.C. 248(a), 1844(c), and 3906 (state member banks and bank holding companies); 12 U.S.C. 1467a(b)(2) and 5412 (savings and loan holding companies); and 12 U.S.C. 1817 and 1820 (insured state nonmember commercial and savings banks and insured state savings associations). The FFIEC 009 information collection is given confidential treatment (5 U.S.C. 552(b)(4) and (b)(8)). The FFIEC 009a information collection is not given confidential treatment.
The agencies invite comment on the following topics related to this collection of information:
(a) Whether the information collections are necessary for the proper performance of the agencies' functions, including whether the information has practical utility;
(b) The accuracy of the agencies' estimates of the burden of the information collections, including the validity of the methodology and assumptions used;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected;
(d) Ways to minimize the burden of information collections on respondents, including through the use of automated collection techniques or other forms of information technology; and
(e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.
All comments will become a matter of public record.
Office of the Comptroller of the Currency (OCC), Treasury.
Notice and Request for Comment.
The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on a continuing information collection, as required by the Paperwork Reduction Act of 1995 (PRA).
Under the PRA, Federal agencies are required to publish notice in the
In accordance with the requirements of the PRA, the OCC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number.
The OCC is soliciting comment concerning its information collection titled, “Community and Economic Development Entities, Community Development Projects, and Other Public Welfare Investments—12 CFR 24.” The OCC also is giving notice that it has sent the collection to OMB for review.
Comments must be submitted on or before July 19, 2013.
Because paper mail in the Washington, DC area and at the OCC is subject to delay, commenters are encouraged to submit comments by email if possible. Comments may be sent to: Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, Attention: 1557–0194, 400 7th Street SW., Suite 3E–218, Mail Stop 9W–11, Washington, DC 20219. In addition, comments may be sent by fax to (571) 465–4326 or by electronic mail to
All comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not enclose any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure.
Additionally, please send a copy of your comments by mail to: OCC Desk Officer, 1557–0194, U.S. Office of Management and Budget, 725 17th Street NW., #10235, Washington, DC 20503, or by email to:
You may request additional information or a copy of the collection from Johnny Vilela or Mary H. Gottlieb, OCC Clearance Officers, (202) 649–5490, Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW., Suite 3E–218, Mail Stop 9W–11, Washington, DC 20219.
In compliance with 44 U.S.C. 3507, the OCC has submitted the following proposed collection of information to OMB for review and clearance.
Section 24.5(a) provides that an eligible national bank may make an investment without prior notification to, or approval by, the OCC if the bank submits an after-the-fact notification of an investment within 10 days of making the investment.
Section 24.5(a)(5) provides that a national bank that is not an eligible bank, but that is at least adequately capitalized, and has a composite rating of at least 3 with improving trends under the Uniform Financial Institutions Rating System, may submit a letter to the OCC requesting authority to submit after-the-fact notices of its investments.
Section 24.5(b) provides that if a national bank does not meet the requirements for after-the-fact notification, the bank must submit an investment proposal to the OCC.
The OCC requests that OMB approve its revised estimates and extend its approval of the information collection.
(a) Whether the collection of information is necessary for the proper performance of the functions of the OCC, including whether the information has practical utility;
(b) The accuracy of the OCC's estimate of the burden of the collection of information;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected;
(d) Ways to minimize the burden of the collection on respondents, including through the use of automated collection techniques or other forms of information technology; and
(e) Estimates of capital or startup costs and costs of operation, maintenance, and purchase of services to provide information.
Office of Foreign Assets Control, Treasury.
Notice.
The Treasury Department's Office of Foreign Assets Control (“OFAC”) is publishing the name of 1 individual whose property and interests in property are blocked pursuant to Executive Order 13224 of September 23, 2001, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism.”
The designation by the Director of OFAC of the individual in this notice, pursuant to Executive Order 13224, is effective on June 6, 2013.
Assistant Director, Compliance Outreach & Implementation, Office of Foreign Assets Control, Department of the Treasury, Washington, DC 20220, tel.: 202/622–2490.
This document and additional information concerning OFAC are available from OFAC's Web site (
On September 23, 2001, the President issued Executive Order 13224 (the “Order”) pursuant to the International Emergency Economic Powers Act, 50 U.S.C. 1701–1706, and the United Nations Participation Act of 1945, 22 U.S.C. 287c. In the Order, the President declared a national emergency to address grave acts of terrorism and threats of terrorism committed by foreign terrorists, including the September 11, 2001 terrorist attacks in New York, Pennsylvania, and at the Pentagon. The Order imposes economic sanctions on persons who have committed, pose a significant risk of committing, or support acts of terrorism. The President identified in the Annex to the Order, as amended by Executive Order 13268 of July 2, 2002, 13 individuals and 16 entities as subject to the economic sanctions. The Order was further amended by Executive Order 13284 of January 23, 2003, to reflect the creation of the Department of Homeland Security.
Section 1 of the Order blocks, with certain exceptions, all property and interests in property that are in or hereafter come within the United States or the possession or control of United States persons, of: (1) Foreign persons listed in the Annex to the Order; (2) foreign persons determined by the Secretary of State, in consultation with the Secretary of the Treasury, the Secretary of the Department of Homeland Security and the Attorney General, to have committed, or to pose a significant risk of committing, acts of terrorism that threaten the security of U.S. nationals or the national security, foreign policy, or economy of the United States; (3) persons determined by the Director of OFAC, in consultation with the Departments of State, Homeland Security and Justice, to be owned or controlled by, or to act for or on behalf of those persons listed in the Annex to the Order or those persons determined to be subject to subsection 1(b), 1(c), or 1(d)(i) of the Order; and (4) except as provided in section 5 of the Order and after such consultation, if any, with foreign authorities as the Secretary of State, in consultation with the Secretary of the Treasury, the Secretary of the Department of Homeland Security and the Attorney General, deems appropriate in the exercise of his discretion, persons determined by the Director of OFAC, in consultation with the Departments of State, Homeland Security and Justice, to assist in, sponsor, or provide financial, material, or technological support for, or financial or other services to or in support of, such acts of terrorism or those persons listed in the Annex to the Order or determined to be subject to the Order or to be otherwise associated with those persons listed in the Annex to the Order or those persons determined to be subject to subsection 1(b), 1(c), or 1(d)(i) of the Order.
On June 6, 2013, the Director of OFAC, in consultation with the Departments of State, Homeland Security, Justice and other relevant agencies, designated, pursuant to one or more of the criteria set forth in subsections 1(b), 1(c) or 1(d) of the Order, one individual whose property and interests in property are blocked pursuant to Executive Order 13224.
The listing for this individual on OFAC's list of Specially Designated Nationals and Blocked Persons appears as follows:
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104–13(44 U.S.C. 3506(c)(2)(A)). Currently, the IRS is soliciting comments concerning Form 1099–B, Proceeds From Broker and Barter Exchange Transactions.
Written comments should be received on or before August 19, 2013 to be assured of consideration.
Direct all written comments to Yvette Lawrence, Internal Revenue Service, room 6129, 1111 Constitution Avenue NW., Washington, DC 20224.
Requests for additional information or copies of the form and instructions should be directed to Sara Covington, at Internal Revenue Service, room 6129, 1111 Constitution Avenue NW., Washington, DC 20224, or at (202) 622–3945, or through the Internet at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104–13(44 U.S.C. 3506(c)(2)(A)). Currently, the IRS is soliciting comments concerning Form 945 and 945–V, Annual Return of Withheld Federal Income Tax/Voucher: Form 945–A Annual Record of Federal Tax Liability: Form 945–X Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund.
Written comments should be received on or before August 19, 2013 to be assured of consideration.
Direct all written comments to Yvette Lawrence, Internal Revenue Service, room 6129, 1111 Constitution Avenue NW., Washington, DC 20224.
Requests for additional information or copies of the form and instructions should be directed to Kerry Dennis, (202) 927–9368, Internal Revenue Service, room 6129, 1111 Constitution Avenue NW., Washington, DC 20224, or through the Internet at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104–13 (44 U.S.C. 3506(c)(2)(A)). Currently, the IRS is soliciting comments concerning, INTL–952–86 (TD 8410R), Allocation and Apportionment of Interest Expense and Certain Other Expenses.
Written comments should be received on or before August 19, 2013 to be assured of consideration.
Direct all written comments to Yvette B. Lawrence, Internal Revenue Service, room 6129, 1111 Constitution Avenue NW., Washington, DC 20224.
Requests for additional information or copies of the regulations should be directed to Sonia D. Escobar at Internal Revenue Service, room 6511, 1111 Constitution Avenue NW., Washington, DC 20224, or at (202) 622–7641, or through the Internet at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
The Veterans Benefits Administration (VBA), Department of Veterans Affairs (VA), is announcing an opportunity for public comment on the proposed collection of certain information by the agency. Under the Paperwork Reduction Act (PRA) of 1995, Federal agencies are required to publish notice in the
Written comments and recommendations on the proposed collection of information should be received on or before August 19, 2013.
Submit written comments on the collection of information through Federal Docket Management System (FDMS) at
Nancy J. Kessinger at (202) 632–8924 or Fax (202) 632–8925.
Under the PRA of 1995 (Pub. L. 104–13; 44 U.S.C. 3501–3521), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. This request for comment is being made pursuant to Section 3506(c)(2)(A) of the PRA.
With respect to the following collection of information, VBA invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of VBA's functions, including whether the information will have practical utility; (2) the accuracy of VBA's estimate of the burden 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 through the use of automated collection techniques or the use of other forms of information technology.
By direction of the Secretary.
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
The Veterans Benefits Administration (VBA), Department of Veterans Affairs (VA), is announcing an opportunity for public comment on the proposed collection of certain information by the agency. Under the Paperwork Reduction Act (PRA) of 1995, Federal agencies are required to publish notice in the
Written comments and recommendations on the proposed collection of information should be received on or before August 19, 2013.
Submit written comments on the collection of information through Federal Docket Management System (FDMS) at
Nancy J. Kessinger at (202) 632–8924 or FAX (202) 632–8925.
Under the PRA of 1995 (Pub. L. 104–13; 44 U.S.C. 3501–3521), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. This request for comment is being made pursuant to Section 3506(c)(2)(A) of the PRA.
With respect to the following collection of information, VBA invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of VBA's functions, including whether the information will have practical utility; (2) the accuracy of VBA's estimate of the burden 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 through the use of automated collection techniques or the use of other forms of information technology.
By direction of the Secretary.
Securities and Exchange Commission.
Proposed rule.
The Securities and Exchange Commission (“Commission” or “SEC”) is proposing two alternatives for amending rules that govern money market mutual funds (or “money market funds”) under the Investment Company Act of 1940. The two alternatives are designed to address money market funds' susceptibility to heavy redemptions, improve their ability to manage and mitigate potential contagion from such redemptions, and increase the transparency of their risks, while preserving, as much as possible, the benefits of money market funds. The first alternative proposal would require money market funds to sell and redeem shares based on the current market-based value of the securities in their underlying portfolios, rounded to the fourth decimal place (
Comments should be received on or before September 17, 2013.
Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Use the Federal eRulemaking Portal (
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
Adam Bolter, Senior Counsel; Brian McLaughlin Johnson, Senior Counsel; Kay-Mario Vobis, Senior Counsel; Amanda Hollander Wagner, Senior Counsel; Thoreau A. Bartmann, Branch Chief; or Sarah G. ten Siethoff, Senior Special Counsel, Investment Company Rulemaking Office, at (202) 551–6792, Division of Investment Management, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–8549.
The Commission is proposing for public comment amendments to rules 419 [17 CFR 230.419] and 482 [17 CFR 230.482] under the Securities Act of 1933 [15 U.S.C. 77a—z–3] (“Securities Act”), rules 2a–7 [17 CFR 270.2a–7], 12d3–1 [17 CFR 270.12d3–1], 18f–3 [17 CFR 270.18f–3], 22e–3 [17 CFR 270.22e–3], 30b1–7 [17 CFR 270.30b1–7], 31a–1 [17 CFR 270.31a–1], and new rule 30b1–8 [17 CFR 270.30b1–8] under the Investment Company Act of 1940 [15 U.S.C. 80a] (“Investment Company Act” or “Act”), Form N–1A under the Investment Company Act and the Securities Act, Form N–MFP under the Investment Company Act, and section 3 of Form PF under the Investment Advisers Act [15 U.S.C. 80b], and new Form N–CR under the Investment Company Act.
Money market funds are a type of mutual fund registered under the Investment Company Act and regulated under rule 2a–7 under the Act.
Money market funds seek to maintain a stable share price by limiting their investments to short-term, high-quality debt securities that fluctuate very little in value under normal market conditions.
In exchange for the ability to rely on the exemptions provided by rule 2a–7, the rule imposes important conditions designed to limit deviations between the fund's $1.00 share price and the market value of the fund's portfolio. It requires money market funds to maintain a significant amount of liquid assets and to invest in securities that meet the rule's credit quality, maturity, and diversification requirements.
Rule 2a–7 also includes certain procedural requirements overseen by the fund's board of directors. These include the requirement that the fund periodically calculate the market-based value of the portfolio (“shadow price”)
Different types of money market funds have been introduced to meet the differing needs of money market fund investors. Historically, most investors have invested in “prime money market funds,” which hold a variety of taxable short-term obligations issued by corporations and banks, as well as repurchase agreements and asset-backed commercial paper.
In the analysis that follows, we begin by reviewing the role of money market funds and the benefits they provide investors. We then review the economics of money market funds. This includes a discussion of several features of money market funds that, when combined, can create incentives for fund shareholders to redeem shares during periods of stress, as well as the potential impact that such redemptions can have on the fund and the markets that provide short-term financing.
Based on these analyses as well as other publicly available analytical works, some of which are contained in the report responding to certain questions posed by Commissioners Aguilar, Paredes and Gallagher (“RSFI Study”)
The combination of principal stability, liquidity, and short-term yields offered by money market funds, which is unlike that offered by other types of mutual funds, has made money market funds popular cash management vehicles for both retail and institutional investors, as discussed above. Retail investors use money market funds for a variety of reasons, including, for example, to hold cash for short or long periods of time or to take a temporary “defensive position” in anticipation of declining equity markets. Institutional investors commonly use money market funds for cash management in part because, as discussed later in this Release, money market funds provide efficient diversified cash management due both to the scale of their operations and their expertise.
Money market funds, due to their popularity with investors, have become an important source of financing in certain segments of the short-term financing markets, as discussed in more detail in section III.E.2 below. Money market funds' ability to maintain a stable share price contributes to their popularity. Indeed, the $1.00 stable share price has been one of the fundamental features of money market funds. As discussed in more detail in section III.A.7 below, the funds' stable share price facilitates the funds' role as a cash management vehicle, provides tax and administrative convenience to both money market funds and their shareholders, and enhances money market funds' attractiveness as an investment option.
Rule 2a–7, in addition to facilitating money market funds' maintenance of stable share prices, also benefits investors by making available an investment option that provides an efficient and diversified means for investors to participate in the short-term financing markets through a portfolio of short-term, high quality debt securities.
Therefore, although rule 2a–7 permits money market funds to use techniques to value and price their shares not permitted to other mutual funds (or not permitted to the same extent), the rule also imposes additional protective conditions on money market funds. These additional conditions are designed to make money market funds' use of the pricing techniques permitted by rule 2a–7 consistent with the protection of investors, and more generally, to make available an investment option for investors that seek an efficient way to obtain short-term yields. These conditions thus reflect the differences in the way money market funds operate and the ways in which investors use money market funds compared to other types of mutual funds.
We recognize, and considered when developing the reform proposals we are putting forward today, that money market funds are a popular investment product and that they provide many benefits to investors and to the short-term financing markets. Indeed, it is for these reasons that we are proposing reforms designed to make the funds more resilient, as discussed throughout this Release, while preserving, to the extent possible, the benefits of money market funds. These reform proposals may, however, make money market funds less attractive to certain investors as discussed more fully below.
The combination of several features of money market funds can create an incentive for their shareholders to redeem shares heavily in periods of financial stress, as discussed in greater detail in the RSFI Study. We discuss these factors below, as well as the harm that can result from heavy redemptions in money market funds.
Money market funds are unique among mutual funds in that rule 2a–7 permits them to use the amortized cost method of valuation and the penny-rounding method of pricing. As discussed above, these valuation and pricing techniques allow a money market fund to sell and redeem shares at a stable share price without regard to small variations in the value of the securities that comprise its portfolio, and thus to maintain a stable $1.00 share price under most conditions.
Although the stable $1.00 share price calculated using these methods provides a close approximation to market value under normal market conditions, differences may exist because market prices adjust to changes in interest rates, credit risk, and liquidity. We note that the vast majority of money market fund portfolio securities are not valued based on market prices obtained through secondary market trading because the secondary markets for most portfolio securities such as commercial paper, repos, and certificates of deposit are not actively traded. Accordingly, most money market fund portfolio securities are valued largely through “mark-to-model” or “matrix pricing” estimates.
Deviations that arise from changes in interest rates and credit risk are temporary as long as securities are held to maturity, because amortized cost values and market-based values converge at maturity. If, however, a portfolio asset defaults or an asset sale results in a realized capital gain or loss, deviations between the stable $1.00 share price and the shadow price become permanent. For example, if a portfolio experiences a 25 basis point loss because an issuer defaults, the fund's shadow price falls from $1.0000 to $0.9975. Even though the fund has not broken the buck, this reduction is permanent and can only be rebuilt internally in the event that the fund realizes a capital gain elsewhere in the portfolio, which generally is unlikely given the types of securities in which money market funds typically invest.
If a fund's shadow price deviates far enough from its stable $1.00 share price, investors may have an economic incentive to redeem money market fund shares.
To illustrate the incentive for investors to redeem shares early, consider a money market fund that has one million shares outstanding and holds a portfolio worth exactly $1 million. Assume the fund's stable share price and shadow price are both $1.00. If the fund recognizes a $4,000 loss, the fund's shadow price will fall below $1.00 as follows:
If investors redeem one quarter of the fund's shares (250,000 shares), the redeeming shareholders are paid $1.00. Because redeeming shareholders are paid more than the shadow price of the fund, the redemptions further concentrate the loss among the remaining shareholders. In this case, the amount of redemptions is sufficient to cause the fund to “break the buck.”
This example shows that if a fund's shadow price falls below $1.00 and the fund experiences redemptions, the remaining investors have an incentive to redeem shares to potentially avoid holding shares worth even less, particularly if the fund re-prices its shares below $1.00. This incentive exists even if investors do not expect the fund to incur further portfolio losses.
As discussed in greater detail in the RSFI Study and as we saw during the 2007–2008 financial crisis as further discussed below, money market funds, although generally able to maintain stable share prices, remain subject to credit, interest rate, and liquidity risks, all of which can cause a fund's shadow price to decline below $1.00 and create an incentive for investors to redeem shares ahead of other investors.
The incentive for money market fund investors to redeem shares ahead of other investors also can be heightened
A money market fund has three sources of internal liquidity to meet redemption requests: cash on hand, cash from investors purchasing shares, and cash from maturing securities. If these internal sources of liquidity are insufficient to satisfy redemption requests on any particular day, money market funds may be forced to sell portfolio securities to raise additional cash.
Lack of investor understanding and complete transparency concerning the risks posed by particular money market funds can exacerbate the concerns discussed above. If investors do not know a fund's shadow price and/or its underlying portfolio holdings (or if previous disclosures of this information are no longer accurate), investors may not be able to fully understand the degree of risk in the underlying portfolio.
Money market funds' sponsors on a number of occasions have voluntarily chosen to provide financial support for their money market funds
The 2007–2008 financial crisis is not the only instance in which some money market funds have come under strain, although it is unique in the amount of money market funds that requested or received sponsor support.
It also is
Finally, the government assistance provided to money market funds during 2007–2008 financial crisis, discussed in more detail below, may have contributed to investors' perceptions that the risk of loss in money market funds is low.
In addition to the incentives described above, other characteristics of money market funds create incentives to redeem in times of stress. Investors in money market funds have varying investment goals and tolerances for risk. Many investors use money market funds for principal preservation and as a cash management tool, and, consequently, these funds can attract investors who are unable or unwilling to tolerate even small losses. These investors may seek to minimize possible losses, even at the cost of forgoing higher returns.
The desire to avoid loss may cause investors to redeem from money market funds in times of stress in a “flight to quality.” For example, as discussed in the RSFI Study, one explanation for the heavy redemptions from prime money market funds and purchases in government money market fund shares during the financial crisis may be a flight to quality, given that most of the assets held by government money market funds have a lower default risk than the assets of prime money market funds.
The analysis above generally describes how potential losses may create shareholder incentives to redeem at a specific money market fund. We now discuss how stress at one money market fund can be positively correlated across funds in at least two ways. Some market observers have noted that if a money market fund suffers a loss on one of its portfolio securities—whether because of a deterioration in credit quality, for example, or because the fund sold the security at a discount to its amortized-cost value—other money market funds holding the same security may have to reflect the resultant discounts in their shadow prices.
As discussed above, in times of stress if investors do not wish to be exposed to a distressed issuer (or correlated issuers) but do not know which money market funds own these distressed securities at any given time, investors may redeem from any money market funds that could own the security (
As was experienced during the financial crisis, the potential for liquidity-induced contagion may have negative effects on investors and the markets for short-term financing of corporations, banks, and governments. This is in large part because of the significance of money market funds' role in such short-term financing markets.
Money market funds' size and significance in the short-term markets, together with their features that can create an incentive to redeem as discussed above, have led to concerns that money market funds may contribute to systemic risk. Heavy redemptions from money market funds during periods of financial stress can remove liquidity from the financial system, potentially disrupting the secondary market. Issuers may have difficulty obtaining capital in the short-term markets during these periods because money market funds are focused on meeting redemption requests through internal liquidity generated either from maturing securities or cash from subscriptions, and thus may be purchasing fewer short-term debt obligations.
Heavy redemptions in money market funds may disproportionately affect slow-moving shareholders because, as discussed further below, redemption data from the 2007–2008 financial crisis show that some institutional investors are likely to redeem from distressed money market funds more quickly than other investors and to redeem a greater percentage of their prime fund holdings.
There are many possible explanations for the redemptions from money market funds during the 2007–2008 financial crisis.
Redemptions in the Primary Fund were followed by redemptions from other Reserve money market funds.
Figure 1, below, provides context for the redemptions that occurred during the financial crisis. Specifically, it shows daily total net assets over time, where the vertical line indicates the date that Lehman Brothers filed for bankruptcy, September 15, 2008. Investor redemptions during the 2008 financial crisis, particularly after Lehman's failure, were heaviest in institutional share classes of prime money market funds, which typically hold securities that are less liquid and of lower credit quality than those typically held by government money market funds. The figure shows that institutional share classes of government money market funds, which include Treasury and government funds, experienced heavy inflows.
On September 19, 2008, the U.S. Department of the Treasury (“Treasury”) announced a temporary guarantee program (“Temporary Guarantee Program”), which would use the $50 billion Exchange Stabilization Fund to support more than $3 trillion in shares of money market funds, and the Board of Governors of the Federal Reserve System authorized the temporary extension of credit to banks to finance their purchase of high-quality asset-backed commercial paper from money market funds.
In March 2010, we adopted a number of amendments to rule 2a–7.
In addition to reducing the risk profile of the underlying money market fund portfolios, the reforms increased the amount of information that money market funds are required to report to the Commission and the public. Money market funds are now required to submit to the SEC monthly information on their portfolio holdings using Form N–MFP.
Finally, money market funds must undergo stress tests under the direction of the board of directors on a periodic basis.
One way to evaluate the efficacy of the 2010 reforms is to examine redemption activity during the summer of 2011. Money market funds experienced substantial redemptions during this time as the Eurozone sovereign debt crisis and impasse over the U.S. debt ceiling unfolded. As a result of concerns about exposure to European financial institutions, prime money market funds began experiencing substantial redemptions.
While it is difficult to isolate the effects of the 2010 amendments, these events highlight the potential increased resilience of money market funds after the reforms were adopted. Most significantly, no money market fund had to re-price below its stable $1.00 share price. As discussed in greater detail in the RSFI Study, unlike September 2008, money market funds did not experience significant capital losses that summer, and the funds' shadow prices did not deviate significantly from the funds' stable share prices; also unlike in 2008, money market funds in the summer of 2011 had sufficient liquidity to satisfy investors' redemption requests, which were made over a longer period than in 2008, suggesting that the 2010 amendments acted as intended to enhance the resiliency of money market funds.
Although money market funds' experiences differed in 2008 and the summer of 2011, the heavy redemptions money market funds experienced in the
When we proposed and adopted the 2010 amendments, we acknowledged that money market funds' experience during the 2007–2008 financial crisis raised questions of whether more fundamental changes to money market funds might be warranted.
Our subsequent consideration of money market funds has been informed by the work of the President's Working Group on Financial Markets, which published a report on money market fund reform options in 2010 (the “PWG Report”).
The potential financial stability risks associated with money market funds also have attracted the attention of the Financial Stability Oversight Council (“FSOC”), which has been tasked with monitoring and responding to threats to the U.S. financial system and which superseded the PWG.
In its proposed recommendation FSOC stated that the Commission, “by virtue of its institutional expertise and statutory authority, is best positioned to implement reforms to address the risk that [money market funds] present to the economy,” and that if the Commission “moves forward with meaningful structural reforms of [money market funds] before [FSOC] completes its Section 120 process, [FSOC] expects that it would not issue a final Section 120 recommendation.”
The RSFI Study, discussed throughout this Release, also has informed our consideration of the risks that may be posed by money market funds and our formulation of today's proposals. The RSFI Study contains, among other things, a detailed analysis of our 2010 amendments to rule 2a–7 and some of the amendments' effects to date, including changes in some of the characteristics of money market funds, the likelihood that a fund with the maximum permitted weighted average maturity (“WAM”) would “break the buck” before and after the 2010 reforms, money market funds' experience during the 2011 Eurozone sovereign debt crisis and the U.S. debt-ceiling impasse, and how money market funds would have performed during September 2008 had the 2010 reforms been in place at that time.
In particular, the RSFI Study found that under certain assumptions the expected probability of a money market fund breaking the buck was lower with the additional liquidity required by the 2010 reforms.
We are proposing alternative amendments to rule 2a–7, and related rules and forms, that would either (i) require money market funds (other than government and retail money market funds)
In addition, we are proposing a number of other amendments that would apply under either alternative proposal to enhance the disclosure of money market fund operations and risks. Certain of our proposed disclosure requirements would vary depending on the alternative proposal adopted (if any) as they specifically relate to the floating NAV proposal or the liquidity fees and gates proposal. In addition, we are proposing additional disclosure reforms to improve the transparency of risks present in money market funds, including daily Web site disclosure of funds' daily and weekly liquid assets and market-based NAV per share and historic instances of sponsor support. We also are proposing to establish a new current event disclosure form that would require funds to make prompt public disclosure of certain events, including portfolio security defaults, sponsor support, a fall in the funds' weekly liquid assets below 15% of total
We are proposing to amend Form N–MFP to provide additional information relevant to assessing the risk of funds and make this information public immediately upon filing. In addition, we are proposing to require that a large liquidity fund adviser that manages a private liquidity fund provide security-level reporting on Form PF that are substantially the same as those currently required to be reported by money market funds on Form N–MFP.
Our proposed amendments also would tighten the diversification requirements of rule 2a–7 by requiring consolidation of certain affiliates for purposes of the 5% issuer diversification requirement, requiring funds to presumptively treat the sponsors of asset-backed securities (“ABSs”) as guarantors subject to rule 2a–7's diversification requirements, and removing the so-called “twenty-five percent basket.”
We note finally that we are not rescinding our outstanding 2011 proposal to remove references to credit ratings from two rules and four forms under the Investment Company Act, including rule 2a–7 and Form N–MFP, under section 939A of the Dodd-Frank Act, and on which we welcome additional comments.
Our first alternative proposal—a floating NAV—is designed primarily to address the incentive of money market fund shareholders to redeem shares in times of fund and market stress based on the fund's valuation and pricing methods, as discussed in section II.B.1 above. It should also improve the transparency of pricing associated with money market funds. Under this alternative, money market funds (other than government and retail money market funds
Under this approach, the “risk limiting” provisions of rule 2a–7 would continue to apply to money market funds.
We also propose to require that all money market funds, other than government and retail money market funds, price their shares using a more precise method of rounding.
The financial crisis of 2007–2008 had significant impacts on investors, money market funds, and the short-term financing markets. The floating NAV alternative is designed to respond, at least in part, to the contagion effects from heavy redemptions from money market funds that were revealed during that crisis. As discussed in greater detail below, although it is not possible to state with certainty what would have happened if money market funds had operated with a floating NAV at that time, we expect that if a floating NAV had been in place, it could have mitigated some of the heavy redemptions that occurred due to the stable share price. Many factors, however, contributed to these heavy redemptions, and we recognize that a floating NAV requirement is a targeted reform that may not ameliorate all of those factors.
Under a floating NAV, investors would not have had the incentive to redeem money market fund shares to benefit from receiving the stable share price of a fund that may have experienced losses, because they would have received the actual market-based value of their shares. The transparency provided by the floating NAV alternative might also have reduced redemptions during the crisis that were a result of investor uncertainty about the value of the securities owned by money market funds because investors would have seen fluctuations in money market fund share prices that reflect market-based factors.
Of course, a floating NAV would not have prevented redemptions from money market funds that were driven by certain other investing decisions, such as a desire to own higher quality assets than those that were in the portfolios of prime money market funds, or not to be invested in securities at all, but rather to hold assets in another form such as in insured bank deposits. The floating NAV alternative is not intended to deter redemptions that constitute rational risk management by shareholders or that reflect a general incentive to avoid loss. Instead, it is designed to increase transparency, and thus investor awareness, of money market fund risks and dis-incentivize redemption activity that can result from informed investors attempting to exploit the possibility of redeeming shares at their stable share price even if the portfolio has suffered a loss.
As discussed above, when a fund's shadow price is less than the fund's $1.00 share price, money market fund shareholders have an incentive to redeem shares ahead of other investors in times of fund and market stress. Given the size of institutional investors' holdings and their resources for monitoring funds, institutions have both the motivation and ability to act on this incentive. Indeed, as discussed above and in the RSFI Study, institutional investors redeemed shares more heavily than retail investors from prime money market funds in both September 2008 and June 2011.
Some market observers have suggested that the valuation and pricing techniques permitted by rule 2a–7 may exacerbate the incentive to redeem in money market funds if investors expect that the value of the fund's shares will fall below $1.00.
Our floating NAV proposal also is designed to increase the transparency of money market fund risk. Money market funds are investment products that have the potential for the portfolio to deviate from a stable value. Although many investors understand that money market funds are not guaranteed, survey data shows that some investors are unsure about the amount of risk in money market funds and the likelihood of government assistance if losses occur.
Our floating NAV proposal is designed to increase the transparency of risks present in money market funds. By making gains and losses a more regular and observable occurrence in money market funds, a floating NAV could alter investor expectations by making clear that money market funds are not risk free and that the funds' share price will fluctuate based on the value of the funds' assets.
To further enhance transparency, we also are proposing to require a number of new disclosures related to fund sponsor support (
We seek comment on this aspect of our proposal.
• Do commenters agree that floating a money market fund's NAV would lessen the incentive to redeem shares in times of fund and market stress that can result from use of amortized cost valuation and penny rounding pricing by money market funds today?
• What would be the effect of the other incentives to redeem that would remain under a floating NAV with basis point pricing requirement?
• Would floating a money market fund's NAV provide sufficient transparency to cause investors to estimate more accurately the investment risks of money market funds? Do commenters believe that daily disclosure of shadow prices on fund Web sites would accomplish the same goal without eliminating the stable share price at which fund investors purchase and redeem shares? Why or why not? Is daily disclosure of a fund's shadow price without transacting at that price likely to lead to higher or lower risks of large redemptions in times of stress? If the enhanced disclosure requirements proposed elsewhere in this Release were in place, what would be the incremental benefit of the enhanced transparency of a floating NAV?
• Are there other places to disclose the shadow price that would make the disclosure more effective in enhancing transparency?
• If the fluctuations in money market funds' NAVs remained relatively small even with a $1.0000 share price, would investors become accustomed only to experiencing small gains and losses, and therefore be inclined to redeem heavily if a fund experienced a loss in excess of investors' expectations?
• Would investors in a floating NAV money market fund that appears likely to suffer a loss be less inclined to redeem because the loss would be shared pro rata by all shareholders? Would a floating NAV make investors in a fund more likely to redeem at the first sign of potential stress because any loss would be immediately reflected in the floating NAV?
• Would floating NAV money market funds treat non-redeeming shareholders, and particularly slower-to-redeem shareholders, more equitably in times of stress?
• To the extent that some investors choose not to invest in money market funds due to the prospect of even a modest loss through a floating NAV, would the funds' resiliency to heightened redemptions be improved?
• Would money market fund sponsors voluntarily make cash contributions or use other available means to support their money market funds and thereby prevent their NAVs from actually floating?
We recognize that a floating NAV may not eliminate investors' incentives to redeem fund shares, particularly when financial markets are under stress and investors are engaging in flights to quality, liquidity, or transparency.
We request comment on the incentive to redeem that exists in a liquidity crisis.
• Do commenters believe that a floating NAV is sufficient to address the incentive to redeem caused by liquidity concerns in times of market stress? Would other tools, such as redemption gates or liquidity fees, also be necessary?
• Do commenters believe that money market funds as currently structured present unique risks as compared with other mutual funds, all of which may face some degree of liquidity pressure during times of market stress? Would the floating NAV proposal suffice to address those risks?
• Did the 2010 amendments, including new daily and weekly liquid asset requirements, address sufficiently the incentive to redeem in periods of illiquidity?
Commenters have cited to the fact that some floating value money market funds in other jurisdictions and U.S. ultra-short bond mutual funds also suffered heavy redemptions during the 2007–2008 financial crisis.
Europe, for example, has several different types of money market funds, all of which can take on more risk than U.S. money market funds as they are not currently subject to regulatory restrictions on their credit quality, liquidity, maturity, and diversification as stringent as those imposed under rule 2a–7, among other differences in regulation.
U.S ultra-short bond funds also experienced redemptions in this period. U.S. ultra-short bond funds are not subject to rule 2a–7's risk-limiting conditions and although their NAVs float, pose more risk of loss to investors than most U.S. money market funds, including floating NAV money market funds under our proposal.
Having pointed out these differences, we recognize that the data is consistent with certain commenters' view that other incentives may lead to heavy redemptions of floating NAV funds in times of stress.
• Do commenters agree with the preceding discussion of what may have caused investors to heavily redeem shares in some floating value money market funds in other jurisdictions and in U.S. ultra-short bond funds during the 2007–2008 financial crisis? Are there other possible factors that we should consider?
• Do commenters agree with the distinctions we identified between money market funds under our proposed floating NAV and money market funds in other jurisdictions and U.S. ultra-short bond funds? Are there similarities or differences we have not identified?
• Do commenters believe that the risk limiting requirements of rule 2a–7 would deter heavy redemptions in money market funds with a floating NAV because of the restrictions on the underlying assets?
• Do commenters believe that money market funds attract very risk averse investors? If so, are these investors more or less likely to rapidly redeem in times of stress to avoid even small losses?
We are proposing that money market funds, other than government and retail money market funds, price their shares using a more precise method of valuation that would require funds to price and transact in their shares at an NAV that is calculated to the fourth decimal place for shares with a target NAV of one dollar (
Market-based valuation with penny rather than “basis point” rounding effectively provides the same rounding convention as exists in money market funds today—the underlying valuation based on market-based factors may deviate by as much as 50 basis points before the fund breaks the buck. Accordingly, it is unlikely to change investor behavior.
A $1.0000 share price, however, would reflect small fluctuations in value more than a $1.00 price, which may more effectively inform investor expectations. For example, the value of a $1.00 per share fund's portfolio securities would have to change by 50 basis points for investors to currently see a one-penny change in the NAV; under our proposal, the share price at which investors purchase and redeem shares would reflect single basis point variations.
“Basis point” rounding should enhance many of the potential advantages of having a floating NAV. It should allow funds to reflect gains and losses more precisely. In addition, it should help reduce incentives for investors to redeem shares ahead of other investors when the shadow price is less than $1.0000 as investors would sell shares at a more precise and equitable price than under the current rules. At the same time, it should help reduce penalties for investors buying shares when shadow prices are less than $1.0000. “Basis point” rounding should therefore help stabilize funds in times of market stress by deterring redemptions from investors that would otherwise seek to take advantage of less precise pricing to redeem at a higher value than a more precise valuation would provide
Our proposed amendment to require that money market funds use “basis point” rounding should provide shareholders with sufficient price transparency to better understand the tradeoffs between risk and return across competing funds, and become more accustomed to fluctuations in market value of a fund's portfolio securities.
We also considered whether to require that money market funds price to three decimal places (for a fund with a target share price of $1.000), as other mutual funds do. We are concerned, however, that such “10 basis point” rounding may not be sufficient to ensure that investors do not underestimate the investment risks of money market funds, particularly if funds manage themselves in such a way that their NAVs remain constant or nearly constant. Fund investment managers may respond to a floating NAV with “10 basis point” rounding by managing their portfolios more conservatively to avoid volatility that would require them to price fund shares at something other than $1.000. It is possible that managers would be able to avoid this volatility for quite some time, even with a floating NAV.
We seek comment on this aspect of our proposal.
• What level of precision in calculating a fund's share price would best convey to investors that floating NAV funds are different from stable price funds? Is “basis point” rounding too precise? Would “10 basis point rounding” ($1.000 for a fund with a $1.00 target share price) provide sufficient price transparency? Or another measure?
• Would requiring funds to price their shares at $1.0000 per share effectively alter investor expectations regarding a fund's NAV gains and losses? Would this in turn make investors less likely to redeem heavily when faced with potential or actual losses?
• Would “basis point” rounding better reflect gains and losses? Would it help eliminate incentives for investors to redeem shares ahead of other investors when prices are less than $1.0000?
• Should we require that all money market funds price their shares at $1.0000, including those funds that currently price their shares at an initial value other than $1.00? Do commenters agree that, regardless of a fund's initial share price, under our proposal all money market funds would be required to price fund shares to an equivalent level of precision (
• What would be the cost of implementing “basis point” rounding? Would funds require corporate actions or shareholder approval to price fund shares at $1.0000? What operational changes and related costs would be involved?
We are proposing an exemption to the floating NAV requirement for government money market funds–money market funds that maintain at least 80% of their total assets in cash, government securities, or repurchase agreements that are collateralized fully.
As discussed above, government money market funds face different redemption pressures and have different risk characteristics than other money market funds because of their unique portfolio composition.
Nonetheless, it is possible that a government money market fund could undergo such stress that it results in a significant decline in a fund's shadow price. Government money market funds may invest up to 20% of their portfolio in non-government securities, and a credit event in that 20% portion of the portfolio or a shift in interest rates could trigger a drop in the shadow price, thereby creating incentives for shareholders to redeem shares ahead of other investors.
Despite these risks, we believe that requiring government money market funds to float their NAV may be unnecessary to achieve policy goals.
Under the proposal, funds taking advantage of the government fund exemption (as well as funds using the retail exemption discussed in the next section) would no longer be permitted to use the amortized cost method of valuation to facilitate a stable NAV, but would continue to be able to use the penny rounding method of pricing. While today virtually all money market funds use both amortized cost valuation and penny rounding pricing together to maintain a stable value, either method alone effectively provides the same 50 basis points of deviation from a fund's shadow price before the fund must “break the buck” and re-price its shares. Accordingly, today the principal benefit from money market funds being able to use amortized cost valuation
The government money market fund exemption to the floating NAV requirement would not be limited solely to Treasury money market funds, but also would extend to money market funds that invest at least 80% of their portfolio in cash, “government securities” as defined in section 2(a)(16) of the Act, and repurchase agreements collateralized with government securities. Allowable securities would include securities issued by government-sponsored entities such as the Federal Home Loan Banks, government repurchase agreements, and those issued by other “instrumentalities” of the U.S. government.
Today, government money market funds hold approximately $910 billion in assets, or around 40% of all money market fund assets.
We request comment on this aspect of our proposal.
• Do commenters agree with our assumption that money market funds with at least 80% of their total assets in cash, government securities, and government repos are unlikely to suffer losses due to credit quality problems correct? Is our assumption that they are unlikely to be subject to significant shareholder redemptions during a financial crisis correct?
• Should government money market funds be exempt from the floating NAV requirement? Why or why not? Are there other risks, such as interest rate or liquidity risks, about which we should be concerned if we adopt this proposed exemption to the floating NAV requirement? If so, what are they and how should they be addressed?
• Would the costs imposed on government money market funds if we required them to price at a floating NAV be different from the costs discussed below?
• Are the proposed criteria for qualifying for the government money market funds exemption to the floating NAV requirement appropriate? Should government money market funds be required to hold more or fewer than 80% of total assets in cash, government securities, and government repos? If so, what should it be and why?
• What kinds of risks are created by exempting government money market funds from a floating NAV requirement where the funds are permitted to maintain 20% of their portfolio in securities other than cash, government securities, and government repos? Should there be additional limits or
• Is penny rounding sufficient to allow government money market funds to maintain a stable price? Should we also permit these funds to use amortized cost valuation? If so, why? Should we permit money market funds to continue using amortized cost valuation for certain types of securities, such as government securities? Why?
• If the Commission does not adopt this exemption, how many investors in government money market funds might reallocate assets to non-government money market fund alternatives? How many assets in government money market funds might be reallocated to alternatives? To what non-government money market fund alternatives are these investors likely to reallocate their investments?
• Should we provide other exemptions to the floating NAV requirement based on the characteristics of a fund's portfolio assets, such as funds that hold heightened daily or weekly liquid assets? If so, why and what threshold should we use?
• Should money market funds that invest primarily in municipal securities be exempted from the floating NAV requirement? Why or why not? To what extent would such funds expect to qualify for the retail exemption?
We are also proposing to exempt money market funds that are limited to retail investors from our floating NAV proposal by allowing them to use the penny rounding method of pricing instead of basis point rounding.
As noted above in section II, during the 2007–2008 financial crisis, institutional prime money market funds had substantially greater redemptions than retail prime money market funds.
Given the tendency of retail investors to continue to hold money market fund shares in times of market stress, it appears to be unnecessary to impose a floating NAV requirement on retail funds to address the risk that a fund would be unable to manage heavy redemptions in times of crisis.
In 2009, similar considerations led us to propose lower requirements for the amount of daily and weekly liquid assets that retail money market funds would need to hold compared with institutional funds.
It is important to note that some commenters on our 2009 money market fund reforms proposal suggested that not all retail and institutional shareholders behave the same way as their peers.
The evidence, however, suggests that retail investors tend to redeem shares slowly in times of fund and market stress or do not redeem shares at all. As indicated in the RSFI study, such lower redemptions may be more readily managed without adverse effects on the fund, in part because of the Commission's enhanced liquidity requirements adopted in 2010.
The retail exemption would take the same form as the government exemption in allowing these money market funds to price using penny rounding instead of basis point rounding. For the reasons described in section III.A.3 above, we do not believe that allowing continued use of amortized cost valuation for all securities in these funds' portfolios is appropriate given that these funds will be required to value their securities using market factors on a daily basis due to new Web site disclosure requirements described in section III.F.3 and given that penny rounding otherwise achieves the same level of price stability.
We request comment on whether we should provide a retail money market fund exemption to the floating NAV.
• Are we correct in our understanding that retail investors are less likely to redeem money market fund shares in times of market stress than institutional investors? Or are they just slower to participate in heavy redemptions?
• Does the evidence showing that retail investors behave differently than institutional investors justify a retail exemption? Is this difference in behavior likely to continue in the future?
• Would a retail exemption reduce the operational effects of implementing the floating NAV requirement, such as systems changes and tax and accounting issues? If so, to what extent and how?
• If the Commission does not adopt an exemption to the floating NAV requirement for retail funds, how many investors in retail prime money market funds might reallocate assets to non-prime money market fund alternatives? How many assets in retail prime money market funds might be reallocated to alternatives? To what non-prime money market alternatives are retail investors likely to reallocate their investments?
• Are we correct that retail investors would prefer an exemption from the floating NAV requirement? Would they instead prefer to invest in floating NAV funds? If so, why?
• Is penny rounding sufficient to allow retail money market funds to maintain a stable price? Should we also permit these funds to use amortized cost valuation? If so, why?
• Should we consider requiring retail funds that rely on an exemption from
The operational challenges of implementing an exemption for retail investor funds are numerous and complex. Currently, many money market funds are owned by both retail and institutional investors, although many are separated into retail and institutional share classes.
It can be difficult to distinguish objectively between retail and institutional money market funds, given that funds generally self-report this designation, there are no clear or consistent criteria for classifying funds and there is no common regulatory or industry definition of a retail investor or a retail money market fund.
Some commenters at the time, however, suggested possible approaches we might take.
We are proposing to define a retail money market fund as a money market fund that restricts a shareholder of record from redeeming more than $1,000,000 in any one business day.
A redemption limitation approach to defining retail funds should also lead institutions to self-select into institutional floating money market funds, since retail money market funds with redemption limitations would typically not meet their operational needs.
Applying the daily redemption limitation method to omnibus accounts may pose difficulties. In order for the fund to impose its redemption limit policies on the underlying shareholders, intermediaries with omnibus accounts would need to provide some form of transparency regarding underlying shareholders, such as account sizes of underlying shareholders (showing that each was below the $1 million redemption limit). Alternatively, the fund could arrange with the intermediary to carry out the fund's policies and impose the redemption limitation, or else impose redemption limits on the omnibus account as a whole. We discuss omnibus account issues further below.
We have selected $1,000,000 as the appropriate daily redemption threshold because we expect that such a daily limit is high enough that it should continue to make money market funds a viable and desirable cash management tool for retail investors,
As mentioned previously, setting an appropriate redemption threshold for retail money market funds is complicated by the fact that retail investors may, however, on occasion need to redeem relatively large amounts from a money market fund, for example, in connection with the purchase of a home, and that some institutions may have small enough cash balances that they may find that a $1,000,000 daily redemption threshold still suits their operational needs. A retail fund's prospectus and advertising materials would need to provide information to shareholders about daily redemption limitations to shareholders.
We request comment on our proposed method of distinguishing between retail and institutional money market funds based on a daily redemption limitation of $1,000,000.
• Would a daily redemption limit effectively distinguish retail from institutional money market funds? Are we correct in assuming that institutional investors would self-select out of retail funds with such redemption limits? Would a daily redemption limit help reduce the risk that a fund might not be able to manage heavy shareholder redemptions in times of stress? Would this method of distinguishing between retail and institutional money market funds appropriately reflect the relative risks faced by these two types of funds?
• If we classify funds as retail or institutional based on an investor's permitted daily redemptions, should we limit a retail fund investor's daily redemptions to $1,000,000, or some other dollar amount such as $250,000 or $5,000,000? Should we provide a means to increase the dollar amount limit to keep pace with inflation? If so, what method should we use?
• How large are institutional investors' typical account balances and daily redemptions? Would institutional investors be willing to break large investments into smaller pieces so they can spread them across multiple retail funds?
• Are current disclosure requirements sufficient to inform current and potential shareholders of the operations and risks of redemption limitations? Should we consider additional disclosure requirements? If so, what kinds of disclosures should be required?
• We ask commenters to provide empirical justification for any comments on a redemption limitation approach to distinguishing retail and institutional money market funds. We also request that commenters with access to shareholder redemption data provide us with detailed information about the size of individual redemptions in normal market periods but especially in September 2008 and summer 2011.
• In particular, we request that commenters submit data on the size and frequency of retail and institutional redemptions in money market funds today, including breakdowns of the typical number and dollar volume of transactions in funds intended for retail and institutional shareholders. We also request empirical data on the size and frequency of retail investors outlier redemption activity, such as when closing out their accounts or making other atypical transactions.
• Should the exemption have a weekly redemption limit as an alternative to, or in addition to, the daily redemption limit? If so, what should that limit be?
We have discussed above why we believe a daily redemption limit may effectively distinguish between retail and institutional investors and may also serve to help a retail fund manage the redemption requests it receives. In some cases, retail investors may still want to
• Should we include a provision permitting retail investors to redeem more than the daily redemption limit if they gave advance notice? How frequently are retail investors likely to need to redeem more than the daily redemption limit, and also know that they would need to make such a redemption in advance? Would such an advance notice provision encourage “gaming behavior,” for example if an institution invested in a retail fund and gave notice that every Friday it would redeem a large position to make payroll? Should we be concerned with such “gaming behavior” provided that the fund was given sufficient notice that it could effectively manage the redemptions?
• If we were to include an advance notice provision, what should the terms be? Should a retail investor be permitted to redeem any amount provided that they gave sufficient notice? A limited amount, such as $5 or $10 million? How much advance notice would be required, 2 days, 5 days, more or less? Should the amount that an investor be permitted to redeem be tied to the amount of advance notice given? For example, should an investor be permitted to redeem $3 million in a single day if they give 3 days' notice, but $10 million in a single day if they gave 10 days' notice?
• Should an advance notice provision include requirements regarding the method of how the notice is submitted to the fund, or for fund recordkeeping of the notices it receives? Should such a provision include requirements on intermediary communications, (for example, if the notice is provided to the intermediary rather than the fund, should we require that the advance notice clock begin counting once the fund receives the notice, not when it is given to the intermediary) or should it leave such details to be worked out between the parties?
• What operational costs would be associated with providing such an advance notice provision? Would funds be able to effectively communicate to investors the terms of such an advance notice provision?
We note that most money market funds that invest in municipal securities (tax-exempt funds) are intended for retail investors, because the tax advantages of those securities are only applicable to individual investors, and accordingly, a retail exemption would likely result in most such funds seeking to qualify for the proposed exemption. Our 2010 reforms exempted tax-exempt funds from the requirement to maintain 10% daily liquid assets because, at the time, we understood that the supply of tax-exempt securities with daily demand features was extremely limited.
• Would tax-exempt funds that rely on the proposed retail exemption be able to manage redemptions in time of stress without such a daily liquid asset requirement? What level of daily liquid assets do tax-exempt money market funds typically maintain today? Should we require tax-exempt money market funds to meet the daily liquid asset requirement if they are to rely on the proposed retail exemption to the floating NAV?
There are different ways a money market fund could comply with the exemption's daily redemption limitation if a shareholder seeks to redeem more than $1 million on any given day notwithstanding the fund's policy not to honor such requests. The fund could treat the entire order as not in “good order” and reject the order in its entirety. Alternatively, the fund could treat the order as a request to redeem $1 million and reject the remainder of the order (or treat it as if it were received on the next business day). Any of those approaches would allow the money market fund to meet the daily redemption limitation and neither would provide an incentive for a shareholder to submit a redemption request in excess of $1 million on any one day. A fund would also need to disclose how it handles such excessive redemption requests in its prospectus.
• Should we specify in rule 2a–7 the way that a money market fund must comply with the exemption's daily redemption limitation? Is either of the ways we discuss above easier or less costly to implement than the other?
• Are there any other approaches, other than the ones discussed above, that funds may use to meet the daily redemption limitation? If so, what are the benefits and costs of those alternatives?
Today, most money market funds do not have the ability to look through omnibus accounts to determine the characteristics and redemption patterns of their underlying investors. An omnibus account may consist of holdings of thousands of small investors in retirement plans or brokerage accounts, just one or a few institutional accounts, or a mix of the two. Omnibus accounts typically aggregate all the customer orders they receive each day, net purchases and redemptions, and they often present a single buy and single sell order to the fund. Because the omnibus account holder is the shareholder of record, to qualify as a retail fund under a direct application of our daily redemptions limitation proposal, a fund would be required to restrict daily redemptions by omnibus accounts to no more than $1,000,000. Because omnibus accounts can represent hundreds or thousands of beneficial owners and their transactions, they would often have daily activity that exceeds this limit. This combined activity would result in omnibus accounts often having daily redemptions that exceed the limit even though no one beneficial owner's
To address this issue, the proposed retail exemption would also permit a fund to allow a shareholder of record to redeem more than $1,000,000 in a single day, provided that the shareholder of record is an “omnibus account holder”
The restriction on “direct or indirect” redemptions is designed to manage issues related to “chains of intermediaries,” such as when an investor purchases fund shares through one intermediary, for example, an introducing broker or retirement plan, which then purchases the fund shares through a second intermediary, such as a clearing broker.
We note that the challenges of managing implementation of fund policies through omnibus accounts are not unique to a retail exemption. For example, funds frequently rely on intermediaries to assess, collect, and remit redemption fees charged pursuant to rule 22c–2 on beneficial owners that invest through omnibus accounts. Funds and intermediaries face similar issues when managing compliance with other fund policies, such as account size limits, breakpoints, rights of accumulation, and contingent deferred sales charges.
The proposed rule would not require retail money market funds to enter into explicit agreements or contracts with omnibus account holders at any stage in the chain, but would instead allow funds to manage these relations in whatever way that best suits their circumstances. We would expect that in some cases, funds may enter into agreements with omnibus account holders to reasonably conclude that their policies are complied with. In other cases, funds may have sufficient transparency into the activity of omnibus account holders, or use other verification methods (such as certifications), that funds could reasonably conclude that their policies are being followed without an explicit agreement. If a fund could not verify or reasonably conclude that an omnibus account holder is applying the redemption limit to underlying beneficial owner transactions, we would expect that a fund would treat that omnibus account holder like any other shareholder of record, and impose the $1,000,000 daily redemption limit on that omnibus account. Retail money market funds will need to monitor compliance and implement policies and procedures to address the implications of potential exceptions, for example, if an intermediary improperly permitted a redemption in excess of the fund's limits. Finally, the rule would also prohibit a fund from allowing an omnibus account holder to redeem more than $1,000,000 for its own account in a single day.
As proposed, the omnibus account holder provision does not provide for any different treatment of intermediaries based on their characteristics and instead applies the redemption limits equally to all beneficial owners. However, in some circumstances such treatment may not be consistent with the intent of the exemption. For example, an intermediary with investment discretion, such as a defined-contribution pension plan that allows the plan sponsor to remove a money market fund from its offerings, could unilaterally liquidate in one day a quantity of fund shares that greatly exceeds the fund's redemption limit, even if no one beneficial owner had an account balance that exceeds the limit. Intermediaries might also pose different risks, for example, the risks associated with a sweep account might be different than the risks posed by a retirement plan. Also, certain intermediaries may not be able to offer funds with redemption restrictions to investors, even if the underlying beneficial owners are retail investors. We understand that identical treatment of intermediaries under the proposal may not precisely reflect the risks of intermediaries with different characteristics, but recognize that this is a cost of our attempt to keep the retail exemption simple to implement.
A shareholder may own fund shares through multiple accounts, either directly with a fund, or through an intermediary. In some cases, such as when one account is held directly with
We request comment on the proposed treatment of omnibus account holders under the retail exemption to the floating NAV alternative.
• Does our proposed treatment of omnibus accounts under the retail exemption appropriately address the operation of such accounts? What types of policies and procedures would funds develop to confirm that omnibus account holders are able to reasonably prevent beneficial owners that invest through the account from violating a retail money market fund's redemption limit policies and procedures?
• The proposed rule does not require funds to enter into agreements with omnibus account holders, nor does it prescribe any other mechanism for requiring a fund to verify that its redemption limits are effectively enforced. Should we require such agreements? What difficulties would arise in implementing such agreements? Instead of agreements, should we consider prescribing some other type of verification or compliance procedure to prevent a fund's limit from being breached, such as certifications from omnibus account holders?
• Should the rule require a fund to obtain periodic certifications regarding the redemptions of beneficial owners in an omnibus account? If so, should we require a specific periodicity of certifications, such as every month, or every quarter?
• Should we differentiate between intermediaries that invest through omnibus accounts? For example, should we require that an intermediary that has investment discretion over a number of beneficial owners' accounts be treated as a single beneficial owner for purposes of the daily redemption limit? Should we treat certain intermediaries differently than others, perhaps allowing higher or unlimited redemptions for investors who invest through certain types of intermediaries such as retirement plans? What operational difficulties would arise if we were to provide for such differential treatment of intermediaries?
• Can funds accurately identify multiple accounts in a fund that are owned by a single shareholder of record? If not, what costs would be incurred in building such systems? How should the redemption limit apply to accounts that are owned by multiple investors? Should we be concerned about investors opening accounts through multiple intermediaries and multiple accounts in an attempt to circumvent the daily redemption limits?
As discussed above, we understand that today many money market funds are unable to determine the characteristics or redemption patterns of their shareholders that invest through omnibus accounts. This lack of transparency can not only hinder a fund from effectively applying a retail exemption but can also lead to difficulties in managing the liquidity levels of a fund's portfolio, if a fund cannot effectively anticipate when it is likely to receive significant shareholder redemptions through examination of its shareholder base. We request comment on whether we should consider requiring additional transparency into money market fund omnibus accounts to enable funds to understand better their respective shareholder base and relevant redemption patterns.
• Should we consider any other methods of generally providing more transparency into omnibus accounts for money market funds so that funds could better manage their portfolios in light of their respective shareholder base? If so, what methods should we consider?
As discussed above, as part of the retail exemption that we are proposing today, we are proposing a method of distinguishing between retail and institutional money market funds based on daily redemption limits. This is not the only method by which we could attempt to distinguish types of funds. Below we discuss several alternate methods of making such a distinction, and request comment on whether we should adopt one of these methods instead.
A different method of distinguishing retail funds would be to define a retail fund as a fund that does not permit account balances of more than a certain size. For example, we could define a fund as retail if the fund does not permit investors to maintain accounts with a balance that exceeds $250,000, $1,000,000, $5,000,000, or some other amount.
Defining a retail fund based on the maximum permitted account balance would be relatively simple to explain to investors through disclosure in the fund's prospectus and advertising materials. This approach could, however, disadvantage funds that do not have an affiliated government or institutional money market fund into which investors' “spillover” investments in excess of the maximum amount could be directed and could encourage “gaming behavior,” if institutional investors were to open multiple accounts through different intermediaries with balances under the maximum amount in order to evade any maximum investment limit we might set.
We request comment on the approach of distinguishing between retail and institutional money market funds based on investors' account balances:
• If we were to classify funds as retail or institutional based on an investor's account balance, what maximum account size would appropriately distinguish a retail account from an institutional account: $250,000, $1,000,000, $5,000,000, or some other dollar amount? Would this method of distinguishing between retail and institutional money market funds appropriately reflect the relative risks faced by these two types of funds? How would funds or other parties, such as intermediaries and omnibus accountholders, be able to enforce account balance limitations?
• Would shareholders with institutional characteristics be likely to open multiple retail money market fund accounts under the maximum amount, for example by going through intermediaries, to circumvent the account size requirement, and if so, would retail funds be subject to greater risk during periods of stress? What disclosure would be necessary to inform current and potential shareholders of the operations and risks of account balance limitations?
• We ask commenters to provide empirical justification for any comments on an account balance approach to distinguishing retail and institutional money market funds. We also request information on composition and distribution of individual account sizes to assist the Commission in considering this approach.
Another approach to distinguishing retail and institutional money market funds might be to base the distinction on the fund's shareholder concentration characteristics. Under this approach, a fund would be able to qualify for a retail exemption if the fund's largest shareholders owned less than a certain percentage of the fund. This type of “concentration” method of distinguishing funds would be a test for identifying funds whose shareholders are more concentrated, and thus have a limited number of shareholders whose redemption choices could affect the fund more significantly during periods of stress. A heavily concentrated fund may indicate that the fund has a smaller number of large shareholders, who are likely institutions. In addition, funds whose shareholders are less concentrated, and thereby that are less subject to heavy redemption pressure from a limited number of investors, may be able to withstand stress more effectively and thus could maintain a stable price.
Commenters have suggested several methods for defining the appropriate concentration level for a fund. One test for determining if a fund is institutional might be whether the top 20 shareholders own more than 15% of the fund's assets,
Distinguishing between retail and institutional money market funds based on shareholder concentration could more accurately reflect the relative risks that funds face than distinguishing retail and institutional money market funds based on the maximum balance of shareholders' accounts, since an individual shareholder's account value does not necessarily reflect the risks of concentrated heavy redemptions. However it may be less accurate at distinguishing types of investors (and at reducing the risks of heavy redemptions associated with certain types of investors) than the redemption limitation discussed above, because the redemption limitation would likely cause investors to self-select into the appropriate fund.
One benefit of the concentration method of distinguishing retail funds is that it may lessen operational issues related to omnibus accounts. If funds were required to count an intermediary with omnibus accounts as one shareholder for concentration purposes (
This concentration method of distinguishing retail funds would also pose a number of difficulties in implementation and operation. For example, it may be over-inclusive and a fund may be wrongly classified as an institutional money market fund if many of its large shareholders of record are intermediaries or sweep accounts,
Finally, this method could create significant operational issues for funds if shareholder concentration levels were to change temporarily, or to fluctuate periodically.
We request comment on the approach of distinguishing between retail and institutional money market funds based on shareholder concentration:
• If we classify funds as retail or institutional based on shareholder concentration, what thresholds should we use? Would criteria such as whether the top 20 investors make up more than 15% of the fund, or some other threshold, effectively distinguish between types of funds? Would such a concentration test pose operational difficulties? How would funds enforce such limits? How should funds treat omnibus accounts if they were to use such a test?
• Would investors who are likely to redeem shares when market-based valuations fall below the stable price per share be willing and able to spread their investment across enough funds to avoid being too large in any one of them?
• Would shareholder concentration limits result in further consolidation in the industry, as funds seek to grow in order to accommodate large investors?
• We ask commenters to provide empirical justification for any comments on a shareholder concentration approach to distinguishing retail and institutional money market funds.
Money market funds could also look at certain characteristics of the investors, such as whether they use a social security number or a taxpayer identification number to register their accounts or whether they demand same-day settlement, to distinguish between retail and institutional money market funds. Such a characteristics test could be used either alone, or in combination with one of the other methods discussed above to distinguish retail funds. However, this approach also has significant drawbacks. While institutional money market funds primarily offer same-day settlement and retail money market funds primarily do not, this is not always the case.
The Commission requests comment on shareholder characteristics that could effectively distinguish between types of investors, as well as other methods of distinguishing between retail and institutional money market funds.
• What types of shareholder characteristics would effectively distinguish between types of investors? Social security numbers and/or taxpayer identification numbers? Whether the fund provides same-day settlement? Some other characteristic(s)?
• Besides the approaches discussed above, are there other ways we could effectively distinguish retail from institutional money market funds? Should we combine any of these approaches? Should we adopt more than one of these methods of distinguishing retail funds, so that a fund could use the method that is lowest cost and best fits their investor base?
• We ask commenters to provide empirical justification for any comments on a shareholder characteristics approach to distinguishing retail and institutional money market funds.
In addition to the costs and benefits of a retail exemption discussed above, implementing any retail exemption to the floating NAV requirement may have effects on efficiency, competition, and capital formation. A retail exemption to the floating NAV requirement could make retail money market funds more attractive to investors than floating NAV funds without a retail exemption, assuming that retail investors prefer such funds. If so, we anticipate a retail exemption could reduce the impact we expect on the number of funds and assets under management, discussed in section III.E below. However, these positive effects on capital formation could be reversed to the extent that the costs funds incur in implementing a retail exemption are passed on to shareholders, or shareholders give up potentially higher yields. As discussed above, a retail exemption to the floating NAV requirement could involve operational costs, with the extent of those costs likely being higher for funds sold primarily through intermediaries than for funds sold directly to investors. These operational costs, depending on their magnitude, might affect capital formation and also competition (depending on the different ability of funds to absorb these costs).
A retail exemption to the floating NAV requirement could have negative effects on competition by benefitting fund groups with large percentages of retail investors, especially where those retail investors invest directly in the funds rather than through intermediaries, relative to other funds.
A retail exemption may promote efficiency by tying the floating NAV requirement to the shareholders that are most likely to redeem from a fund in response to deviations between its stable share price and market-based NAV per share. However, to the extent that a retail exemption fails to distinguish effectively institutional from retail shareholders, it may have negative effects on efficiency by permitting “gaming behavior” by shareholders with institutional characteristics who nonetheless invest in retail funds. It may also negatively affect fund efficiency to the extent that, to take advantage of a retail exemption, a fund that currently separates institutional and retail investors through different classes instead would need to create separate and distinct funds, which may be less efficient. The costs of such a re-organization are discussed in this Release below.
We request comment on the effects of a retail exemption to the floating NAV proposed on efficiency, competition, and capital formation.
• Would implementing a retail exemption have an effect on efficiency, competition, or capital formation? Which methods of distinguishing retail and institutional investors discussed above, if any, would result in the most positive effects on efficiency, competition, and capital formation?
• Would the floating NAV proposal have less of a negative impact on capital formation with a retail exemption than without? Would it provide competitive advantages to fund groups that have large percentages of retail investors, especially where those retail investors invest directly in the funds rather than through intermediaries, relative to other funds that have lower percentages of retail investors?
• Would a retail exemption better promote efficiency by tying the floating NAV requirement to institutional shareholders instead of retail shareholders? Why or why not?
The qualitative costs and benefits of any retail exemption to the floating NAV proposal are discussed above. Because we do not know how attractive such funds would be to retail investors, we cannot quantify these qualitative benefits or costs. However, we can quantify the operational costs that money market funds, intermediaries, and money market fund service providers might incur in implementing and administering the retail exemption to the floating NAV requirement that we are proposing today.
Although we do not have the information necessary to provide a point estimate
Many money market funds are currently owned by both retail and institutional investors, although they are often separated into retail and institutional share classes. A fund relying on the proposed retail exemption would need to be structured to accept only retail investors as determined by the daily redemption limit, and thus any money market fund that currently has both retail and institutional shareholders would need to be reorganized into separate retail and institutional money market funds. One-time costs associated with this reorganization would include costs incurred by the fund's counsel to draft appropriate organizational documents and costs incurred by the fund's board of directors to approve such documents. One-time costs also would include the costs to update the fund's registration statement and any relevant contracts or agreements to reflect the reorganization, as well as costs to update prospectuses and to inform shareholders of the reorganization. Funds and intermediaries may also incur one-time costs in training staff to understand the operation of the fund and effectively implement the redemption restrictions.
The daily redemption limitation method of distinguishing retail and institutional investors that we are proposing today would also require funds to have policies and procedures reasonably designed to allow the conclusion that omnibus account holders apply the fund's redemption limits to beneficial owners invested through the omnibus accounts. Adopting such policies and procedures and building systems to implement them would also involve one-time costs for funds and intermediaries. Funds could either conclude that their policies are enforced by obtaining information regarding underlying investors in omnibus accounts (transparency), or use some other sort of method to reasonably verify that omnibus account holders are implementing the fund's redemption policies, such as entering into an agreement or getting certifications from the omnibus account holder. In preparing the following cost estimates, the staff assumed that funds would generally rely on financial intermediaries to implement redemption policies without undergoing the costs of entering into an agreement, because funds and intermediaries would typically take the approach that is the least expensive. However, some funds may undertake the costs of obtaining an explicit agreement despite the expense. Our staff estimates that the one-time costs necessary to implement the retail exemption to the floating NAV proposal, including the various organizational, operational, training, and other costs discussed above, would range from $1,000,000 to $1,500,000 for each fund that chooses to take advantage of the retail exemption.
Funds that choose to take advantage of the retail exemption would also incur ongoing costs. These ongoing costs would include the costs of operating two separate funds (retail and institutional) instead of separate classes of a single fund, such as additional transfer agent, accounting, and other similar costs. Funds and intermediaries would also incur ongoing costs related to enforcing the daily redemption limitation on an ongoing basis and monitoring to conclude that the limits are being effectively enforced. Other ongoing costs may include systems maintenance, periodic review and updates of policies and procedures, and additional staff training. Accordingly, our staff estimates that money market funds and intermediaries administering a retail exemption likely would incur ongoing costs of 20%–30% of the one-time costs, or between $200,000 and $450,000 per year.
• Are the staff's cost estimates too high or too low, and, if so, by what amount and why? Are there operational or other costs associated with segregating retail investors other than those discussed above?
• Do commenters believe that the proposed retail exemption would involve expenses beyond those estimated? To what extent would the costs vary depending on how a retail exemption is structured? Which of the staff's assumptions would most significantly affect the costs? Has our staff identified the assumptions that most significantly influence the cost of a retail exemption?
• What kinds of ongoing activities would be required to administer the proposed retail exemption to the floating NAV requirement, and to what extent? Would it be less costly for some funds (
Rule 17a–9 provides an exemption from section 17(a) of the Act to permit affiliated persons of a money market fund to purchase portfolio securities from the fund under certain circumstances, and it is designed to provide a means for an affiliated person to provide liquidity to the fund and prevent it from breaking the buck.
Rule 17a–9, as adopted in 1996, provides an exemption from section 17(a) of the Act to permit affiliated persons of a money market fund to purchase a security from a money market fund that is no longer an eligible security (as defined in rule 2a–7), provided that the purchase price is (i) paid in cash; and (ii) equals the greater of amortized cost of the security or its market price (in each case including accrued interest).
Funds with a floating NAV would still be required to adhere to rule 2a–7's risk-limiting conditions to reduce the likelihood that portfolio securities experience losses from credit events and interest rate changes. Even with a floating NAV and limited risk, as specified by the provisions of rule 2a–7, money market funds face potential liquidity, credit and reputational issues in times of fund and market stress and the resultant incentives for shareholders to redeem shares.
In normal market conditions, that shareholders may request immediate redemptions from a fund with a portfolio that does not hold securities that mature in the same time frame generally is no cause for concern because funds typically can sell portfolio securities to satisfy shareholder redemptions without negatively affecting prices. In times of crisis when the secondary markets for portfolio assets become illiquid, funds might be unable to sell sufficient assets without causing large price movements that affect not only the non-redeeming shareholders but also investors in other funds that hold similar assets. Therefore, to provide fund sponsors with flexibility to protect shareholder interests, we are proposing to allow fund sponsors to continue to support money market fund operations through, for example, affiliate purchases (in reliance on rule 17a–9), provided such support is thoroughly and consistently disclosed.
As exists today, money market fund sponsors that have a greater capacity to support their funds may have a competitive advantage over other fund sponsors that do not. The value of this competitive advantage depends on the extent to which fund sponsors choose to support their funds and may be reduced by the proposed enhanced disclosure requirements discussed in this Release which may disincentivize fund sponsors from supporting their funds. The value of potential sponsor support also will depend on whether investors view support as good news (because, for example, the sponsor stands behind the fund) or bad news (because, for
We request comment on retaining the rule 17a–9 exemption.
• Do commenters believe affiliated person support is important to funds, investors, or the securities markets even under our floating NAV proposal? Do commenters agree with our assumptions that liquidity concerns are likely to remain significant even with a floating NAV and that fund sponsors should continue to have this flexibility to protect shareholder interests? We note that rule 17a–9 was established and then expanded in 2010, in the context of stable values. If money market funds are required to float their NAVs, should we limit further the circumstances under which fund sponsors or advisers can use rule 17a–9? If so, how?
• Does permitting affiliated purchases for floating NAV money market funds reduce the transparency of fund risks that our floating NAV proposal is designed, in part, to achieve? If so, does the additional disclosure we are proposing mitigate such an effect? Are there additional ways we can mitigate such an effect?
• Should we allow only certain types of support or should we prohibit certain types of support? For example, should we allow sponsors to purchase under rule 17a–9 only liquidity-impaired assets, or should we prohibit sponsors from purchasing defaulted securities? Why or why not? If yes, what types of support should be permitted and what types should be prohibited? Why?
• Would the ability of fund sponsors to support the NAV of floating funds affect the way in which money market funds are structured and marketed? If so, how? Would it affect the competitive position of fund sponsors that are more or less likely to have available capital to support their funds?
• Do commenters agree that our proposed amendment would not impose additional costs on funds or shareholders or impact efficiency or capital formation?
• Instead of retaining 17a–9, should we instead repeal the rule and thereby prohibit certain types of sponsor support of money market funds? If so, why?
Rule 22e–3 exempts money market funds from section 22(e) of the Act to permit them to suspend redemptions and postpone payment of redemption proceeds to facilitate an orderly liquidation of the fund.
As discussed above, we recognize that our floating NAV proposal, in conjunction with our other proposals, may not be sufficient to eliminate the incentive for shareholders to redeem shares in times of fund and market stress. As such, floating NAV money market funds may still face liquidity issues that could force them to want to suspend redemptions and liquidate. Commenters have noted the benefits of rule 22e–3, including that the rule prevents a lengthy and disorderly liquidation process, like that experienced by the Reserve Primary Fund.
Government money market funds and retail money market funds, which would be exempt from the floating NAV requirement, would be able to suspend redemptions and liquidate if either (1) the fund, at the end of a business day, has less than 15% of its total assets in weekly liquid assets or (2) the fund's price per share as computed for purposes of distribution, redemption, and repurchase is no longer equal to its stable share price or the fund's board (including a majority of disinterested directors) determines that such a change is likely to occur.
Because money market funds already comply with rule 22e–3, we do not believe that retaining the rule in the
We request comment on this proposed amendment.
• Do commenters believe that the ability to suspend redemptions (under the circumstances we propose) would be important to floating NAV funds, their investors, and the securities markets?
• Would this ability be important to a retail or government money market fund even though we are proposing to exempt these funds from the floating NAV requirement, in part, because they are less likely to face heavy redemptions in times of stress?
• Is it appropriate to allow a money market fund to suspend redemptions and liquidate if its level of weekly liquid assets falls below 15% of its total assets? Is there a different threshold based on daily or weekly assets that would better protect money market fund shareholders? What is that threshold, and why is it better? Is there a threshold based on different factors that would better protect money market fund shareholders? What are those factors, and why are they better? If so, is such suspension then appropriate only in connection with liquidation, or should it be broader?
• Is our conclusion correct that it will impose no costs nor have any effects on competition, efficiency, or capital formation?
Money market funds' ability to maintain a stable value per share simplifies tax compliance for their shareholders. Today, purchases and sales of money market fund shares at a stable $1.00 share price generate no gains or losses, and money market fund shareholders therefore generally need not track the timing and price of purchase and sale transactions for capital gains or losses.
If we were to require some money market funds to use floating NAVs, taxable investors in those money market funds, like taxable investors in other types of mutual funds, would experience gains and losses. Shareholders in floating NAV money market funds, therefore, could owe tax on any gains on sales of their money market fund shares, could have tax benefits from any losses, and would have to determine those amounts.
Commenters also have asserted that taxable investors in floating NAV money market funds, like taxable investors in other types of mutual funds, would be required to track the timing and price of purchase and sale transactions to determine the amounts of gains and losses realized.
We understand, based on discussions by our staff with staff at the Treasury Department and the IRS, that, by operation of the current tax regulations, if our floating NAV proposal is adopted, money market funds that float their NAV per share would no longer be excluded from the information reporting requirements currently applicable to mutual funds and intermediaries.
We anticipate that these modifications, if effected, could reduce burdens and costs to shareholders when reporting annual realized gains or losses from transactions in a floating NAV money market fund. We recognize that if these modifications are not made, the tax reporting effects of a floating NAV could be quite burdensome for money market fund investors that typically engage in frequent transactions. Regardless of the applicability of net information reporting or of summary income tax reporting, however, all shareholders of floating NAV money market funds would be required to recognize and report taxable gains and losses with respect to redemptions of fund shares, which does not occur today
We request comment on the burdens of tax compliance for money market fund shareholders (the impact on funds is discussed in the operational costs section below).
• If any shareholders of a floating NAV money market fund are not exempt recipients (and thus receive the information reporting that other non-exempt-recipient shareholders of other mutual funds currently receive), how difficult would it be for those shareholders to use that information to determine and report taxable gains and losses? Would it be any more difficult for floating NAV money market fund shareholders than other mutual fund shareholders? What kinds of costs, by type and amount, would be involved?
• In the case of floating NAV fund shareholders that are exempt recipients (which are not required recipients of information reporting), what types and amounts of costs would those shareholders incur to track their share purchases and sales and report any taxable gains or losses?
• As discussed above, mutual funds and intermediaries are not required to provide information reporting for exempt recipients, including virtually all institutional investors. Do mutual funds and intermediaries provide this information to shareholders even if tax law does not require them to do so? If not, would money market funds and intermediaries be able to use their existing systems and processes to access this information if investors request it as a result of our floating NAV proposal? Would doing so involve systems modifications or other costs in addition to those we estimate in section III.A.7, below? Would institutions or other exempt recipients find it useful or more efficient to receive this information from funds rather than to develop it themselves?
• Would exempt-recipient investors continue to invest in floating NAV funds if there continues to be no information reporting with respect to them?
• Would exempt-recipient investors invest in floating NAV money market funds if there is no administrative relief related to summary reporting of capital gains and losses, as discussed above? What would be the effect on the utility of floating NAV money market funds if the anticipated administrative relief is not provided? Would investors be able to use floating NAV money market funds in the same way or for the same purposes absent the anticipated administrative relief?
In addition to the tax obligations that may arise through daily fluctuations in purchase and redemption prices of floating NAV money market funds (discussed above), special “wash sale” rules apply when shareholders sell securities at a loss and, within 30 days before or after the sale, buy substantially identical securities.
We request comment on the tax implications related to our floating NAV proposal.
• Would investors continue to invest in floating NAV money market funds absent administrative relief from the Treasury Department and IRS relating to wash sales? What would be the effect on the utility of floating NAV money market funds if the anticipated administrative relief is not provided? Would investors be able to use floating NAV money market funds in the same way or for the same purposes absent the anticipated administrative relief?
If we were to adopt our floating NAV proposal, some money market fund shareholders may question whether they would be able to treat their fund shares as “cash equivalents” on their balance sheets. We understand that classifying money market fund investments as cash equivalents is important because, among other things, investors may have debt covenants that mandate certain levels of cash and cash equivalents.
Current U.S. GAAP defines cash equivalents as “short-term, highly liquid investments that are readily convertible to known amounts of cash and that are so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.”
Except as noted below, the Commission believes that an investment in a money market fund with a floating NAV would meet the definition of a “cash equivalent.” We believe the adoption of floating NAV alone would not preclude shareholders from classifying their investments in money market funds as cash equivalents because fluctuations in the amount of cash received upon redemption would likely be insignificant and would be consistent with the concept of a `known' amount of cash. The RSFI Study supports our belief by noting that floating NAV money market funds are not likely to experience significant fluctuations in value.
As is the case today with stable share price money market funds, events may occur that give rise to credit and liquidity issues for money market funds and shareholders would need to reassess if their investments continue to meet the definition of a cash equivalent. For example, during the financial crisis,
Do commenters believe using a floating NAV would preclude money market funds from being classified as cash equivalents under GAAP?
• Would shareholders be less likely to invest in floating NAV money market funds if the shares held were classified for financial statement purposes as an “investment” rather than “cash and cash equivalent?”
• Are there any other accounting-related costs or burdens that money market fund shareholders would incur if we require money market funds to use floating NAVs?
We also recognize that many states have established local government investment pools (“LGIPs”), money market fund-like investment pools that invest in short-term securities,
• Would our floating NAV proposal affect LGIPs as described above? Are there other ways in which LGIPs would be affected? If so, please describe.
• Are there other costs that we have not considered?
• How do commenters think states and other market participants would react to our floating NAV proposal? Do commenters believe that states would amend their statutes or policies to permit LGIPs to have a floating NAV per share provided the fund complies with rule 2a–7, as we propose to amend it? If so, what types and amounts of costs would states incur? If not, would there be any effect on efficiency, competition, or capital formation?
Money market funds (or their transfer agents) are required under rule 2a–7 to have the capacity to redeem and sell fund shares at prices based on the funds' current net asset value per share pursuant to rule 22c–1 rather than $1.00,
We recognize, however, that funds, transfer agents, intermediaries, and others in the distribution chain may not currently have the capacity to process transactions at floating NAVs constantly, as would be required under our proposal.
We understand that the costs to modify a particular entity's existing controls and procedures would vary depending on the capacity, function and level of automation of the accounting systems to which the controls and procedures relate and the complexity of those systems' operating environments.
We anticipate, however, that many money market funds, transfer agents, custodians, and intermediaries in the distribution chain may not bear the estimated costs on an individual basis and therefore experience economies of scale. For example, the costs would likely be allocated among the multiple users of affected systems, such as money market funds that are members of a fund group, money market funds that use the same transfer agent or custodian, and intermediaries that use systems purchased from the same third party. Accordingly, we expect that the cost for many individual entities that would have to process transactions at floating NAVs may be less than the estimated costs.
We request comment on this analysis and our range of estimated costs to money market funds, transfer agents, custodians, and intermediaries.
• To what extent would transfer agents, fund accounting departments, custodians, and intermediaries need to develop and implement additional controls and procedures or modify existing ones under our floating NAV proposal?
• To what extent do intermediaries, as a result of their separate obligations to investors regarding distribution of proceeds, have the capacity to process (on a continual basis) transactions at a fund's floating NAV?
• Do money market funds and others expect they would incur costs in addition to those we estimate above or that they would incur different costs? If so, what are these costs?
• Would the costs incurred by money market funds and others in the distribution chain discussed above be passed on to retail (and other) investors in the form of higher fees?
• If a number of money market funds already report daily shadow prices using “basis point” rounding, are there additional operational costs that funds would incur to price their shares to four decimal places? If so, please describe. Are there means by which these operational costs can be reduced while still providing sufficient price transparency?
• Do all funds have the ready capability to price their shares to four decimal places? For those funds that do so already, we seek comment on the costs involved in developing this capability. For funds that do not have the capability, what types and amounts of costs would be incurred?
• What type of ongoing maintenance and training would be necessary, and to what extent? Do commenters agree that such costs would likely range between 5% and 15% of one-time costs? If not, is there a more accurate way to estimate these costs?
• To what extent would money market funds or others experience economies of scale?
• We request that intermediaries and others provide data to support the costs they expect they would incur and an explanation of the work they have already undertaken as a result of rule 2a–7's current requirement that money market funds (or their transfer agents) have the capacity to transact at a floating NAV.
In addition, funds would incur costs to communicate with shareholders the change to a floating NAV per share. Although funds (and their intermediaries that provide information to beneficial owners) already have the means to provide shareholders the values of their money market fund holdings, our staff anticipates that they would incur additional costs associated with programs and systems modifications necessary to provide shareholders with access to that information online, through automated phone systems, and on shareholder statements under our floating NAV proposal and to explain to shareholders that the value of their money market funds shares will fluctuate.
Our staff anticipates that these communication costs would vary among funds (or their transfer agents) and fund intermediaries depending on the current capabilities of the entity's Web site, automated or manned phone systems, systems for processing shareholder statements, and the number of investors. We believe that money market funds themselves would need to perform an in-depth analysis of our proposed rules in order to estimate the necessary systems modifications. While we do not have the information necessary to provide a point estimate of the potential costs of systems modifications, our staff
• Do commenters agree with our estimated range of costs to funds (or their transfer agents) and fund intermediaries to communicate with shareholders the change to a floating NAV per share? If not, we request detailed estimates of the types and amounts of costs.
Money market funds' ability to maintain a stable value also facilitates the funds' role as a cash management vehicle and provides other operational efficiencies for their shareholders.
Commenters have asserted that money market funds with floating NAVs would be incompatible with these systems because, among other things, transactions in shares of these money market funds, like other types of mutual fund transactions, would generally not settle on the same day that an order is placed, and the value of the shares of these money market funds could not be determined precisely before that day's NAV had been calculated.
• Would money market funds and financial intermediaries continue to provide the retail-focused services discussed above if we were to require money market funds to use floating NAVs? If not, why not?
• Would investors reduce or eliminate their money market fund investments if these services were no longer available or if the cost of these services increases?
Commenters also assert that requiring money market funds to use floating NAVs would extend the settlement cycle from same-day settlement to next-day settlement, which would expose parties to transactions to increased risk (
• Do commenters expect to incur the types of costs described above (
• What kinds of costs, specifically, do commenters expect to incur? What kinds of employee costs would be involved?
• Would an extended settlement cycle impose costs on money market fund investors? If so, what kinds of costs and how much?
• Would money market funds extend the settlement cycle or would they exercise either of those other options?
• Would exercising either of the two options discussed above impose costs on money market funds? If so, how much? Are there options that we have not identified that money market funds could use to provide same-day settlement?
• Would extending the settlement cycle cause investors to leave or not invest in money market funds?
• Do commenters agree that a delay in settlement for some money market fund transactions could expose parties to the transactions to increased counterparty risk? To what extent would this occur, and how does the nature of this risk differ from counterparty risk that arises in other aspects of a money market fund shareholder's business?
• Do commenters agree that money market funds generally could still offer same-day settlement if required to use a floating NAV?
• Do fund pricing services have the capacity to provide pricing multiple times each day? If not, what types and amounts of costs would pricing services incur to develop this capacity? Would pricing services pass these costs down to funds?
• Are the money market funds that currently same-day settle with a floating NAV representative of what a broader industry of floating NAV money market funds could achieve? Are there additional costs or complications in conducting such same-day settlement for larger funds than smaller funds?
In addition to money market funds and other entities in the distribution chain, each money market fund shareholder would also likely be required to perform an in-depth analysis of our floating NAV proposal and its own existing systems, procedures, and controls to estimate the systems modifications it would be required to undertake. Because of this, and the variation in systems currently used by institutional money market fund shareholders, we do not have the information necessary to provide a point estimate of the potential costs of systems modifications. Nevertheless, our staff has attempted to describe the types of activities typically involved in making systems modifications and estimated a range of hours and costs that may be required to perform these activities. In addition, the Commission requests from commenters information regarding the potential costs of system modifications for money market fund shareholders.
Our staff has prepared ranges of estimated costs, taking into account variations in the functionality, sophistication, and level of automation of money market fund shareholders' existing systems and related procedures and controls, and the complexity of the operating environment in which these systems operate.
Staff estimates that a shareholder whose systems (including related procedures and controls) would require less extensive or labor-intensive modifications would incur one-time costs ranging from $123,000 to $253,000.
• Are shareholder systems in fact unable to accommodate a floating NAV, even if the NAV typically fluctuates very little (a fraction of a penny) on a day-to-day basis?
• If shareholder systems are unable to accommodate a floating NAV, what kinds of programming costs would shareholders incur in reprogramming the systems and how do they compare to our staff's estimates above?
• Do shareholders have other systems they use to manage their investments that fluctuate in value? If so, could these systems be used for money market funds? If not, why not?
• How much would it cost to adapt existing shareholder systems (currently used to accommodate investments that fluctuate in value) to accommodate money market funds with floating NAVs and how do these costs compare to our staff's estimates above?
We are proposing disclosure-related amendments to rule 482 under the Securities Act
Our proposal would also affect fund supplemental sales literature (
The move to a floating NAV would be designed to change the investment expectations and behavior of money market fund investors. As a measure to achieve this change, we propose to require that each money market fund, other than a government or retail fund, include a bulleted statement disclosing the particular risks associated with investing in a floating NAV money market fund on any advertisement or sales material that it disseminates (including on the fund Web site). We also propose to include wording designed to inform investors about the primary risks of investing in money market funds generally in this bulleted disclosure statement. While money market funds are currently required to include a similar disclosure statement on their advertisements and sales materials,
Specifically, we would require floating NAV money market funds to include the following bulleted disclosure statement on their advertisements and sales materials:
• You could lose money by investing in the Fund.
• You should not invest in the Fund if you require your investment to maintain a stable value.
• The value of shares of the Fund will increase and decrease as a result of changes in the value of the securities in which the Fund invests. The value of the securities in which the Fund invests may in turn be affected by many factors, including interest rate changes and defaults or changes in the credit quality of a security's issuer.
• An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
• The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
We also propose to require a substantially similar bulleted disclosure statement in the summary section of the statutory prospectus (and, accordingly, in any summary prospectus, if used).
With respect to money market funds that are not government or retail funds, we propose to remove current requirements that money market funds state that they seek to preserve the value of shareholder investments at $1.00 per share.
As discussed above, the floating NAV proposal would provide exemptions to the floating NAV requirement for government and retail money market funds.
• You could lose money by investing in the Fund.
• The Fund seeks to preserve the value of your investment at $1.00 per
• An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
• The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Likewise, if an affiliated person, promoter, or principal underwriter of the fund, or an affiliated person of such person, has entered into an agreement to provide financial support to the fund, and the term of the agreement will extend for at least one year following the effective date of the fund's registration statement, the fund would be permitted to omit the last bulleted sentence from the disclosure statement that appears on the fund's registration statement.
The proposed disclosure statements are intended to be one measure to change the investment expectations and, therefore, the behavior of money market fund investors. The risk-limiting conditions of rule 2a–7 and past experiences of money market fund investors have created expectations of a stable, cash-equivalent investment. As discussed above, one reason for such expectation may have been the role of sponsor support in maintaining a stable net asset value for money market funds.
We request comment on the disclosure statements
• Would the disclosure statement proposed to be used by floating NAV funds adequately alert investors to the risks of investing in a floating NAV fund, and would investors understand the meaning of each part of the proposed disclosure statement? Will investors be fully aware that the value of their money market fund shares will increase and decrease as a result of the changes in the value of the underlying portfolio securities? If not, how should the proposed disclosure statement be amended?
• Would the disclosure statement proposed to be used by government and retail money market funds, which are not subject to the floating NAV requirement, adequately alert investors to the risks of investing in those types of funds, and would investors understand the meaning of each part of the proposed disclosure statement? If not, how should the proposed disclosure statement be amended?
• Would different shareholder groups or different types of funds benefit from different disclosure statements? For example, should retail and institutional investors receive different disclosure statements, or should funds that offer cash management features such as check writing provide different disclosure statements from funds that do not? Why or why not? If yes, how should the disclosure statement be tailored to different shareholder groups and fund types?
• Will the proposed disclosure statement respond effectively to investor preferences for clear, concise, and understandable language?
• Would the following variations on the proposed disclosure statement be any more or less useful in alerting shareholders to the risks of investing in a floating NAV fund (as applicable) and/or the risks of investing in money market funds generally?
○ Removing or amending the following bullet point in the proposed disclosure statement: “The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.”
○ Removing or amending the following bullet point in the proposed disclosure statement: “The value of the securities in which the Fund invests may in turn be affected by many factors, including interest rate changes and defaults or changes in the credit quality of a security's issuer.”
○ Amending the final bullet point in the proposed disclosure statement to read: “Your investment in the Fund therefore may experience losses.”
○ Amending the final bullet point in the proposed disclosure statement to read: “Your investment in the Fund therefore may experience gains or losses.”
• Would investors benefit from requiring the proposed disclosure statement also to be included on the front cover page of a money market fund's prospectus (and on the cover page or beginning of any summary prospectus, if used)?
• Would investors benefit from any additional types of disclosure in the summary section of the statutory prospectus or on the prospectus' cover page? If so, what else should be included?
• Should we provide any instruction or guidance in order to highlight the proposed disclosure statement on fund advertisements and sales materials (including the fund's Web site) and/or lead investors efficiently to the
The proposed requirement that money market funds transition to a floating NAV would entail certain additional tax- and operations-related disclosure, which disclosure requirements would not necessitate rule and form amendments.
We request comment on the disclosure that we expect floating NAV money market funds would include in their prospectuses about the tax consequences to shareholders of buying, holding, exchanging, and selling the shares of the fund, as well as the effects (if any) on fund operations resulting from the transition to a floating NAV.
• Should Form N–1A or its instructions be amended to more explicitly require any of the disclosure we discuss above, or any additional disclosure, to be included in a fund's prospectus and/or SAI?
• Is there any additional information about a floating NAV fund's operations that shareholders should be aware of that is not discussed above? If so, would such additional information already be covered under existing Form N–1A requirements, or would we need to make any amendments to the form or its instructions?
A fund must update its registration statement to reflect any material changes by means of a post-effective amendment or a prospectus supplement (or “sticker”) pursuant to rule 497 under the Securities Act.
• Besides requiring a fund that transitions to a floating NAV to update its registration statement by filing a post-effective amendment or prospectus supplement, should we also require that, when a fund transitions to a floating NAV, it must notify shareholders individually about the risks and operational effects of a floating NAV on the fund, such as a separate mailing or email notice? Would shareholders be more likely to understand and appreciate these risks and operational effects (disclosure of which would be included in the fund's registration statement, as discussed above) if they were to receive such individual notification? If so, what information should this individual notification include? What would be an appropriate time frame for this notification? How would such notification be accomplished, and what costs would be incurred in providing such notification?
As discussed above, our floating NAV proposal would provide exemptions to the floating NAV requirements for government money market funds and retail money market funds. We request comment on whether we should require new terminology in money market fund names
• Given that, under our floating NAV proposal, some funds' share prices would increase and decrease as a result of changes in the value of the securities in which the fund invests, should we require new terminology in money market fund names to reduce any risk of investor confusion that might result from both stable price money market funds and floating NAV money market funds using the same term “money market fund” in their names? For example, should we require money market funds to use either the term “stable money market fund” or “floating money market fund,” as appropriate, in their names? Why or why not?
The floating NAV proposal makes significant changes to the nature of money market funds as an investment vehicle. The proposed disclosure requirements in this section are intended to communicate to shareholders the nature of the risks that follow from the floating NAV proposal. In section III.E, we discussed how the floating NAV proposal might affect shareholders' use of money market funds and the resulting effects on the short-term financing markets. The factors and uncertain effects of those factors discussed in that section would influence any estimate of the incremental effects that the proposed disclosure requirements might have on either shareholders or the short-term financing markets. However, we believe that the proposed disclosure will better inform shareholders about the changes, which should result in shareholders making investment decisions that better match their investment preferences. We expect that this will have similar effects on efficiency, competition, and capital formation as those that are outlined in
We anticipate that all money market funds would incur costs to update their registration statements, as well as their advertising and sales materials (including the fund Web site), to include the proposed disclosure statement, and that floating NAV funds additionally would incur costs to update their registration statements to incorporate tax- and operations-related disclosure relating to the use of a floating NAV. We expect these costs generally would be incurred on a one-time basis. Our staff estimates that the average costs for a floating NAV money market fund to comply with these proposed disclosure amendments would be approximately $1,480 and that the compliance costs for a government or retail money market fund would be approximately $592.
We expect the new required disclosure would add minimal length to the current required prospectus disclosure, and thus would not increase the number of pages in, or change the printing costs of, a fund's prospectus. Based on conversations with fund representatives, the Commission understands that, in general, unless the page count of a prospectus is changed by at least four pages, printing costs would remain the same.
We request comment on this economic analysis:
• Are any of the proposed disclosure requirements unduly burdensome, or would they impose any unnecessary costs?
• We request comment on the staff's estimates of the operational costs associated with the proposed disclosure requirements.
• We request comment on our analysis of potential effects of these proposed disclosure requirements on efficiency, competition, and capital formation.
The PWG Report suggests that a transition to a floating NAV could itself result in significant redemptions.
To avoid large numbers of preemptive redemptions by shareholders and allow sufficient time for funds and intermediaries to cost-effectively adapt to the new requirements, we propose to delay compliance with this aspect of the proposed rules for a period of 2 years from the effective date of our proposed rulemaking. Accordingly, money market funds subject to our floating NAV proposal could continue to price their shares as they do today for up to 2 years following this date. On or before the compliance date, all stable value money market funds not exempted from the floating NAV proposal would convert to a floating NAV. However, we note that, under our floating NAV proposal, investors who prefer a stable price product also could invest in a government or retail money market fund. We request comment on the proposed transition.
If we were to adopt the floating NAV proposal, money market funds and their shareholders would have 2 years to understand the implications of and implement our reform. We believe this would benefit money market funds and their shareholders by allowing money market funds to make this transition at the optimal time and potentially not at the same time as all other money market funds (which may be more likely to have a disruptive effect on the short-term financing markets, and thus not be perceived as optimal by funds). It would also provide time for investors such as corporate treasurers to modify their investment guidelines or seek changes to any statutory or regulatory constraints to which they are subject to permit them to invest in a floating NAV money market fund or other investments as appropriate.
Giving fund shareholders ample time to dispose of their investments in an orderly fashion also should benefit money market funds and their other shareholders because it would give funds additional time to respond appropriately to the level and timing of redemption requests.
We considered an even longer transition period, including the 5-year period in FSOC's proposed floating NAV recommendation.
We request comment on our proposed compliance date.
• Would our proposed transition period mitigate operational or significant redemption risks that could result from requiring money market funds to use floating NAVs?
• If not, how much time would be sufficient to allow money market fund shareholders that do not wish to remain in a money market fund with a floating NAV to identify alternatives without posing operational or significant redemption risk?
• Do commenters agree that a compliance period of 2 years is sufficient to address operational issues associated with converting funds to floating NAVs? Should the compliance period be shorter or longer? Why? Would a 5-year transition period, consistent with FSOC's proposed floating NAV recommendation, be more appropriate?
• Do fund sponsors anticipate converting (at an appropriate time) existing stable value money market funds to floating NAV funds or would sponsors establish new funds? If sponsors expect to establish new funds, are there costs other than those we describe below (related to a potential grandfathering provision)?
• Are there other measures we could take that would minimize the risks that could arise from investors seeking preemptively to redeem their shares in advance of a fund's adoption of a floating NAV?
• Should we provide a grandfathering provision, in addition to, or in lieu of, a relatively long compliance date? If we adopted a grandfathering provision, how long should the grandfathering period last? Would a grandfathering provision better achieve our objective of facilitating an orderly transition?
As an alternative to the floating NAV proposal discussed above, we are proposing to continue to allow money market funds to transact at a stable share price under normal conditions but to (1) require money market funds to institute a liquidity fee in certain circumstances and (2) permit money market funds to impose a gate in certain circumstances. In particular, this fees and gates alternative proposal would require that if a money market fund's weekly liquid assets fell below 15% of its total assets (the “liquidity threshold”), the fund must impose a liquidity fee of 2% on all redemptions unless the board of directors of the fund (including a majority of its independent directors) determines that imposing such a fee would not be in the best interest of the fund. The board may also determine that a lower fee would be in the best interest of the fund.
We also are proposing that when a money market fund's weekly liquid assets fall below 15% of total assets, the money market fund board would also have the ability to impose a temporary suspension of redemptions (also referred to as a “gate”) for a limited period of time if the board determines that doing so is in the fund's best interest. Such a gate could be imposed, for example, if the liquidity fees were not proving sufficient in slowing redemptions to a manageable level.
Under this option, rule 2a–7 would continue to permit money market funds to use the penny rounding method of pricing so long as the funds complied with the conditions of the rule, but would not permit use of the amortized cost method of valuation. We would eliminate the use of the amortized cost method of valuation for money market funds under the fees and gates alternative for the same reasons we are proposing to do so under the retail and government exemptions to the floating NAV alternative.
As previously discussed, the financial crisis of 2007–2008 exposed contagion effects from heavy redemptions in money market funds that had significant impacts on investors, funds, and the markets. We have designed the fees and gates alternative to address certain of these issues. Although it is impossible to know what exactly would have happened if money market funds had operated with fees and gates at that time, we expect that if money market funds were armed with such tools, they would have been able to better manage the heavy redemptions that occurred and to limit the spread of contagion, regardless of the reason for the redemptions.
During the crisis, some investors redeemed at the first sign of market stress, and could do so without bearing any costs even if their actions imposed costs on the fund and the remaining shareholders. As discussed in greater detail below, if money market funds had imposed liquidity fees during the crisis, it could have resulted in those investors re-assessing their redemption decisions because they would have been required to pay for the costs of their redemptions. Based on the level of redemption activity that occurred during the crisis, we expect that many money market funds would have faced liquidity pressures sufficient to cross the liquidity thresholds we are proposing today that would trigger the use of fees and gates. If funds therefore had imposed fees, this might have caused some investors to choose not to redeem because the direct costs of the liquidity fee may have been more tangible than the uncertain possibility of potential future losses. In addition, funds that imposed fees would likely have been able to better manage the impact of the redemptions that investors submitted, and any contagion effects may have been limited, because the fees would have helped offset the costs of the liquidity provided to redeeming
If a fund had been able to impose a redemption gate at the time, it also would have been able to stop mounting redemptions and possibly generate additional internal liquidity in the fund while the gate was in place. However, fees and gates do not address all of the factors that may lead to heavy redemptions in money market funds.
As discussed in section III.C, we also request comment on whether we should combine this option with our floating NAV alternative. This reform would be intended to achieve our goals of preserving the benefits of stable share price money market funds for the widest range of investors and the availability of short-term financing for issuers, while enhancing investor protection and risk transparency, making funds more resilient to mass redemptions, and improving money market funds' ability to manage and mitigate potential contagion from high levels of redemptions, as further discussed below.
As discussed in the RSFI Study and in section II above, shareholders may redeem money market fund shares for several reasons under stressed market conditions.
Because the circumstances under which liquidity becomes expensive historically have been infrequent, we expect that liquidity fees only will be imposed when the fund's board of directors considers the fund's liquidity costs to be at a premium and the liquidity fee, if imposed, will apply only to those shareholders who redeem and cause the fund to incur that cost. Under normal market conditions, fund shareholders would continue to enjoy unfettered liquidity for money market fund shares.
In addition to liquidity fees, our proposal also would allow money market funds to impose redemption gates after the liquidity threshold is reached. Our proposal on liquidity fees and gates, however, could affect shareholders by potentially limiting the full, unfettered redeemability of money market fund shares under certain conditions, a principle embodied in the Investment Company Act.
We are proposing a combination of liquidity fees and gates because we believe that liquidity fees and gates, while both aimed at helping funds better and more systematically manage high levels of redemptions, do so in different ways and thus with somewhat different tradeoffs. Liquidity fees are designed to reduce shareholders' incentives to redeem when it is abnormally costly for the fund to provide liquidity by requiring redeeming shareholders to bear at least some of the liquidity costs of their redemption (rather than transferring those costs to remaining shareholders).
Fees and gates also may have different levels of effectiveness under different stress scenarios. For example, we expect that liquidity fees will be able to reduce the harm to non-redeeming shareholders and the broader markets when a fund faces heavy redemptions during periods in which its true liquidity costs are less than the fund's imposed liquidity fee. Redemptions during this time will increase the value of the fund, which, in turn, will stabilize the fund to the extent remaining shareholders' incentive to redeem shares is decreased. However, it is possible that liquidity fees might not be fully effective during periods of systemic crises because, for example, shareholders might choose to redeem from money market funds irrespective of the level of a fund's true liquidity costs and imposition of the liquidity fee.
Finally, research in behavioral economics suggests that liquidity fees may be particularly effective in dampening a run because, when faced with two negative options, investors tend to prefer possible losses over certain losses, even when the amount of possible loss is significantly higher than the certain loss.
We are proposing a combination of fees and gates, with a fee as the initial default but with an optional ability for a fund's board to replace the fee with a gate, or impose a gate immediately, in each case as the board deems best for the fund.
Many participants in the money market fund industry have expressed support for imposing some form of a liquidity fee or gate on redeeming money market fund investors when the fund comes under stress as a way of reducing, in a targeted fashion, the fund's susceptibility to heavy redemptions.
We recognize that the prospect of a fund imposing a liquidity fee or gate could raise a concern that shareholders will engage in preemptive redemptions if they fear the imminent imposition of fees or gates (either because of the fund's situation or because such redemption restrictions have been triggered in other money market funds).
While we acknowledge that liquidity fees may not always preclude redemptions, fees are designed so that as redemptions begin to increase, if liquidity costs exceed the prescribed threshold for imposing a fee and the fund imposes a fee, the run will be halted. The fees, once imposed, should both curtail the level of redemptions, and fees paid by those that do redeem should, at least partially, cover liquidity costs incurred by funds and may even potentially repair the NAV of any funds that have suffered losses. One
Under this proposal, money market funds would have the benefit of being able to use the penny rounding method of pricing for their portfolios. As discussed further below in section III.F.4 and III.F.5, they would also have to provide much fuller transparency of the market-based NAV per share of the funds and the marked-based value of the funds' portfolio securities. This increased transparency is designed to allow better shareholder understanding of deviations between the fund's value using market-based factors and its stable price. It also is aimed at helping investors better understand any risk involved in money market fund investments as a result of rule 2a–7's rounding convention. However, retaining these valuation and pricing methods for money market funds does not eliminate the ability of investors to redeem ahead of other investors from a money market fund that is about to “break the buck” and consequently may permit those early redeemers to receive $1.00 per share instead of its market value as discussed in section III.A above. Nevertheless, in times of fund or market stress the fund is likely to impose either liquidity fees or gates, which will limit the ability of redeeming shareholders to receive more than their pro-rata share of the market-based value of the fund's assets.
Requiring that boards impose liquidity fees absent a finding that the fee is not in the best interest of the fund, and permitting them to impose gates once the fund has crossed certain thresholds could offer advantages to the fund in addition to better and more systematically managing liquidity and redemption activity. They could provide fund managers with a powerful incentive to carefully monitor shareholder concentration and shareholder flow to lessen the chance that the fund would have to impose liquidity fees or gates in times of market stress (because larger redemptions are more likely to cause the fund to breach the threshold). Such a requirement also could encourage portfolio managers to increase the level of daily and weekly liquid assets in the fund, as that would tend to lessen the likelihood of a liquidity fee or gate being imposed.
The prospect of facing fees and gates when a fund is under stress serves to make the risk of investing in a money market fund more transparent and to better inform and sensitize investors to the inherent risks of investing in money market funds. Fees and gates also could encourage shareholders to monitor and exert market discipline over the fund to reduce the likelihood that either the imposition of fees or gates will become necessary in that fund.
Our proposal on liquidity fees and gates, however, could affect shareholders by potentially limiting the full, unfettered redeemability of money market fund shares under certain conditions, a principle embodied in the Investment Company Act.
We request comment on our discussion of the economic basis and tradeoffs for this alternative.
• Would our proposal on liquidity fees and gates achieve our goals of preserving the benefits of stable share price money market funds for the widest range of investors and the availability of short-term financing for issuers while enhancing investor protection and risk transparency, making funds more resilient to mass redemptions and improving money market funds' ability to manage and mitigate potential contagion from high levels of redemptions? Are there other benefits that we have not identified and discussed?
• Would a liquidity fee provide many of the same potential benefits as the proposed floating NAV? If not, what are the differences in potential benefits? Would it result in a more effective pricing of liquidity risk into the funds' share prices and a fairer allocation of that cost among shareholders? Would a liquidity fee that potentially restores the fund's shadow price reduce some remaining shareholders incentive to redeem?
• Would the prospect of a fee or gate encourage investors to limit their concentration in a particular fund? Would an appropriately structured threshold for liquidity fees and gates provide an incentive for fund managers to monitor shareholder concentration and flows as well as portfolio composition to minimize the possibility of a fund applying a fee or gate? Would it encourage better board monitoring of the fund? Would it encourage shareholders to monitor and exert appropriate discipline over the fund? Would shareholders underestimate whether a fee or gate would ever be imposed by the board? How would the prospect of a fee or gate affect shareholder behavior?
• How will the liquidity fees or gates affect the fund's portfolio choices? Will it affect the way funds manage their weekly liquid assets?
• Funds currently have the ability to delay the payment of redemption proceeds for up to seven days.
• Would the expected imposition of a liquidity fee or gate increase redemption activity as the fund's liquidity levels near the threshold? Would the prospect of a liquidity fee or gate create an incentive to redeem during times of potential stress by shareholders fearing that such a fee or gate might be imposed, thus inciting a run? If so, do commenters agree that in such a case the redemptions would trigger a fee or gate and slow or halt redemptions? If not, are there ways in which we could modify our proposed threshold for liquidity fees and gates such that a run could not arise without triggering fees or gates? What information would be needed for investors to reliably predict that a fund is on the verge of imposing fees or gates? Would the necessary information be readily available under our proposal?
• Are some types of shareholders more likely than other types of shareholders to attempt to redeem in anticipation of the imposition of the fee or gate? Are there ways that we could reduce the risk of pre-emptive redemptions? Would imposition of a fee or gate as a practical matter lead to liquidation of that fund? If so, should this be a concern?
• Is penny rounding sufficient to allow government money market funds to maintain a stable price? Should we also permit these funds to use amortized cost valuation? If so, why?
• Should we prohibit advisers to money market funds from charging management fees while the fund is gated? How might this affect advisers' incentives to make recommendations to the board when it is considering whether to not impose a liquidity fee or gate?
We note that we are not proposing to repeal or otherwise modify rule 17a–9 (permitting sponsors to support money market funds through portfolio purchases in some circumstances) under this proposal. Therefore, money market fund sponsors would be able to continue to support the money market funds they manage by purchasing securities from money market fund portfolios at their amortized cost value (or market price, if greater). Instead, we are requiring greater and more timely disclosure of any sponsor support of a money market fund, as further described in section III.F.1 below. We note that some sponsors could use such support to prevent a money market fund from breaching a threshold that would otherwise require the board to consider imposition of a liquidity fee. Such support could benefit fund shareholders by preventing them from incurring the costs or loss of liquidity that a liquidity fee or gate may entail. However, because such support would be discretionary, its possibility may create uncertainty about whether fund investors will have to bear the costs and burdens of a liquidity fee or gate in times of stress, which could lead to unpredictable shareholder behavior and inefficient shareholder allocation of investments if their expectations of risk turn out to be misplaced. Our continuing to permit sponsor support of money market funds, albeit with greater transparency,
• Should we continue to allow this type of sponsor support of money market funds, given the enhanced transparency requirements? Would allowing sponsor support prevent or limit this proposal from achieving the goal of enhancing investor protection and improving money market funds' ability to manage high levels of redemptions? If so, how? Should we instead prohibit sponsor support under this option? If so, why? If we prohibited sponsor support, how would this advance investor protection if such support would protect the value or liquidity of the fund? Should we modify rule 17a–9 to limit or condition sponsor support?
• Would sponsors provide support to prevent a money market fund from breaching a liquidity threshold? Would sponsors be more willing and able to provide support to stabilize the fund under the liquidity fees and gates proposal than they were to support money market funds before the 2007–2008 financial crisis? Why or why not?
As discussed further below, we also are proposing to require that money market funds disclose their market-based NAVs and levels of daily and weekly liquid assets on a daily basis on the funds' Web sites.
We are proposing that if a money market fund's weekly liquid assets fall or remain below 15% of its total assets at the end of any business day, the next business day it must impose a 2% liquidity fee on each shareholder's redemptions, unless the fund's board of directors (including a majority of its independent directors) determines that
In addition, once the fund had crossed below the 15% threshold, the fund's board of directors (including a majority of its independent directors) would be able to temporarily suspend redemptions and gate the fund if the board determines that doing so is in the best interest of the fund.
We are proposing a default liquidity fee that the money market fund's board of directors can modify or remove if it is in the best interest of the fund, because this structure offers the possibility of achieving many of the benefits of both fully discretionary and automatic (regulatory mandated) redemption restriction triggers. A purely discretionary trigger allows a fund board the flexibility to determine when a restriction is necessary, and thus allows tailoring of the triggering of the fee to the market conditions at the time, and the specific circumstances of the fund. However, a purely discretionary trigger creates the risk that a fund board may be reluctant to impose restrictions, even when they would benefit the fund and the short-term financing markets. They may not impose such restrictions out of fear that doing so signals trouble for the individual fund or fund complex (and thus may incur significant business and reputational effects) or could incite redemptions in other money market funds in anticipation that fees may be imposed in those funds as well. Fully discretionary triggers also provide shareholders with little advance knowledge of when such a restriction might be triggered and fund boards could end up applying them in a very disparate manner. Fully discretionary triggers also may present operational difficulties for fund managers who suddenly may need to implement a liquidity fee and may not have systems in place that can rapidly institute a fee whose trigger and size was previously unknown.
Automatic triggers set by the Commission may mitigate these potential concerns, but they create a risk of imposing costs on shareholders when funds are not truly distressed or when liquidity is not abnormally costly. Establishing thresholds that result in the imposition of a fee, unless the board makes a finding that such a fee is not in the best interest of the fund, balances these tradeoffs by providing some transparency to shareholders on potential fee or gate triggers and giving some guidance to boards on when a fee or gate might be appropriate. At the same time, it also allows boards to avoid imposing a fee or gate when it would be inappropriate in light of the circumstances of the fund and the conditions in the market.
Our proposed rule essentially creates a default liquidity fee of a pre-determined size, imposed when the fund's weekly liquid assets have dropped below a certain threshold. However, it provides the fund's board flexibility to alter the default option—for example, by imposing a gate instead of a fee or by imposing a fee at a different threshold or imposing a lower percentage fee—as long as it determines that doing so is in the best interest of the fund.
We request comment on our proposed default structure for the liquidity fees and gates.
• Should the imposition of a liquidity fee or gate be fully discretionary or should it have a completely automatic trigger? Why?
• Would a money market fund's board of directors impose a fully discretionary fee or gate during times of stress on the money market fund despite its possible unpopularity with investors and potential competitive disadvantage for the fund or fund group if other funds are not imposing a liquidity fee or gate? On the other hand, would a fund's board of directors be able to best determine when a fee or gate should be imposed rather than an automatic trigger?
• What operational complexities would be involved in a fully discretionary liquidity fee? Would fund complexes and their intermediaries be able to program systems in advance to accommodate the immediate imposition of a liquidity fee whose trigger and size were unknown in advance?
We are proposing that a liquidity fee automatically be imposed on money market fund redemptions if the fund's weekly liquid assets fall below 15% of its total assets, unless the fund's board of directors (including a majority of its independent directors) determines that a fee would not be in the best interest of the fund.
Our proposed 15% weekly liquid asset threshold is a default for money market funds imposing liquidity fees that requires the board to consider taking action. Fund boards of directors have the flexibility to impose a liquidity fee or gate if weekly liquid assets fall below this threshold (or they may determine not to impose a liquidity fee or gate at all), and can continue to reconsider their decision in light of new events as long as the fund is below this liquidity threshold.
Fees and gates are a tool to mitigate problems in funds, so we selected a threshold that would indicate distress in a fund, but also one that few funds would cross in the ordinary course of business, allowing funds and their boards to avoid the costs of frequent unnecessary consideration of fees and gates. The analysis below shows that if the triggering threshold was between 25–30% weekly liquid assets, funds would have crossed this threshold every month except one during the period, and if it was set at between 20–25% weekly liquid assets, some funds would have crossed it nearly every other month. However, the analysis shows that funds rarely cross the threshold of between 15–20% weekly liquid assets during normal operations, and that during the time period analyzed, there were only 2 months that had any funds below the 15% weekly liquid assets threshold.
Because the data on liquidity is reported at the end of the month, it could be the case that more than four money market funds' level of weekly liquid assets fell below 15% on other days of the month during our period of study. However, this number may overestimate the percentage of funds that are expected to impose a fee or gate because we expect that funds would increase their risk management around their level of weekly liquid assets in response to the fees and gates requirement to avoid breaching the liquidity threshold. Using this information to inform our choice of the appropriate level for a weekly liquid asset threshold, we are proposing a 15% weekly liquid assets threshold to balance the desire to have such consideration triggered while the fund still had liquidity reserves to meet redemptions but also not set the trigger at a level that frequently would be tripped by normal fluctuations in liquidity levels that typically would not indicate a fund under stress.
We are proposing to require that any fee or gate be lifted automatically once the fund's weekly liquid assets have risen back above 30% of the fund's assets—the minimum currently mandated under rule 2a–7—and thus a fee or gate would appear to be no longer justified. We considered whether a fee or gate should be lifted automatically before the fund's weekly liquid assets were completely restored to their required minimum—for example, once they had risen to 25%. However, we preliminarily believe that automatically removing such a restriction before the fund's level of weekly liquid assets was fully replenished may result in a fund being unable to maintain a liquidity fee or gate to protect the fund even when the fund is still under stress and before stressed market conditions have fully subsided. We note that a fund's board can always determine to lift a fee or gate before the fund's level of weekly liquid assets is restored to 30% of its assets.
There are a number of factors that a fund's board of directors may consider in determining whether to impose a liquidity fee once the fund's weekly liquid assets have fallen below 15% of its total assets. For example, it may want to consider why the level of weekly
We considered instead proposing a threshold based on the shadow price of the money market fund. For example, one money market fund sponsor has suggested that we require money market funds' boards of directors to consider charging a liquidity fee on redeeming shareholders if the shadow price of a fund's portfolio fell below a specified threshold.
We also considered proposing a threshold based on the level of daily liquid assets rather than weekly liquid assets. We expect that a money market fund would meet heightened shareholder redemptions first by depleting the fund's daily liquid assets and next by depleting its weekly liquid assets, as daily liquid assets tend to be the most liquid. Accordingly, basing this threshold on weekly liquid assets thus provides a deeper picture of the fund's overall liquidity position, as a fund whose weekly liquid assets have fallen to 15% has likely depleted all of its daily liquid assets. In addition, a fund's levels of daily liquid assets may be more volatile because they are one of the first assets used to satisfy day-to-day shareholder redemptions, and thus more difficult to use as a gauge of true fund distress. Finally, as noted above, funds are able under the Investment Company Act to delay payment of redemption requests for up to seven days. Thus, substantial depletion of weekly liquid assets may be a better indicator of true fund distress. We also considered a trigger that would combine liquidity and market-based NAV thresholds but have preliminarily concluded that a single threshold would accomplish our goals without undue complexity and would be easier for investors to understand.
We request comment on our default threshold for liquidity fees and our threshold on when a money market fund's board may impose a gate.
• What should be the trigger either for a default liquidity fee or for a board's ability to impose a gate? Rather than our proposed trigger based on a fund's level of weekly liquid assets, should it be based on the fund's shadow price or its level of daily liquid assets? Should it be based on a certain fall in either the fund's weekly liquid assets or shadow price? Why and what extent of a fall? Should it be based on some other factor? Should it be based on a combination of factors?
• If we considered a threshold based on the fund's shadow price, do shareholders differentiate between realized and market-based losses (such as those from security defaults versus those from market interest rate changes) when considering a money market fund's shadow price? If so, how does it affect their propensity to redeem shares when one or more funds have losses?
• Should we permit a fund board to impose a liquidity fee or gate even before a fund passes the trigger requiring the default fee to be considered if the board determines that an early imposition of a liquidity fee or gate would be in the best interest of the fund? Would that reduce the benefits discussed above of having an automatic default trigger? What concerns would arise from permitting imposition of a fee or gate before a fund passes the thresholds we may establish?
• What extent of decline in weekly liquid assets should trigger consideration of a fee or gate and why? Should it be more or less than 15% weekly liquid assets, such as 10% or 20%?
• How do fund holdings of weekly liquid assets vary within the calendar month, between Form N–MFP filing dates? How do net shareholder redemptions vary within the calendar month, between Form N–MFP filing dates? How accurately can the fund forecast the net redemptions of its shareholders? When is the fund more likely to make forecasting errors?
• Should a liquidity fee or gate not be required until the fund suffers an actual loss in value? Why or why not and if so, how much of a loss in value?
• Is one type of threshold less susceptible to preemptive runs? If so, why?
• Are there other factors that a board might consider in determining whether to impose a fee or gate? Should we require that boards consider certain factors? If so, which factors and why?
We are proposing that the liquidity fee be set at a default rate of 2%, although a fund's board could impose a lower liquidity fee (or no fee at all) if it determines that a lower level is in the best interest of the fund.
We also considered whether we should require a liquidity fee with an amount explicitly tied to market indicators of changes in liquidity costs for money market funds. For example, one fund manager suggested that the amount of the liquidity fee charged could be based on the anticipated change in the market-based NAV of the fund's portfolio from the redemption, assuming a horizontal slice of the fund's portfolio was sold to meet the redemption request.
There may be a number of drawbacks to such a “market-sized” liquidity fee, however. First, it does not provide significant transparency in advance to shareholders of the size of the liquidity fee they may have to pay in times of stress. It could also reduce the fees' efficacy in stemming redemptions if investors fear that the fee might go up in the future. This lack of transparency may hinder shareholders' ability to make well-informed decisions. It also may be difficult for money market funds to rapidly determine precise liquidity costs in times of stress when the short-term financing markets may be generally illiquid. Indeed, our staff gave no-action assurances to money market funds relating to valuation during the 2008 financial crisis because determining pricing in the then-illiquid markets was so difficult.
These factors have led us to propose a default liquidity fee of a fixed size, but to allow the board of directors (including a majority of its independent directors) to impose a smaller-sized liquidity fee if it determines that such a smaller fee would be in the best interest of the fund.
We request comment on our proposed default size for the liquidity fee.
• What should be the amount of the liquidity fee? Should it be a default amount, a fixed amount, or an amount directly tied to the cost of liquidity in times of stress? If as proposed, we adopt a default fee, should it be 2%, 1%, or some other level? Should we give boards discretion to impose a higher fee if the board determines that it is in the best interest of the fund? Commenters are requested to please provide data to support your suggested fee level.
• If the amount of the liquidity fee is tied to the cost of liquidity at the time of the redemption, how would that
• Is a flat, fixed liquidity fee preferable to a variable fee that might be higher than the flat fee? Will the fund's ability to choose a lower liquidity fee result in any conflicts of interest between redeeming shareholders, non-redeeming shareholders, and the investment adviser?
• How should we weigh the risk that a flat liquidity fee may be higher or lower than the actual liquidity costs to the money market fund from the redemption, against the risk that a market-based liquidity fee may not provide sufficient advance transparency to shareholders and may be difficult to set appropriately in a crisis?
• How difficult would it be for money market funds and various intermediaries in the distribution chain of money market fund shares to handle from an operational perspective a liquidity fee that varied?
Our proposal provides that a liquidity fee be imposed once a non-government money market fund's weekly liquid assets has fallen below 15% of its total assets (which is one-half of its required 30% minimum), unless the board of directors determines that such a fee would not be in the best interest of the fund. After the fund has crossed that 15% liquidity threshold, the board could also impose a gate. Based on this default choice, the implicit ordering of redemption restrictions thus would be a liquidity fee, and if that fee is not sufficiently slowing redemptions, a gate (although once the liquidity fee threshold was crossed, a board would be able to immediately impose a gate instead of a fee). We proposed a liquidity fee, rather than a gate, as the default because we believe that a fee has the potential to be less disruptive to fund shareholders and the short-term financing markets because a fee allows fund shareholders to continue to transact in times of stress (although at a cost). Some industry commenters instead have suggested that money market funds impose a gate first.
• Should the implicit ordering in the proposed rule be reversed, with a default of the fund imposing a gate once the fund has crossed the weekly liquid asset threshold, unless or until the board determines to re-open with a liquidity fee? Why?
• Should there be a different threshold for consideration of a gate if we adopted a gate as the default? Why or why not? Should a gate be mandatory under certain circumstances? If so, under what circumstances? Should any mandatory gate have a pre-specified window? If so, how long should that gate be imposed?
We are proposing that a money market fund board must lift any gate it imposes within 30 days and that a board could not impose a gate for more than 30 days in any 90-day period. As noted above, a fund board could only impose a gate if it determines that the gate is in the best interest of the fund, and we would expect the board would lift the gate as soon as it determines that a gate is no longer in the best interest of the fund. This time limitation for the gate is designed to balance protecting the fund in times of stress while not unduly limiting the redeemability of money market fund shares, given the strong preference embodied in the Investment Company Act for the redeemability of open-end investment company shares.
These concerns motivated us to propose a time period that would not freeze shareholders' money market fund investments for an excessively long period of time. On the other hand, we do want to provide some time for stressed market conditions to subside, for portfolio securities to mature and provide internal liquidity to the fund, and for potentially distressed fund portfolio securities to recover or be held to maturity. As of February 28, 2013, 43% of prime money market fund assets had a maturity of 30 days or less.
• Does a 30-day limit appropriately balance these objectives? Should there be a shorter time limit, such as 10 days? Should there be a longer time limit, such as 45 days? Why?
• Will our proposed limit on the number of days a fund can be gated in any 90-day period effectively prevent “gaming” of the 30-day gate limitation? Should it be a shorter window or larger window? 60 days? 120 days?
• Should we impose additional restrictions on a money market fund's use of a gate? Should we, for example, require the board of directors of a money market fund that has imposed a gate to meet each day or week that the gate is in place, and permit the gate to remain in place only if the board makes specified findings at these meetings? We could provide that a gate may only remain in place if the board, including a majority of the independent directors, finds that lifting the gate and meeting shareholder redemptions could result in material dilution or other unfair results to investors or existing shareholders. Would requiring the board to make such a finding to continue to use a gate help to prevent a fund from imposing a gate for longer than is necessary or appropriate? Would a different required finding better achieve this goal? Would fund boards be able to make such findings accurately, particularly during a crisis when a board may be more likely to impose a gate? Would such a requirement deter fund boards from keeping a gate in place when doing so may be in the best interest of the fund?
For beneficial owners holding mutual fund shares through omnibus accounts, we understand that, with respect to redemption fees imposed to deter market timing of mutual fund shares, financial intermediaries generally impose any redemption fees themselves to record or beneficial owners holding through that intermediary.
We request comment on the application of liquidity fees and gates to shares held through omnibus accounts.
• Do commenters agree with our view that liquidity fees likely will be handled by intermediaries in a manner similar to how they currently impose redemption fees? If not, how would liquidity fees be applied to shares held through financial intermediaries? Is our understanding correct that financial intermediaries generally apply any liquidity fees themselves to record or beneficial owners holding through that intermediary? Would they do so based on existing contractual arrangements or would funds make contractual modifications? What cost would be involved in any contractual modifications?
• Would funds in addition or instead seek certifications from financial intermediaries that they will apply any liquidity fees? What cost would be involved in any such certifications?
• What other methods might money market funds use to gain assurances that financial intermediaries will apply any liquidity fees appropriately? At what costs? Will some intermediaries not offer prime money market funds to avoid operational costs involved with fees and gates?
The Commission is proposing exemptions from various provisions of the Investment Company Act to permit a fund to institute liquidity fees and gates.
We do not believe that gates would conflict with the purposes underlying section 22(e), which was designed to prevent funds and their investment advisers from interfering with the redemption rights of shareholders for improper purposes, such as the preservation of management fees.
We also propose to provide exemptions from rule 22c–1 to permit a money market fund to impose liquidity fees because a money market fund would impose liquidity fees to benefit the fund and its shareholders by providing a more systematic allocation of liquidity costs.
A gate would also be similarly limited. It could only be imposed for a limited period of time and only under circumstances of stress on the fund. This aspect of gates, therefore, is akin to rule 22e–3, which also provides an exemption from section 22(e) to permit money market fund boards to suspend redemptions of fund shares in order to protect the fund and its shareholders from the harmful effects of a run on the fund, and to minimize the potential for disruption to the securities markets.
We request comment on our proposed amendments allowing money market funds to institute fees and gates.
• Would the proposed amendments to rule 2a–7 provide sufficient exemptive relief to permit a money market fund to institute fees or gates with both the requirements of rule 2a–7 and the Investment Company Act? Are there other provisions of the Investment Company Act from which the Commission should consider providing an exemption?
Under this proposal, we also would amend rule 22e–3 to permit (but not require) the permanent suspension of redemptions and liquidation of a money market fund if the fund's level of weekly liquid assets falls below 15% of its total assets.
We considered whether a money market fund's level of weekly liquid assets should have to fall further than the 15% threshold that allows the imposition of fees and gates for the fund to be able to permanently suspend redemptions and liquidate. A permanent suspension of redemptions could be considered more draconian because there is no prospect that the fund will re-open—instead the fund will simply liquidate and return money to shareholders. Accordingly, one could consider a lower weekly liquid asset threshold than 15% justified. However, we believe such considerations must be balanced against the risk that might be caused by establishing a lower threshold for enabling a permanent suspension of redemptions. For example, a fund with a fee or gate in place might know (based on market conditions or discussions with its shareholders or otherwise) that upon lifting the fee or gate it will experience a severe run. We would not want to force such a fund to lift the fee or re-open and weather enough of that run to deplete its weekly liquid assets below a lower threshold. We preliminarily believe this risk is great enough to warrant allowing money market funds to suspend redemptions permanently once the fund's weekly liquid assets fall below 15% of its total assets.
As under existing rule 22e–3, a money market fund also would still be able to suspend redemptions and liquidate if it determines that the extent of the deviation between its shadow price and its market-based NAV per share may result in material dilution or other unfair results to investors or existing shareholders.
We request comment on our proposed amendments to rule 22e–3 under this proposal.
• Is it appropriate to allow a money market fund to suspend redemptions and liquidate if its level of weekly liquid assets falls below 15% of its total assets? Is there a different threshold based on daily or weekly assets that would better protect money market fund shareholders?
• Should a fund's ability to suspend redemptions and liquidate be tied only to adverse deviations in its shadow price? If so, is our current standard under rule 22e–3 appropriate or is there a different level of shadow price decline that should trigger a money market fund's ability to suspend redemptions and liquidate?
We are proposing that government money market funds (including Treasury money market funds) be exempt from any fee or gate requirement but that these funds be permitted to impose such a fee or gate under the regime we have described above if the ability to impose such fees and gates were disclosed in the fund's prospectus.
As discussed in the RSFI Study, government money market funds historically have experienced inflows, rather than outflows, in times of stress due to flights to quality, liquidity, and transparency.
We note that Treasury money market funds generally would be exempt from any liquidity fees and gates requirement because at least 80% of their assets generally must be Treasury securities and overnight repurchase agreements collateralized with Treasury securities, each of which is a weekly liquid asset. Accordingly, it is highly unlikely for a Treasury money market fund to breach the 15% weekly liquid asset threshold that would allow imposition of a fee or gate. Most government money market funds similarly always would have at least 15% weekly liquid assets because of the nature of their portfolio, but it is possible to have a government money market fund with below 15% weekly liquid assets. We also note that government money market funds and Treasury money market funds do not necessarily have the same risk profile. For example, government money market funds generally have a much higher portion of their portfolios invested in securities issued by the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Banks and thus a higher exposure to the home mortgage market than Treasury money market funds. We note that this exemption would not apply to tax-exempt (or municipal) money market funds. As discussed above, because tax-exempt money market funds are not required to maintain 10% daily liquid assets, these funds may be less liquid than other money market funds, which could raise concerns that tax-exempt retail funds might not be able to manage even the lower level of redemptions expected in a retail money market fund. In addition, municipal securities typically present greater credit and liquidity risk than government securities and thus could come under pressure in times of stress.
We request comment on our proposed exemption of government money market funds from the proposed liquidity fees and gates requirement.
• Is this exemption appropriate, particularly in light of the redemptions from government funds in late June and early July 2011? Why or why not?
• Is it appropriate to give government money market funds the option to have the ability to impose fees and gates so long as they disclose the option to investors? Why or why not? What factors might lead a government fund to exercise this option?
• Should the exemption for government money market funds be extended to municipal money market funds? Why or why not?
We also considered whether there should be other exemptions from the proposed liquidity fees and gates requirement. For example, as discussed in section III.A.4 above, we are proposing an exemption for retail money market funds from any floating NAV requirement. We noted in that section how retail money market funds experienced fewer redemptions during the 2007–2008 financial crisis and thus may be less likely to suffer heavy redemptions in the future. However, unlike with government money market funds, a retail prime money market fund generally is subject to the same credit and liquidity risk as an institutional prime money market fund. In addition, a floating NAV requirement affects a shareholder's experience with a money market fund on a daily basis. Given the costs and burdens associated with a floating NAV requirement, and the potential limited benefit to retail shareholders on an ongoing basis given that they are less likely to engage in heavy redemptions, a retail exemption might be more appropriate on balance under a floating NAV requirement than under a liquidity fees and gates requirement. In contrast, a fee or gate requirement would not affect a money market fund unless the fund's weekly liquid assets fell below 15% of its total assets—
We also have considered whether irrevocable redemption requests submitted at least a certain period in advance should be exempt as the fund should be able to plan for such liquidity demands and hold sufficient liquid assets. However, we are concerned that shareholders could try to “game” the fee or gate requirement through such exemptions, for example, by redeeming a certain amount every week and then reinvesting the redemption proceeds immediately if the cash is not needed. We also are concerned that allowing such an exception would add significantly to the cost and complexity of this requirement, as fund groups would need to be able to separately track which shares are subject to a fee or gate and which are not.
We request comment on other potential exemptions from the proposed liquidity fees and gates requirement.
• Should retail money market funds (including tax-exempt money market funds) or retail investors be exempt from any liquidity fee or gate provision? Should there be an exemption for small redemption requests, such as redemptions below $10,000? If so, below what level? If a retail money
• Should we create an exemption for shareholders that submit an irrevocable redemption request at least a certain period in advance of the needed redemption? Why or why not? With what period of advance notice? For each of these exemptions, could funds track the shares that are not subject to the fee or gate? What operational costs would be involved in including such an exemption? Would shareholders “game” such exemptions?
• Would further exemptions undermine the goal of the liquidity fee or gate in deterring or stopping heavy redemptions? Why or why not? Would exemptions from the fee or gate proposal make it more difficult or costly to implement or operationalize? How would any such difficulties compare to the benefits that could be obtained from such exemptions?
Money market funds and others in the distribution chain (depending on how they are structured) likely would incur some operational costs in establishing or modifying systems to administer a liquidity fee or gate. These costs likely would be incurred by, or spread amongst, a fund's transfer agents, sub-transfer agents, recordkeepers, accountants, portfolio accounting departments, and custodian. Money market funds and others also may be required to develop procedures and controls, and may incur other costs, for example to update systems necessary for confirmations and account statements to reflect the deduction of a liquidity fee from redemption proceeds. Money market funds and their intermediaries may need to establish new, or modify existing, systems or procedures that would allow them to administer temporary gates. Money market fund shareholders also might be required to modify their own systems to prepare for possible future liquidity fees, or manage gates, although we expect that only some shareholders would be required to make these changes.
These costs would vary depending on how a liquidity fee or gate is structured, including its triggering event, as well as on the capabilities, functions, and sophistication of the fund's and others' current systems. These factors will vary among money market funds, shareholders, and others, and particularly because we request comment on a number of ways in which we could structure a liquidity fee or gate requirement, we cannot ascertain at this stage the systems and other modifications any particular money market fund or other affected entity would be required to make to administer a liquidity fee or manage a gate. Indeed, we believe that money market funds and other affected entities themselves would need to engage in an in-depth analysis of this alternative in order to estimate the costs of the necessary systems modifications. While we do not have the information necessary to provide a point estimate of the potential costs of systems modifications needed to administer a liquidity fee or gate, our staff has estimated a range of hours and costs that may be required to perform activities typically involved in making systems modifications.
If a money market fund determines that it would only impose a flat liquidity fee of a fixed percentage known in advance (
Although our staff has estimated the costs that a single affected entity would incur, we anticipate that many money market funds, transfer agents, and other affected entities may not bear the estimated costs on an individual basis. Instead, the costs of systems modifications likely would be allocated among the multiple users of the systems, such as money market fund members of a fund group, money market funds that use the same transfer agent or custodian, and intermediaries that use systems purchased from the same third party. Accordingly, we expect that the cost for many individual entities may be less than the estimated costs due to economies of scale in allocating costs among this group of users.
Moreover, depending on how a liquidity fee or gate is structured, mutual fund groups and other affected entities already may have systems that could be adapted to administer a liquidity fee or gate at minimal cost, in which case the costs may be less than the range we estimate above. For example, some money market funds may be part of mutual fund groups in which one or more funds impose deferred sales loads or redemption fees
Our staff estimates that a money market fund shareholder whose systems (including related procedures and controls) required modifications to account for a liquidity fee or gate would incur one-time costs ranging from $220,000 to $450,000.
We request comment on our estimate of operational costs associated with the liquidity fees and gates alternative.
• Do commenters agree with our estimates of operational costs?
• Are there operational costs in addition to those we estimate above? What systems would need to be reprogrammed and to what extent? What types of ongoing maintenance, training, and other activities to administer the liquidity fee or gate would be required, and to what extent?
• Are our estimates too high or too low and, if so, by what amount? To what extent would the estimate vary based on the event that would trigger the imposition of a liquidity fee or the manner in which the fee would be calculated once triggered? To what extent would the estimate vary based on how the gate is structured?
• To what extent would money market funds or others experience the economies of scale that we identify?
We understand that liquidity fees may have certain tax implications for money market funds and their shareholders. Similar to the liquidity fee we are proposing today, rule 22c–2 allows mutual funds to recover costs associated with frequent mutual fund share trading by imposing a redemption fee on shareholders who redeem shares within seven days of purchase. We understand that for tax purposes, shareholders of these mutual funds generally treat the redemption fee as offsetting the shareholder's amount realized on the redemption (decreasing the shareholder's gain, or increasing the shareholder's loss, on redemption).
If, as described above, a liquidity fee has no direct tax consequences for the money market fund, that tax treatment would allow the fund to use 100% of the fee to repair a market-based price per share that was below $1.0000. If redemptions involving liquidity fees cause the money market fund's shadow price to reach $1.0050, however, the fund may need to distribute to the remaining shareholders sufficient value to prevent the fund from breaking the buck (and thus rounding up to $1.01 in pricing its shares).
In the absence of sufficient earnings and profits, however, some or all of these additional distributions would be treated as a return of capital. Receipt of a return of capital would reduce the recipient shareholders' basis (and thus could decrease a loss, or create or increase a gain for the shareholder in the future when the shareholder redeems the affected shares).
Finally, we understand that the tax treatment of a liquidity fee may impose certain operational costs on money market funds and their financial intermediaries and on shareholders. Either fund groups or their intermediaries would need to track the tax basis of money market fund shares as the basis changed due to any return of capital distributions, and shareholders would need to report in their annual tax filings any gains
We request comment on this aspect of our proposal.
• If liquidity fees cause the fund's shadow price to exceed $1.0049, will that result cause the fund to make a special distribution to current shareholders?
• Do money market funds and other intermediaries already have systems in place to track and report the variations in basis, and the gains and losses that might result from imposing liquidity fees? If not, what costs would be
In connection with the liquidity fees and gates alternative, we are also proposing alternate disclosure-related amendments to rule 2a–7, rule 482 under the Securities Act,
The Commission's liquidity fees and gates alternative proposal would permit funds to charge liquidity fees and impose redemption restrictions on money market fund investors. As a measure to achieve this reform, we propose to require that each money market fund (other than government money market funds that have chosen to rely on the proposed rule 2a–7 exemption for government money market funds from any fee or gate requirements), include a bulleted statement, disclosing the particular risks associated with investing in a fund that may impose liquidity fees or redemption restrictions, on any advertisement or sales material that it disseminates (including on the fund Web site). We also propose to include wording designed to inform investors about the primary general risks of investing in money market funds in this bulleted disclosure statement. While money market funds are currently required to include a similar disclosure statement on their advertisements and sales materials,
Specifically, we would require each money market fund (other than government money market funds that have chosen to rely on the proposed rule 2a–7 exemption for government money market funds from any fee or gate requirements) to include the following bulleted disclosure statement on their advertisements and sales materials:
• You could lose money by investing in the Fund.
• The Fund seeks to preserve the value of your investment at $1.00 per share, but cannot guarantee such stability.
• The Fund may impose a fee upon sale of your shares when the Fund is under considerable stress.
• The Fund may temporarily suspend your ability to sell shares of the Fund when the Fund is under considerable stress.
• An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
• The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
If an affiliated person, promoter, or principal underwriter of the fund, or an affiliated person of such person, has entered into an agreement to provide financial support to the fund, the fund would be permitted to omit this bulleted sentence from the disclosure statement for the term of the agreement.
As discussed above, the liquidity fees and gates proposal would exempt government money market funds from any fee or gate requirement, but a government money market fund would be permitted to charge liquidity fees and impose gates if the ability to charge liquidity fees and impose gates were disclosed in the fund's prospectus. Accordingly, the proposed amendments to rule 482 and Form N–1A would require government money market funds that have chosen to rely on this exemption to include a bulleted disclosure statement on the fund's advertisements and sales materials and in the summary section of the fund's statutory prospectus (and, accordingly, in any summary prospectus, if used) that does not include disclosure of the risks of liquidity fees and gates, but that includes additional detail about the risks of investing in money market funds generally. We propose to require each government money market fund that relies on the exemption to include the following bulleted disclosure statement in the summary section of its statutory prospectus (and, accordingly, in any summary prospectus, if used), and on any advertisement or sales material that it disseminates (including on the fund Web site):
• You could lose money by investing in the Fund.
• The Fund seeks to preserve the value of your investment at $1.00 per share, but cannot guarantee such stability.
• An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
• The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Likewise, if an affiliated person, promoter, or principal underwriter of the fund, or an affiliated person of such person, has entered into an agreement to provide financial support to the fund, and the term of the agreement will extend for at least one year following the effective date of the fund's registration statement, the fund would be permitted to omit this bulleted sentence from the disclosure statement that appears on the fund's registration statement.
The proposed disclosure statements are intended to be one measure to change the investment expectations of money market fund investors, including the expectation that a money market fund is a stable, riskless investment.
We request comment on the proposed disclosure statement.
• Would the proposed disclosure statement adequately alert investors to the risks of investing in a money market fund, including a fund that could impose liquidity fees or gates under certain circumstances? Would investors understand the meaning of each part of the proposed disclosure statement? If not, how should the proposed disclosure statement be amended? Would the following variations on the proposed disclosure statement be any more or less useful in alerting shareholders to potential investment risks?
○ Removing or amending the following bullet in the proposed disclosure statement: “The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.”
○ Including additional disclosure of the possibility that a temporary suspension of redemptions could become permanent if the board determines that the fund should liquidate.
○ Including additional disclosure to the effect that retail shareholders should not invest all or most of the cash that they might need for routine expenses (
○ Amending the final bullet in the proposed disclosure statement to read: “Your investment in the Fund therefore may experience losses.”
• Will the proposed disclosure statement respond effectively to investor preferences for clear, concise, and understandable language?
• Would investors benefit from requiring this disclosure statement also to be included on the front cover page of a non-government money market fund's prospectus (and on the cover page or beginning of any summary prospectus, if used)?
• Should we provide any instruction or guidance in order to highlight the proposed disclosure statement on fund advertisements and sales materials (including the fund's Web site) and/or lead investors efficiently to the disclosure statement?
Currently, funds are required to disclose any restrictions on fund redemptions in their registration statements.
In addition, we would expect money market funds to incorporate additional disclosure in the prospectus or SAI, as the fund determines appropriate, discussing the operations of fees and gates in more detail.
• Means of notifying shareholders about the imposition and lifting of fees and/or gates (
• Timing of the imposition and lifting of fees and gates, including an explanation that if a fund's weekly liquid assets fall below 15% of its total assets at the end of any business day, the next business day it must impose a 2% liquidity fee on shareholder redemptions unless the fund's board of directors determines otherwise, and an explanation of the 30-day limit for imposing gates;
• Use of fee proceeds by the fund, including any possible return to shareholders in the form of a distribution;
• The tax consequences to the fund and its shareholders of the fund's receipt of liquidity fees; and
• General description of the process of fund liquidation
We request comment on the disclosure that we expect funds to include in their registration statements regarding the operations and effects of liquidity fees and redemption gates.
• Would the disclosure that we discuss above adequately assist money market fund investors in understanding the potential effect of their redemption decisions, and in evaluating the full costs of redeeming fund shares? Should we require funds to include this disclosure in their prospectuses and/or SAIs? Should we require funds to include any additional prospectus and SAI disclosure discussing, in detail, the operations and effects of fees and redemption gates? In particular, should we require funds to include any additional details about the fund's liquidation process?
• Should we require any information about the basic operations and effects of fees and redemption gates to be disclosed in the summary section of the statutory prospectus (and any summary prospectus, if used)?
• Should we require disclosure to investors of the particular risks associated with buying fund shares when the fund or market is stressed, especially when the fund is imposing either a liquidity fee or a gate?
• Should Form N–1A or its instructions be amended to more explicitly require any of the proposed disclosure to be included in a fund's prospectus and/or SAI? If so, how should it be amended?
If we were to adopt a reform alternative involving liquidity fees and gates, we believe that it would be important for money market funds (other than government money market funds that have chosen to rely on the proposed rule 2a–7 exemption from the fees and gates requirements) to inform existing and prospective shareholders when: (i) The fund's weekly liquid assets fall below 15% of its total assets; (ii) the fund's board of directors imposes a liquidity fee pursuant to rule 2a–7; or (iii) the fund's board of directors temporarily suspends the fund's redemptions pursuant to rule 2a–7 or permanently suspends redemptions pursuant to rule 22e–3. This information would be important for shareholders to receive, as it could influence prospective shareholders' decision to purchase shares of the fund, as well as current shareholders' decision or ability to sell fund shares. To this end, we are proposing an amendment to rule 2a–7 that would require a fund to post prominently on its Web site certain information that the fund would be required to report to the Commission on Form N–CR
We believe that this Web site disclosure would provide greater transparency to shareholders regarding occasions on which a fund's weekly liquid assets drop below 15% of the fund's total assets, as well as the imposition of liquidity fees and suspension of fund redemptions, because many investors currently obtain important information about the fund on the fund's Web site.
A fund currently must update its registration statement to reflect any material changes by means of a post-effective amendment or a prospectus supplement (or “sticker”) pursuant to rule 497 under the Securities Act.
We request comment on the proposed requirement for money market funds to inform existing and prospective shareholders, on the fund's Web site and in the fund's registration statement, of any present occasion in which the fund's weekly liquid assets fall below 15% of its total assets, the fund's board imposes a liquidity fee, or the fund's board temporarily suspends the fund's redemptions.
• Should any more, any less, or any other information be required to be posted on the fund's Web site than that disclosed on Form N–CR?
• As proposed, should we require this information to be posted “prominently” on the fund's Web site? Should we provide any other instruction as to the presentation of this information, in order to highlight the information and/or lead investors efficiently to the information, for example, should we require that the information be posted on the fund's home page or be accessible in no more than two clicks from the fund's home page?
• Should this information be posted on the fund's Web site for a longer or shorter period than one year following the date on which the fund filed Form N–CR to disclose any of the events specified in Part E, F, or G of Form N–CR?
• Besides requiring a money market fund that imposes a liquidity fee or gate to file a prospectus supplement and include related disclosure on the fund's Web site, should we also require the fund to notify shareholders individually about the effects of the fee or gate? Should we require a fund to engage in any other supplemental shareholder communications, such as issuing a press release or disclosing the fee or gate on any form of social media that the fund uses?
• How will the disclosure of the imposition of a fee or gate affect the willingness of current or prospective investors to purchase shares of the fund? How will this disclosure affect investors' purchases and redemptions in other funds? How will it affect other market participants? Will these effects differ based on the number of funds that concurrently impose fees and/or gates?
We also believe that money market funds' current and prospective shareholders should be informed of post-compliance-period historical occasions in which the fund's weekly liquid assets have fallen below 15% or the fund has imposed liquidity fees or redemption gates. While we recognize that historical occurrences are not necessarily indicative of future events, we anticipate that current and prospective fund investors could use this information as one factor to compare the risks and potential costs of investing in different money market funds.
We are therefore proposing an amendment to Form N–1A to require money market funds (other than government money market funds that have chosen to rely on the proposed rule 2a–7 exemption from the fees and gates requirements) to provide disclosure in their SAIs regarding any occasion during the last 10 years (but not before the compliance period) on which the fund's weekly liquid assets have fallen below 15%, and with respect to each such occasion, whether the fund's board of directors determined to impose a liquidity fee and/or suspend the fund's redemptions.
We request comment on the proposed requirement for money market funds to include SAI disclosure regarding the historical occasions in which the fund's weekly liquid assets have fallen below 15% or the fund has imposed liquidity fees or redemption gates.
• Would the proposed disclosure requirement assist current and prospective fund investors in comparing the risks and potential costs of investing in different money market funds, and would retail investors as well as
• Keeping in mind the compliance period we propose,
• Should the proposed SAI disclosure be permitted to be incorporated by reference in a fund's registration statement, on account of the fact that funds will have previously disclosed the information proposed to be required in this SAI disclosure on Form N–CR?
• Should we require this historical disclosure to be included anywhere else, for example, on the fund's Web site?
Under the proposed liquidity fees and gates alternative, a liquidity fee would only be imposed when a fund experiences stress (
We request comment on the proposed Form N–1A instruction that would clarify that, for purposes of the prospectus fee table, the term “redemption fee” does not include a liquidity fee imposed in accordance with rule 2a–7.
• Would shareholders find it instructive for funds to disclose the proposed liquidity fee in the prospectus fee table? Why or why not? If we were to require money market funds to include liquidity fees in the fee table, how should the fee table account for the contingent nature of liquidity fees and inform investors that liquidity fees will only be imposed in certain circumstances? Should the possibility of a liquidity fee be disclosed in a footnote of the fee table? Should a cross-reference to the fund's SAI disclosure regarding historical occasions on which the fund has imposed liquidity fees be disclosed in a footnote of the fee table?
• Would the proposed SAI amendments requiring disclosure of the historical occasions on which the fund has imposed liquidity fees be an effective way for shareholders to compare the extent to which money market funds have historically imposed liquidity fees, and analyze the probability that a fund will impose such fees in the future?
The liquidity fees and gates proposal makes significant changes to the nature of money market funds as an investment vehicle. The proposed disclosure requirements in this section are intended to communicate to shareholders the nature of the risks that follow from the liquidity fees and gates proposal. In section III.B, we discussed why we are unable to estimate how the liquidity fees and gates proposal will affect shareholders' use of money market funds or the resulting effects on the short-term financing markets because we do not have the information necessary to provide a reasonable estimate. For similar reasons, we are unable to estimate the incremental effects that the proposed disclosure requirements will have on either shareholders or the short-term financing markets. However, we believe that the proposed disclosure will better inform shareholders about the changes, which should result in shareholders making investment decisions that better match their investment preferences. We expect that this will have similar effects on efficiency, competition, and capital formation as those outlined in section III.E rather than to introduce new effects. We further believe that the effects of the proposed disclosure requirements will be small relative to the liquidity fees and gates proposal. The Commission staff has not measured the quantitative benefits of these proposed requirements at this time because of uncertainty about how increased transparency may affect different investors' understanding of the risks associated with money market funds.
We anticipate that money market funds would incur costs to amend their registration statements, and to update their advertising and sales materials (including the fund Web site), to include the proposed disclosure statement. We also anticipate that money market funds (besides government money market funds that have chosen to rely on the proposed rule 2a–7 exemption from the fees and gates requirements) would incur costs to (i) amend their registration statements to incorporate disclosure regarding the effects of fees and gates on redemptions; (ii) include disclosure of the post-compliance-period historical occasions in which the fund's weekly liquid assets have fallen below 15% or the fund has imposed liquidity fees or gates; and (iii) update the prospectus fee table. These funds also would incur costs to disclose current instances of liquidity fees or gates on the fund's Web site. These costs would include initial, one-time costs, as well as ongoing costs. Our staff estimates that the average one-time costs for a money market fund (except government money market funds that have chosen to rely on the proposed rule 2a–7 exemption from the fees and
We expect the new required disclosure would add minimal length to the current required registration statement disclosure, and thus would not increase the number of pages in, or change the printing costs of, a fund's registration statement. Based on conversations with fund representatives, the Commission understands that, in general, unless the page count of a registration statement is changed by at least four pages, printing costs would remain the same.
Ongoing compliance costs include the costs for money market funds periodically to update disclosure in their registration statements regarding historical occasions in which the fund's weekly liquid assets have fallen below 15% or the fund has imposed fees or gates, and also to disclose current instances of any of these events on the fund's Web site. Because the required registration statement and Web site disclosure overlaps with the information that a fund must disclose on Form N–CR when the fund's weekly liquid assets fall below 15%, or the fund imposes or removes a fee or gate,
We request comment on this economic analysis:
• Are any of the proposed disclosure requirements unduly burdensome, or would they impose any unnecessary costs?
• We request comment on the staff's estimates of the operational costs associated with the proposed disclosure requirements.
• We request comment on our analysis of potential effects of these proposed disclosure requirements on efficiency, competition, and capital formation.
We are proposing that money market fund boards of directors be permitted to institute liquidity fees or gates (and potentially one followed by the other). This proposal is designed to provide money market funds with multiple tools to manage heightened redemptions in the best interest of the fund and to mitigate potential contagion effects on the short-term financing markets for issuers.
We also have considered whether we should permit these money market funds to institute only liquidity fees or only gates. As discussed above, fees and gates can accomplish somewhat different objectives and have somewhat different tradeoffs and effects on shareholders and the short-term financing markets for issuers. For shareholders valuing principal preservation in their evaluation of money market fund investments, a gate may be preferable to a liquidity fee particularly if the fund expects to rebuild liquidity through maturing assets. In contrast, shareholders preferring liquidity over principal preservation may prefer a liquidity fee because it allows full liquidity of that investor's money market fund shareholdings—it just imposes a greater cost for that liquidity if the fund is under stress.
Because fees and gates can accomplish somewhat different objectives and one may be better suited to one set of market circumstances than the other, we preliminarily believe that providing funds with the ability to use either tool, as the board determines is in the best interest of the fund, is a better approach to preserve the benefits of money market funds for investors and the short-term financing markets for issuers, enhance investor protection, and improve money market funds' ability to manage and mitigate high levels of redemptions. It also may better allow funds to tailor the redemption restrictions they employ to their experience with the preferences and behavior of their particular shareholder base and to adapt the restriction they institute as they or the industry gains experience over time employing such restrictions. We request comment on stand-alone liquidity fees or stand-alone gates.
• Should we adopt rule amendments that would just permit money market funds to institute liquidity fees or just permit these money market funds to institute a gate? Why might it be preferable to allow only a fee or only a gate? If we allowed only a fee or only a gate, should there be different parameters or restrictions around when the fee or gate could be imposed or lifted than what we have proposed? If so, what should they be and why?
We are proposing to permit money market funds to institute a complete gate in certain circumstances—a temporary suspension of redemptions. Some have suggested that we allow money market funds to impose partial gates in times of stress.
A partial gate can operate to prevent “fire sales” of assets in the fund and provide some liquidity to investors while allowing time for the fund to satisfy the remaining portion of redemptions requests under better market conditions or with internally generated liquidity. It can act as a gradual brake on redemptions, reducing
On the other hand, a partial gate may not impose a substantial enough deterrent on redemption activity in times of stress to effectively reduce the contagion impact of heavy redemptions on remaining investors and the short-term financing markets. For example, in 2007 when a Florida local government investment pool suspended redemptions in response to a run, it re-opened with a combined partial gate and liquidity fee—local governments could take out the greater of 15% of their holdings or $2 million without penalty, and the remainder of any redemptions were subject to a 2% redemption fee.
We request comment on whether we should require or permit partial gates in certain circumstances.
• Should we allow partial gates? If so, why? Under what conditions and of what nature? Should they limit each shareholder's redemptions to a certain percentage of his or her shareholdings (
• How would partial gates affect shareholder redemption decisions compared to our proposal of liquidity fees and full gates? Would they achieve our goals of preserving the benefits of money market funds for investors and the short-term financing markets for issuers, while mitigating the risk of runs, enhancing investor protection and improving money market funds' ability to manage and mitigate high levels of redemptions to the same extent as our proposed liquidity fees and gates? Why or why not?
• If we allowed partial gates, should they be allowed in addition to liquidity fees and full gates or in lieu of fees or full gates? What operational and other costs would be involved if we allowed partial gates in addition to or in lieu of fees and/or full gates?
In 2009, we requested comment on requiring that funds satisfy redemption requests in excess of a certain size through in-kind redemptions.
In both instances, almost all commenters addressing this potential reform option opposed it.
These comments led us to believe that requiring in-kind redemptions would create operational difficulties that could prevent funds from operating fairly to investors in practice and that it would not necessarily mitigate money market funds' susceptibility to runs and related adverse effects on the short-term financing markets and capital formation. Thus, we expect that the liquidity fees and gates approach described above would better achieve our goals of preserving the benefits of money market funds for investors and the short-term financing markets for issuers while enhancing investor protection and improving money market funds' ability to manage and mitigate potential contagion from high levels of redemptions. Liquidity fees and gates also may be easier to implement than required in-kind redemptions. We request comment on whether we are correct in our analysis of the relative merits and costs of in-kind redemptions as compared to the other forms of redemption restrictions described in this Release as well as any others that money market funds could seek to impose.
We also request comment on all the redemption restriction alternatives discussed in this Release.
• Are there other alternatives that we should consider? Do commenters agree with our discussion about the advantages and disadvantages of the various alternatives? Do commenters agree with our discussion of their potential benefits and costs and other economic effects?
Today, we are proposing two alternative methods of reforming money market funds. Although these two proposals are designed to achieve many of the same goals, by their nature they would do so to different degrees and with different tradeoffs. As discussed above, our first alternative would require money market funds (other than government and retail funds) to adopt floating NAVs. This proposal is designed primarily to address the incentive for shareholders to redeem shares ahead of other investors in times of fund and market stress. It also is intended to improve the transparency of funds' investment risks through more transparent valuation and pricing methods. It makes explicit the risk and reward relation for money market funds. We recognize, however, that the proposal does not necessarily address shareholders' incentive to redeem from money market funds due to their liquidity risk or for other reasons as discussed below. In times of severe market stress when the secondary markets for funds' assets become illiquid, investors may still have incentives to redeem shares before their fund's liquidity dries up. It also may not alter money market fund shareholders' incentive to redeem in times of market stress when investors are engaging in flights to quality, liquidity, and transparency and the related contagion effects from such high levels of redemptions.
Our second proposal, which requires funds to impose liquidity fees unless the fund's board determines that it would not be in the best interest of the fund and permits them to impose gates in certain circumstances, is primarily focused on helping money market funds manage heightened redemptions and reducing shareholders' incentive to redeem under stress. It also could improve the transparency of funds' liquidity risks through a more transparent and systematic allocation of liquidity costs. In doing so, it addresses a principal drawback of our floating NAV proposal by imposing a cost on redemptions in times of market stress that may incorporate not just investment risk but also liquidity risk. The prospect of facing liquidity fees and gates will give the additional benefit of better informing and sensitizing investors to the risks of investing in money market funds. We recognize, however, that our liquidity fees and gates proposal does not entirely eliminate the incentive of shareholders to redeem when the fund's shadow price falls below a dollar. Moreover, it does not eliminate the lack of valuation transparency in the pricing of money market funds and any corresponding lack of shareholder appreciation of money market fund valuation risks.
We are considering addressing the limitations of the two proposals by combining them into a single reform package; that is, requiring money market funds (other than government money market funds and, regarding the floating NAV, retail money market funds) to both use a floating NAV and potentially impose liquidity fees or gates in times of fund and market stress.
A combined reform approach could reduce investors' incentive to quickly redeem assets from money market funds in a crisis, improve the transparency of funds' investment and liquidity risks, and enhance money market funds' ability to manage and mitigate potential contagion from high levels of redemptions relative to either proposal alone. Under a combined approach, the floating NAV should reduce investors' incentive to redeem early to avoid a market-based loss embedded in the fund's portfolio because the fund would be transacting at the fair value of its portfolio at all times. Doing so should reduce the likelihood that investors engage in preemptive redemptions that could trigger the imposition of fees and gates.
The combination would provide a broader range of tools to a floating NAV money market fund to manage redemptions in a crisis, thereby avoiding “fire sales” of assets that would affect all shareholders and potentially the short-term financing markets for issuers. The combined approach also should further enhance the ability of money market funds to treat shareholders equitably, and could allow better management of funds' portfolios in a crisis to minimize shareholder losses.
Requiring funds that can impose liquidity fees and gates to have a floating NAV provides fuller transparency of fund valuation and
We request comment on the potential benefits of combining our two alternatives into a single proposal.
• Would combining the floating NAV alternative with the liquidity fees and gates alternative have the benefits we discuss above? Are there any other benefits that we have not discussed? If so, what would they be?
• Would combining the floating NAV alternative with only liquidity fees or only gates provide different benefits?
Some drawbacks may result from combining the two proposals.
Another drawback of combining the two proposals is that if a floating NAV significantly changes investor expectations regarding money market fund risk and their prospect of suffering losses, requiring funds with a floating NAV to also be able to impose standby liquidity fees and gates may be unnecessary to manage the risks of heavy redemptions in times of crisis. Because of the unique features of stable price money market funds, liquidity fees and gates may be necessary for a fund to ensure that all of its shareholders are treated the same, while also managing the risks of contagion from heavy redemptions. A fund with a floating NAV may not face these same risks and thus providing those funds with the ability to impose fees or gates may not be justified, particularly in light of the Investment Company Act's expressed preference for full redeemability of open-end fund shares.
A last potential drawback is that although some investors may be comfortable investing in a money market fund that has
We request comment on the potential drawbacks of combining our two alternatives into a single proposal.
• Would combining the floating NAV alternative with the liquidity fees and gates alternative have the drawbacks we discuss above? Are there any other drawbacks that we have not discussed? If so, what would they be?
• Would combining the floating NAV alternative with only liquidity fees or only gates impose different costs?
As discussed above, each of the alternatives that we are proposing today achieves similar goals, in different ways, but they bear distinct costs. Accordingly, if we were to combine the two proposals, while there is the likelihood that a combination may in some ways improve on each alternative standing alone, the combination would impose two separate sets of costs on funds, investors, and the markets. We request comment on whether the benefit of combining the two alternatives into a single reform would justify the drawbacks of imposing two distinct sets of costs and economic impacts.
• Should we combine the two alternatives as a single reform? What would be the advantages and drawbacks of such a combination? Would the benefits of combining the proposals justify requiring the two individual sets of costs associated with implementing the combined alternatives? Would the imposition of two sets of costs materially impact the decisions of money market fund sponsors on whether or not they would continue to offer the product?
Combining the two alternatives into a single approach could pose certain operational issues and raise questions about how we should structure such a reform. These issues are discussed below.
Under our liquidity fees and gates proposal, the board of directors of a money market fund would be required to impose a liquidity fee (unless they find that not doing so would be in the best interest of the fund) if the fund's weekly liquid assets fell below 15% of its total assets. The default liquidity fee would be 2% unless the board determined that a lesser fee would be in the best interest of fund shareholders.
The liquidity fees imposed by a floating NAV fund may serve different purposes than those of a stable price fund. A stable price fund board, for example, might use liquidity fees to recoup the costs associated with selling assets at distressed prices in an illiquid market to meet redemptions, as well as to help repair the fund's NAV. In contrast, a floating NAV fund board might choose to impose liquidity fees only to recoup the costs associated with selling assets at distressed prices. This difference in the purpose served by liquidity fees raises questions about the appropriate default size of a liquidity fee for the combined proposal, the
We request comment on the structure of the default liquidity fee if applied to a floating NAV money market fund.
• Should we alter the default liquidity fee for the combined proposal? Should we specify a default fee for the combined proposal or merely require that a fee be based on the costs incurred by the fund selling assets to meet redemptions? We previously noted issues that can arise with variable liquidity fees.
• Should we contemplate different percentages for funds to consider before applying liquidity fees or gates to a floating NAV money market fund than weekly liquid assets falling below 15%? If so, what percentages should we consider. Should we consider a different threshold for automatic removal of liquidity fees other than recovery of a fund's liquidity to 30% weekly liquid assets? If so, what should the threshold for removal be?
• Should a liquidity fee in a floating NAV fund be triggered by a different factor other than weekly liquid assets falling below 15%, such as a change in NAV? If so, should such a trigger be based on a relative percentage change in NAV over some time period or on an absolute change since a fund's inception? For example, should a liquidity fee be triggered if a fund's NAV falls by more than
Under our liquidity fees and gates alternative, a fund would have the option of imposing temporary redemption gates if liquidity falls below the same threshold that it imposes liquidity fees. These redemption gates are designed to act as “circuit breakers” to halt redemptions, thereby allowing funds to minimize losses to all shareholders and reducing any associated contagion risks. Most of the concerns that redemption gates are designed to address in a stable price money market fund also apply to a floating NAV money market fund, and gates should be similarly useful in addressing them. Much like a stable price fund, a floating NAV fund may also face difficulties managing heavy redemptions in times of stress, and redemption gates may work to mitigate these difficulties. Gates, by halting redemptions, would provide “breathing room” for investors to take better stock of a situation. Conversely, redemption gates may not be in the interest of investors who rationally wish to redeem at the time, or who want immediate liquidity.
• Do redemption gates on a floating NAV fund pose any particular issues or provide any specific benefits different than those associated with gates in a stable price fund? If so, what are they?
• If we were to combine the two alternatives and permit redemption gates on a floating NAV fund, should the thresholds be the same as for imposing liquidity fees? If not, what should they be? Should they be tied to redemption activity? Drops in NAV?
• Should the length of time permitted for redemption gates in a floating NAV fund be the same as that permitted under the standalone alternative? Should floating NAV funds be permitted to gate redemptions for a longer or shorter time? If so, why?
• If the proposals were combined, would a partial gate be appropriate?
If we were to combine the alternatives, we could also do so in a partial manner, requiring money markets to maintain a floating NAV and combining it with standby liquidity fees standing alone. Similarly, we could instead require that a floating NAV fund be able to impose gates, but not liquidity fees. Combining a floating NAV with just liquidity fees or gates may simplify operational implementation of the combination and make money market funds more attractive to investors. On the other hand, such a limited combination may not achieve the goals of the proposed reform to the same extent as a full combination. We request comment on whether, if we were to combine the two alternatives, we should require a floating NAV fund to only have standby liquidity fees or gates, but not both.
• What advantages and disadvantages would result from such a limited combination?
• If we were to pursue a limited combination, which measure should we combine with the floating NAV? Liquidity fees or gates? Why?
Another way of combining the floating NAV and fees and gates alternatives discussed in this Release would be to require that money market funds (other than government money market funds) choose to either transact with a floating NAV or be able to impose liquidity fees and gates in times of stress—in other words, each non-government money market fund would have to choose to apply either the floating NAV alternative or the liquidity fees and gates alternative. Providing such a choice may allow each money market fund to choose the reform alternative that is most efficient, cost-effective, and preferable to shareholders. This could enhance the efficiency of our reforms and minimize costs and competitive impacts. On the other hand, allowing such a choice may not achieve the goals of the proposed reform to the same extent as a full combination or mandating one alternative versus another. In addition, in making such a choice, the money market fund industry may not necessarily be incentivized to take into consideration the full likely effects of their decisions on the short-term financing markets, and thus capital formation, or the broader systemic effects of their choices. Funds would need to clearly communicate their choice of approaches to shareholders. We request comment on whether we should permit non-government money market funds to choose to apply either the floating NAV alternative or the fees and gates alternative.
• What advantages and disadvantages would result from permitting such a choice?
• Would permitting such a choice achieve our reform goals to the same extent as either our floating NAV proposal or our fees and gates proposal?
• Would this cause investor confusion because of a fragmentation in the market?
• How should a fund elect to make such a choice? At inception of the fund? Should a fund be permitted to switch elections?
The combination of the two alternatives could create other operational issues. For example, we have previously discussed our understanding that a floating NAV fund would meet the definition of a cash equivalent for accounting purposes, because it is unlikely to experience significant fluctuations in value.
• Would a money market fund that combines a floating NAV with liquidity fees and gates continue to be treated as a cash equivalent under GAAP? If not, why not?
• Would a combination of the alternatives create any additional accounting or any novel tax issues? If so, what would they be?
Under our floating NAV proposal we are proposing that a fund would be required to price to the fourth decimal place if they price their shares at one dollar (
• Would such a level of pricing precision be appropriate for a fund that combines liquidity fees and gates with a floating NAV? If not, why not, and what level of pricing precision should be required instead?
As discussed above, we are proposing exemptions under each alternative. Under the floating NAV alternative, we are proposing an exemption for government and retail money market funds. Under the liquidity fees and gates alternative, we are proposing an exemption for government money market funds, but not retail funds. We would expect that a combined approach would also include these exemptions, considering that the reasons we are proposing the exemptions to the floating NAV remain the same in the context of a combined approach. However, our liquidity fees and gates proposal treats government and retail funds differently, and provides an exemption to the liquidity fees and gates proposal for government money market funds, but not for retail funds. For the reasons discussed in the sections where we propose the exemptions, if we were to combine the proposals, we would expect to continue to offer the exemptions provided under each alternative, but would not extend them. Accordingly, a combined approach would likely provide an exemption to the floating NAV
• If we were to combine the two alternatives, should we retain the proposed exemptions to the floating NAV requirement for government and retail money market funds? If not, why not?
• Under a combined approach, should we also exempt retail funds from not only the floating NAV but also from the fees and gates requirements? If so, why?
We are also proposing to retain rules 17a–9 and 22e–3 under both of the alternatives we are proposing today, with certain amendments to account for operational differences to rule 22e–3's triggering mechanism.
• Would a combined approach have any significant effects on our proposed treatment of rules 17a–9 and 22e–3? Would we need to make any other changes to those rules to accommodate such a combination?
Our floating NAV alternative includes a compliance period of 2 years to allow for funds to transition to a floating NAV without imposing unnecessary costs.
• Should we provide the same compliance period under a combined approach? If not, should the compliance period be longer or shorter? Should we consider a grandfathering approach instead of or in addition to a compliance period?
Under both of the alternatives that we are proposing today, we are also including a variety of proposed disclosure improvements designed to improve transparency of fund risks and risk management, with the relevant disclosure tailored to each alternative. If we were to combine the two approaches, we would likely merge the disclosure reforms, and revise the disclosure requirements to take such a merger into account. We would not expect that a combined approach would require significant additional disclosure reforms not discussed under the two alternatives.
• Would a combined approach pose any new disclosure issues that are not currently contemplated in the discussion of disclosure reforms for each of the two alternatives? If so, what would those issues be? Would a combined approach result in any new or changed risks that investors should be informed of?
We do not expect that there would be any significant additional costs from combining the two approaches that are not previously discussed in the sections discussing the costs of the two alternatives above. It is likely that implementing a combined approach would likely save some percentage over the costs of implementing each alterative separately as a result of synergies and the ability to make a variety of changes to systems at a single time. We do not expect that combining the approaches would create any new costs as a result of the combination itself. Accordingly, we estimate that the costs of implementing a combined approach would at most be the sum of the costs of each alternative, but may likely be less.
We request comment on the costs of combining the two approaches.
• Would there be any new costs associated with combining the two approaches that are not already discussed separately under each alternative? If so, what would they be?
• Would there be a reduction in costs as a result of implementing both alternatives at the same time? If so, how much savings would there be?
In addition to the proposed reforms and alternatives described elsewhere in this Release, it is important to note that in coming to this proposal, we and our staff considered a number of additional alternative options for regulatory reform in this area. For example, we considered each option discussed in the PWG Report and the FSOC Proposed Recommendations. We currently are not pursuing certain of these other options because we believe, after considering the comments we received on the PWG Report and that FSOC received on the FSOC Proposed Recommendations and the economic analysis set forth in this Release, that they would not achieve our regulatory goals as well as what we propose today. We discuss below these options, and our principal reasons for not pursuing them further at this time.
As discussed in section II.D.3 above, in November 2012, FSOC proposed to recommend that we undertake structural reforms of money market funds. FSOC proposed three alternatives for consideration, which, it stated, could be implemented individually or in combination. The first option
• No buffer requirement for cash, Treasury securities, and repos collateralized solely by cash and Treasury securities (“Treasury repo”);
• A 0.75% buffer requirement for other daily liquid assets (or weekly liquid assets, in the case of tax-exempt money market funds); and
• A 1% buffer requirement for all other assets.
A fund whose NAV buffer fell below the required minimum amount would be required to limit its new investments to cash, Treasury securities, and Treasury repos until its NAV buffer was restored. A fund that completely exhausted its NAV buffer would be required to suspend redemptions and liquidate or could continue to operate with a floating NAV indefinitely or until it restored its NAV buffer.
A money market fund could use any funding method or combination of methods to build the NAV buffer, and could vary these methods over time. The FSOC Proposed Recommendations identified three funding methods that would be possible with Commission relief from certain provisions of the Investment Company Act: (1) An escrow account that a money market fund's sponsor established and funded and that was pledged to support the fund's stable share price; (2) the money market fund's issuance of a class of subordinated, non-redeemable equity securities (“buffer shares”) that would absorb first losses in the funds' portfolios; and (3) the money market fund's retention of some earnings that it would otherwise distribute to shareholders (subject to certain tax limitations).
The minimum balance at risk (“MBR”) would require that the last 3% of a shareholder's highest account value in excess of $100,000 during the previous 30 days (the shareholder's MBR or “holdback shares”) be redeemable only with a 30-day delay.
The last option in the FSOC Proposed Recommendations would require money market funds to have a risk-based NAV buffer of up to 3% (which otherwise would have the same structure as discussed above), and this larger NAV buffer could be combined with other measures.
In the sections that follow, we discuss our evaluation of a NAV buffer requirement and an MBR requirement for money market funds. We also discuss comments FSOC received on these recommendations. For the reasons discussed below, the Commission is not pursuing these alternatives because we presently believe that the imposition of either a NAV buffer combined with a minimum balance at risk or a stand-alone NAV buffer, while advancing some of our goals for money market fund reform, might prove costly for money market fund shareholders and could result in a contraction in the money market fund industry that could harm the short-term financing markets and capital formation to a greater degree than the proposals under consideration.
In considering a NAV buffer such as those recommended by FSOC as a potential reform option for money market funds, we considered the benefits that such a buffer could provide, as well as its costs. Our evaluation of what could be a reasonable size for a NAV buffer also factored into our analysis of the advantages and disadvantages of these options. A buffer can be designed to satisfy different potential objectives. A large buffer could protect shareholders from losses related to defaults, such as the one experienced by the Reserve Primary Fund following the Lehman Brothers bankruptcy. However, if complete loss absorption is the objective, a substantial buffer would be required, particularly given that money market funds can hold up to 5% of their assets in a single security.
Alternatively, if a buffer were not intended for complete loss absorption, but rather designed primarily to absorb day-to-day variations in the market-based value of money market funds' portfolio holdings under normal market conditions, this would allow a fund to hold a significantly smaller buffer. Accordingly, the relatively larger buffers contemplated in the FSOC Proposed Recommendations
The FSOC Proposed Recommendations discusses a number of potential benefits that a NAV buffer could provide to money market funds and their investors, many of which we discuss below.
In effect, depending on the size of the buffer, a buffer could provide various levels of coverage of losses due to both the illiquidity and credit deterioration of portfolio securities. Money market funds that are supported by a NAV buffer would be more resilient to redemptions and credit or liquidity changes in their portfolios than stable value money market funds without a buffer (the current baseline).
A second benefit is that a NAV buffer would force money market funds to provide explicit capital support rather than the implicit and uncertain support that is permitted under the current regulatory baseline. This would require funds to internalize some of the cost of the discretionary capital support sometimes provided to money market funds, and to define in advance how losses will be allocated. In addition, a NAV buffer could reduce fund managers' incentives to take risk beyond what is desired by fund shareholders because investing in less risky securities reduces the probability of buffer depletion.
Another potential benefit is that a NAV buffer might provide counter-cyclical capital to the money market fund industry. This is because once a buffer is funded it remains in place regardless of redemption activity. With a buffer, redemptions increase the relative size of the buffer because the same dollar buffer now supports fewer assets.
Finally, by allowing money market funds to absorb small losses in portfolio securities without affecting their ability to transact at a stable price per share, a NAV buffer may facilitate and protect capital formation in short-term financing markets during periods of modest stress. Currently, money market fund portfolio managers are limited in their ability to sell portfolio securities when markets are under stress because they have little ability to absorb losses without causing a fund's shadow NAV to drop below $1.00 (or embed losses in the fund's market-based NAV per share). As a result, managers tend to avoid trading when markets are strained, contributing to further illiquidity in the short-term financing markets in such circumstances. A NAV buffer should enable funds to absorb small losses and thus could reduce this tendency. Thus, by adding resiliency to money market funds and enhancing their ability to absorb losses, a NAV buffer may benefit capital formation in the long term. A more stable money market fund industry may produce more stable short-term financing markets, which would provide more reliability as to the demand for short-term credit to the economy.
There are significant ongoing costs associated with a NAV buffer. They can be divided into direct costs that affect money market fund sponsors or investors and indirect costs that impact capital formation. In addition, a NAV buffer does not protect shareholders completely from the possibility of heightened rapid redemption activity during periods of market stress, particularly in periods where the buffer is at risk of depletion. As the buffer becomes impaired (or if shareholders believe the fund may suffer a loss that exceeds the size of its NAV buffer), shareholders have an incentive to redeem shares quickly because, once the buffer fails, the fund will no longer be able to maintain a stable value and shareholders will suddenly lose money on their investment.
Another possible implication of this facet of NAV buffers is that money market funds with buffers may avoid holding riskier short-term debt securities (like commercial paper) and instead hold a higher amount of low yielding investments like cash, Treasury securities, or Treasury repos. This could lead money market funds to hold more conservative portfolios than investors may prefer, given tradeoffs between principal stability, liquidity, and yield.
The most significant direct cost of a NAV buffer is the opportunity cost associated with maintaining a NAV buffer. Those contributing to the buffer essentially deploy valuable scarce resources to maintain a NAV buffer rather than being able to use the funds elsewhere. The cost of diverting funds for this purpose represents a significant incremental cost of doing business for those providing the buffer funding. We cannot provide estimates of these opportunity costs because the relevant data is not currently available to the Commission.
However, a number of FSOC commenters have already cautioned that a NAV buffer could make money market funds unprofitable.
The second direct cost of a NAV buffer is the equilibrium rate of return that a provider of funding for a NAV buffer would demand. An entity that
One could analogize a NAV buffer to bank capital by considering the similarities between money market funds with a NAV buffer and banks with capital. A traditional bank generally finances long-term assets (customer loans) with short-term liabilities (demand deposits). The Federal Reserve Board, as part of its prudential regulation, requires banks to adhere to certain minimum capital requirements.
The effectiveness of a NAV buffer to protect against large-scale redemptions during periods of stress is predicated upon whether shareholders expect the decline in the value of the fund's portfolio to be less than the value of the NAV buffer. Once investors anticipate that the buffer will be depleted, they have an incentive to redeem before it is completely depleted.
As noted above, substantial NAV buffers may be able to absorb much, if not all, of the default risk in the underlying portfolio of a money market fund. This implies that any compensation for bearing default risk will be transferred from current money market fund shareholders to those financing the NAV buffer, effectively converting a prime money market fund into a fund that mimics the return of a Treasury fund for current money market fund shareholders. If fund managers are unable to pass through the yield associated with holding risky securities, like commercial paper, to money market fund shareholders, it is likely that they will reduce their investment in risky securities, such as commercial paper or short-term municipal securities.
In addition, many investors are attracted to money market funds because they provide a stable value but have higher rates of return than Treasury securities. These higher rates of return are intended to compensate for exposure to greater credit risk and potential volatility than Treasury securities. As a result of funding the buffer, the returns to money market fund shareholders are likely to decline, potentially reducing demand from investors who are attracted to money market funds for their higher yield than alternative stable value investments.
Taken together, the demand by investors for some yield and the incentives for fund managers to reduce portfolio risk may impact competition and capital formation in two ways. First, investors seeking higher yield may move their funds to other alternative investment vehicles resulting in a contraction in the money market fund industry. In addition, fund managers may have an incentive to reduce the funds' investment in commercial paper or short-term municipal securities in order to reduce the volatility of cash flows and increase the resilience of the NAV buffer. In both of these cases, there may be an effect on the short-term financing markets if the decrease in demand for short-term securities from money market funds results in an increase in the cost of capital for issuers of commercial paper and other securities.
As discussed above, under the second alternative in the FSOC Proposed Recommendations, a 1% capital buffer is paired with an MBR or a holdback of a certain portion of a shareholder's money market fund shares.
An MBR requirement could provide some benefits to money market funds. First, it would force redeeming shareholders to pay for the cost of their liquidity during periods of severe market stress when liquidity is particularly costly. Such a requirement could create an incentive against shareholders participating in a run on a fund facing potential losses of certain sizes because shareholders will incur greater losses if they redeem.
Second, it would allocate liquidity costs to investors demanding liquidity when the fund itself is under severe stress. This would be accomplished primarily by making redeeming shareholders bear first losses when the fund first depletes its buffer and then the fund's value falls below its stable share price within 30 days after their redemption. Redeeming shareholders subject to the holdback are the ones whose redemptions may have contributed to fund losses if securities are sold at fire sale prices to satisfy those redemptions. If the fund sells assets to meet redemptions, the costs of doing so would be incurred while the redeeming investor is still in the fund because of the delay in redeeming his or her holdback shares. Essentially, investors would face a choice between redeeming to preserve liquidity and remaining invested in the fund to protect their principal.
Third, an MBR would provide the fund with 30 days to obtain cash to satisfy the holdback portion of a shareholder's redemption. This may give the fund time for distressed securities to recover when, for example, the market has acquired additional information about the ability of the issuer to make payment upon maturity. As of February 28, 2013, 43% of prime money market fund assets had a maturity of 30 days or less.
There are a number of drawbacks to an MBR requirement. It forces shareholders that redeem more than 97% of their assets to pay for any losses, if incurred, on the entire portfolio on a ratable basis. Rather than simply delaying redemption requests, the contingent nature of the way losses are distributed among shareholders forces early redeeming investors to bear the losses they are trying to avoid.
As discussed in section II.B.2 above, there is a tendency for a money market fund to meet redemptions by selling assets that are the most liquid and have the smallest capital losses. Liquid assets are sold first because managers can trade at close to their non-distressed valuations—they do not reflect large liquidity discounts. Managers also tend to sell assets whose market-based values are close to or exceed amortized cost because realized capital gains and losses will be reflected in a fund's shadow price. Assets that are highly liquid will not be sold at significant discounts to fair value. Since the liquidity discount associated with the sale of liquid assets is smaller than that for illiquid assets, shareholders can continue to immediately redeem shares at $1.00 per share under an MBR provided the fund is capable of selling liquid assets. Once a fund exhausts its supply of liquid assets, it will sell less liquid assets to meet redemption requests, possibly at a loss. If in fact, assets are sold at a loss, the stable value of the fund's shares could be impaired, motivating shareholders to be the first to leave. Therefore, even with a NAV buffer and an MBR there continues to be an incentive to redeem in times of fund and market stress.
The MBR, which applies to all redemptions without regard to the fund's circumstances at the time of redemption, constantly restricts some portion of an investor's holdings. Under the resulting continuous impairment of full liquidity, many current investors who value liquidity in money market funds may shift their investment to other short-term investments that offer higher yields or fewer restrictions on redemptions. A reduction in the number of money market funds and/or the amount of money market fund assets under management as a result of any further money market fund reforms would have a greater negative impact on money market fund sponsors whose fund groups consist primarily of money market funds, as opposed to sponsors that offer a more diversified range of mutual funds or engage in other financial activities (
The MBR will introduce additional complexity to what to-date has been a relatively simple product for investors to understand. For example, requiring shareholders that redeem more than 97% of their balances to bear the first loss creates a cash flow waterfall that is complex and that may be difficult for retail investors to understand fully.
Implementing an MBR could involve significant operational costs. These would include costs to convert existing shares or issue new holdback and subordinated holdback shares and changes to systems that would allow recordkeepers to account for and track the MBR and allocation of unrestricted, holdback or subordinated holdback shares in shareholder accounts. We expect that these costs would vary significantly among funds depending on a variety of factors. In addition, funds subject to an MBR may have to amend or adopt new governing documents to issue different classes of shares with quite different rights: Unrestricted shares, holdback shares, and subordinated holdback shares.
Overall, the complexity of an MBR may be more costly for unsophisticated investors because they may not fully appreciate the implications. In addition, money market funds and their intermediaries (and money market fund shareholders that have in place cash management systems) could incur potentially significant operational costs to modify their systems to reflect a MBR requirement. We believe that an MBR coupled with a NAV buffer would turn money market funds into a more complex instrument whose valuation may become more difficult for investors to understand.
One option outlined in the PWG Report is a private emergency liquidity facility (“LF”) for money market funds.
Participating funds would elect a board of directors that would oversee the LF, with representation from large, medium, and smaller money market fund complexes. The LF would have restrictions on the securities that it could purchase from funds seeking liquidity and on the LF's investment portfolio. The LF would be able to pledge approved securities (less a haircut) to the Federal Reserve discount window. We note that the interaction with the Federal Reserve discount window (as well as the bank structure of the LF) means that the Commission does not have regulatory authority to create the LF.
An LF could lessen and internalize some of the liquidity risk of money market funds that contributes to their vulnerability to runs by acting as a purchaser of last resort if a liquidity event is triggered. It also could create efficiency gains by pooling this liquidity risk within the money market fund industry.
Commenters on the PWG Report addressing this option generally supported the concept of the LF, stating that it would facilitate money market funds internalizing the costs of liquidity and other risks associated with their operations through the cost of participation. In addition, such a facility could reduce contagion effects by limiting the need for fire sales of money market fund assets to satisfy redemption pressures.
However, several commenters expressed reservations regarding this reform option. For example, one commenter supported “the idea” of such a facility “in that it could provide an incremental liquidity cushion for the industry,” but noted that “it is difficult to ensure that [a liquidity facility] with finite purchasing capacity is fairly administered in a crisis. . . . [which] could lead to [money market funds] attempting to optimize the outcome for themselves, rather than working cooperatively to solve a systemic crisis.”
[a private liquidity facility] cannot possibly eliminate completely the risk of breaking the buck without in effect eliminating maturity transformation, for instance through the imposition of capital and liquidity standards on the private facilities. Thus, in the case of a pervasive financial shock to asset values, [money market fund] shareholders will almost certainly view the presence of private facilities as a weak reed and widespread runs are likely to develop. In turn, government aid is likely to flow. Because shareholders will expect government aid in a pervasive financial crisis, shareholder and [money market fund] investment decisions will be distorted. Therefore, we view emergency facilities as perhaps a valuable enhancement, but not a reliable overall solution either to the problem of runs or to the broader problem of distorted investment decisions.
A private liquidity facility was also discussed at the 2011 Roundtable, where many participants made points and expressed concerns similar to those discussed above.
We have considered these comments, and our staff has spent considerable time evaluating whether an LF would successfully mitigate the risk of runs in money market funds and change the economic incentives of market participants. We have determined not to pursue this option further for a number of reasons, foremost because we are concerned that a private liquidity facility would not have sufficient purchasing capacity in the event of a widespread run without access to the Federal Reserve's discount window and we do not have legal authority to grant discount window access to an LF. Access to the discount window would raise complicated policy considerations and likely would require legislation.
We also are concerned about the conflicts of interest inherent in any such facility given that it would be managed by a diverse money market fund industry, not all of whom may have the same interests at all times. Participating money market funds would be of different sizes and the governance arrangements would represent some fund complexes and not others. There may be conflicts relating to money market funds whose nature or portfolio makes them more or less likely to ever need to access the LF. The LF may face conflicts allocating limited liquidity resources during a crisis, and choosing which funds gain access and which do not. To be successful, an LF would need to be managed such that it sustains its credibility, particularly in a crisis, and does not distort incentives in the market to favor certain business models or types of funds.
These potential issues collectively created a concern that such a facility may not prove effective in a crisis and thus we would not be able to achieve our regulatory goals of reducing money market funds' susceptibility to runs and the corresponding impacts on investor protection and capital formation. Combined with our lack of authority to create an LF bank with access to the Federal Reserve's discount window, these concerns ultimately have led us to not pursue this alternative.
We also considered whether money market funds should be required to carry some form of public or private insurance, similar to bank accounts that carry Federal Deposit Insurance Corporation deposit insurance, which has played a central role in mitigating the risk of runs on banks.
While a few commenters expressed some support for a system of insurance for money market funds,
“If the insurance program were partial (for example, capped at $250,000 per account), many institutional investors likely would invest in this partially insured product rather than directly in the market or in other cash pools because the insured funds would offer liquidity, portfolios that were somewhat less risky than other pools, and yields only slightly lower than alternative cash pools. Without insurance covering the full value of investors' account balances, however, there would still be an incentive for these investors to withdraw the uninsured portion of their assets from these funds during periods of severe market stress.”
Commenters stated that with respect to private insurance, it has been made available in the past but the product proved unsuccessful due to its cost and in the future would be too costly.
Given these comments, combined with our staff's analysis of this option, and considering that we do not have regulatory authority to create a public insurance scheme for money market funds, we are not pursuing this option as it does not appear that it would achieve our goal, among others, of materially reducing the contagion effects from heavy redemptions at money market funds without undue costs. We have made this determination based on money market fund insurance's potential for creating moral hazard and encouraging excessive risk-taking by money market funds, given the difficulties and costs involved in creating effective risk-based pricing for insurance and additional regulatory structure to offset this incentive.
We also evaluated whether money market funds should be regulated as special purpose banks. Stable net asset value money market fund shares can bear some similarity to bank deposits.
As the PWG Report noted, and as commenters reinforced, there are a number of drawbacks to regulating money market funds as special purpose banks. While a few commenters expressed some support for this option,
The potential costs involved in creating a new special purpose bank regulatory framework to govern money market funds do not seem justified. In addition, given our view that money market funds have some features similar to banks but other aspects quite different from banks, applying substantial parts of the bank regulatory regime to money market funds does not seem as well tailored to the structure of and risks involved in money market funds compared to the reforms we are proposing in this Release. After considering our lack of regulatory authority to transform money market funds into special purpose banks as well as the views expressed in these comment letters and our staff's analysis of these matters and for the reasons set forth above, we are not pursuing a reform option of transforming money market funds into special purpose banks.
We evaluated options that would institute a dual system of money market funds, where either institutional money market funds or money market funds using a stable share price would be subject to more stringent regulation than others. As discussed in the PWG Report,
There also may be other enhanced forms of regulation or other types of dual systems. For example, an alternative formulation of this regulatory regime would apply the enhanced regulatory constraints discussed above (
These dual system regulatory regimes for money market funds could provide several important benefits. They attempt to apply the enhanced regulatory constraints on those aspects of money market funds that most contribute to their susceptibility to runs—whether it is institutional investors that have shown a tendency to run or a stable net asset value created through the use of amortized cost valuation that can create a first mover advantage for those investors that redeem at the first signs of potential stress. A dual system that imposes enhanced constraints on stable net asset value money market funds would allow investors to choose their preferred mixture of stability, risk, and return.
Because insurance, special purpose banks, and the private liquidity facility generally are beyond our regulatory authority to create, these particular dual options, which would impose one of these regulatory constraints on a subset of money market funds, could not be created under our current regulatory authority. Other options, such as requiring a floating NAV or liquidity fees and gates only for some types of money market funds, however, could be imposed under our current authority and are indeed proposed.
Each of these dual systems generally has the same advantages and disadvantages as the potential enhanced regulatory constraints that would be applied, described above. In addition, for any two-tier system of money market fund regulation to be effective in reducing the risk of contagion effects from heavy redemptions, investors would need to fully understand the difference between the two types of funds and their associated risks. If they did not, they may indiscriminately flee both types of money market funds even if only one type experiences difficulty.
A dual system approach also would allow the Commission to tailor its reforms to the particular areas of the money market fund industry that are of most concern (
In this section, we analyze the macro-economic consequences of our floating NAV and liquidity fees and gates proposals, as well as some of their effects on efficiency, competition, and capital formation. We also examine the potential implications of these proposals on current investments in money market funds and on the short-term financing markets.
Our proposals should provide a number of benefits and positive effects on competition, efficiency, and capital formation. As discussed in detail earlier in this Release, we have designed both
The liquidity fees and gates alternative would preserve the benefits of the stable price per share that shareholders currently enjoy, but it would do so at the cost of potentially reducing (or making more costly) shareholder liquidity in certain circumstances. The liquidity fees and gates proposal is designed to protect fund shareholders that remain invested in a fund from bearing the liquidity costs of shareholders that exit a fund when the funds' liquidity is under stress. Redeeming fund shareholders receive the benefits of a fund's liquidity, which in times of stress may have the effect of imposing costs on the shareholders remaining in the fund. The liquidity fees and gates proposal would address this risk. The proposal also is designed to better position a money market fund to withstand heavy redemptions. A fund's board would be permitted to impose a gate when the fund is under stress, which would provide time for a panic to subside; for the fund's portfolio securities to mature and provide internal liquidity to meet redemptions; and for fund managers to assess the appropriate strategy to meet redemptions. Liquidity fees also could lessen investors' incentives to redeem and require investors to evaluate and price their liquidity needs. The fees and gates proposal, however, would not fully eliminate the incentive to quickly redeem in times of stress, because redeeming shareholders would retain an economic advantage over shareholders that remain in a fund if they redeem when the costs of liquidity are high, but the fund has not yet imposed a fee or gate. Also, by their nature, liquidity fees and redemption gates, if imposed, increase costs on shareholders who seek to redeem fund shares.
Both of these proposals are intended, in different ways, to stabilize funds in times of stress. Thus, the proposals are designed to reduce the likelihood and associated costs of any contagion effects from heavy redemptions in money market funds to other money market funds, the short-term financing markets, and other parts of the economy. Nevertheless, we recognize that the expected benefits of the proposals may be accompanied by some adverse effects on the short-term financing markets for issuers, and may affect the level of investment in money market funds that would be subject to the proposals. The magnitude of these effects, including any effects on competition, efficiency, and capital formation, would depend on the extent to which investors reallocate their investments within the money market fund industry and on the extent to which investors reallocate their investments between money market funds and alternatives outside the money market fund industry. We anticipate that the adverse effects on investment in money market funds and the short-term financing markets for debt issuers would be small if either relatively little money is reallocated, or if the alternatives to which investors reallocate their cash invest in securities similar to those previously held by the money market funds. Conversely, the effects on investment in money market funds and the short-term financing markets would be larger if a substantial amount of money is reallocated to alternatives and those alternatives invest in securities of a different type from those previously held by money market funds.
The popularity of money market funds today indicates they compete favorably with other investment alternatives. As of February 28, 2013, all money market funds had approximately $2.9 trillion in assets under management while government money market funds had approximately $929 billion under management.
If we were to adopt either of the alternatives we are proposing today, current money market fund investors would likely consider the tradeoffs involved of investing in a money market fund subject to our proposals. Investors may decide to remain invested in money market funds subject to either a floating NAV or liquidity fees and gates, or they may choose to invest in a money market fund that is exempt from our proposed reforms (such as a government money market fund, or for the floating NAV proposal, a retail fund), invest directly in short-term debt instruments, hold cash in a bank deposit account, invest in one of the few alternative diversified investments products that maintains a stable value (such as certain unregistered private funds), or invest in other products that fluctuate in value, such as ultra-short bond funds.
Money market funds under either of our proposals, like money market funds today, would compete against many investment alternatives for investors' assets. Our proposals, by increasing transparency and reducing the incentive for investors to redeem shares ahead of other investors in times of stress, could increase the attractiveness of money market funds in the long term for investors who value this aspect of our reforms, potentially offsetting the loss of some money market fund investors that may occur in the short term if we were to adopt either proposal, and enhancing competition. The proposals could also increase competition as investors become more aware of certain aspects of the industry and funds respond to meet investors' preferences. Our proposals also could increase allocative efficiency
If we were to adopt reforms to money market funds, investors may withdraw some of their assets from affected money market funds. We believe that investors may withdraw more assets under the floating NAV proposal than they would under the liquidity fees and gates alternative because the floating NAV proposal may have a more significant effect on investors' day-to-day experience with and use of money market funds than the liquidity fees and gates alternative and because many investors place great value on principal stability in a money market fund.
We understand that many money market fund investors value both price stability and share liquidity.
For those money market funds that would be required to use floating NAVs or to consider imposing liquidity fees and gates, there may be shifts in asset allocations not only among funds in the money market fund industry but also into alternative investment vehicles. We currently do not have a basis for estimating under either reform alternative the number of investors that might reallocate assets, the magnitude of the assets that might shift, or the likely investment alternatives because we do not know how investors will weigh the tradeoffs involved in reallocating their investments to alternatives. We request comment on these issues below.
As discussed in sections III.A and III.B above, we anticipate some institutional investors would not or could not invest in a money market fund that does not offer principal stability or that has restrictions on redemptions. We do expect that more institutional investors would be unwilling to invest in a floating NAV money market fund than a money market fund that might impose a fee or gate because a floating NAV would have a persistent effect on investors' experience in a money market fund. These investors also may be unwilling to incur the operational and other costs and burdens discussed above that would be necessary to use floating NAV money market funds. One survey concluded, among other things, that if the Commission were to require money market funds to use floating NAVs, 79% of the 203 corporate, government, and institutional investors that responded to the survey would decrease their money market fund investments or stop using the funds.
As of February 28, 2013, institutional prime money market funds manage approximately $974 billion in assets.
Investors that are unable or unwilling to invest in a money market fund subject to our proposed reforms would have a range of investment options, each offering a different combination of price stability, risk exposure, return, investor protections, and disclosure. For example, some current money market fund investors may manage their cash themselves and, based on our understanding of institutional investor cash management practices, many of these investors would invest directly in securities similar to those held by money market funds today. If so, our proposal would not have a large negative effect on capital formation. Any desire to self-manage cash, however, would likely be tempered by the expertise required to invest in a diversified portfolio of money market securities directly and the costs of investing in those securities given the economies of scale that would be lost when each investor has to conduct credit analysis itself for each investment (in contrast to money market funds which could spread their credit analysis costs for each security across their entire shareholder base).
Shifts from reformed money market funds to other investment alternatives that could result from our proposals likely would transfer certain risks from money market funds to other markets and institutions. Commenters have cited to the fact that a shift of assets from money market funds to bank deposits, for example, would increase investors' reliance on FDIC deposit insurance and increase the size of the banking sector, possibly increasing the concentration of risk in banks.
As discussed in the RSFI Study, there are a range of investment alternatives that currently compete with money market funds. If we adopt either of our proposals, investors could choose from among at least the following alternatives: Money market funds that are exempt from the proposed reforms; under the liquidity fees and gates proposal, money market funds that invest only in weekly liquid assets; bank deposit accounts; bank certificates of deposit; bank collective trust funds; local government investment pools (“LGIPs”); U.S. private funds; offshore money market funds; short-term investment funds (“STIFs”); separately managed accounts; ultra-short bond funds; short-duration exchange-traded funds; and direct investments in money market instruments.
The following table, taken from the RSFI Study, outlines the principal
If we adopt the floating NAV proposal, investors that value principal stability would likely consider shifting investments to government money market funds (or retail money market funds), which would be permitted to continue to maintain stable prices under that proposal. Similarly, if we adopt the alternative fees and gates proposal, investors that are unwilling to invest in a money market fund that might impose a liquidity fee or gate when liquidity is particularly costly might shift their investments to government money market funds. Investors that shifted their assets from prime money market funds to government money market funds would likely sacrifice yield under both proposals, but they would maintain the principal stability and liquidity of their assets. Investors in exempt retail money market funds would not have to face the same tradeoff. Alternatively, money market fund investors could reallocate assets to various bank products such as demand deposits or short-maturity certificates of deposit. FDIC insurance would provide principal stability and liquidity irrespective of market conditions for bank accounts whose deposits are within the insurance limits.
Today, interest-bearing accounts and non-interest-bearing transaction accounts at depository institutions are insured up to $250,000. Accordingly, institutions would be deterred from moving their investments from money market funds to banks because their assets would probably be above the current depository insurance limits which would expose them to substantial counterparty risk.
Investors in reformed money market funds that value principal stability would find most other investment alternatives unattractive, including floating value enhanced cash funds, ultra-short bond funds, short-duration ETFs, and collective investment funds. These alternatives typically do not offer principal stability. These investments, however, might be attractive to investors that value yield over principal stability and the lowest investment risk. To our knowledge, none of these alternative investment products (except potentially enhanced cash funds) may restrict redemptions in times of stress without obtaining relief from regulatory restrictions.
One practical constraint for many money market fund investors is that they may be precluded from investing in certain alternatives, such as STIFs, offshore money market funds, LGIPs, separately managed accounts, and direct investments in money market instruments, due to significant
Some current money market fund investors may have self-imposed restrictions or fiduciary duties that limit the risks they can assume or that preclude them from investing in certain alternatives. They might be prohibited from investing in, for example, enhanced cash funds that are privately offered to institutions, wealthy clients, and certain types of trusts due to greater investment risk, limitations on investor base, or the lack of disclosure and legal protections of the type afforded them by U.S. securities regulations.
Both retail and institutional investors' assessments of money market funds as reformed under our proposals and their attractiveness relative to alternatives may be influenced by investors' views on the degree to which funds' NAVs will change from day to day under our floating NAV proposal or the frequency with which fees and gates will be imposed under our liquidity fees and gates proposal. For example, managers of floating NAV funds could invest a large percentage of their holdings in very short-term or Treasury securities to minimize fluctuations in the funds' NAVs. Additionally, under our liquidity fees and gates proposal, we expect that funds would attempt to manage their liquidity levels in order to avoid crossing the threshold for applying liquidity fees or gates. One possible effect of each of these actions may be to lower the expected yield of the fund. Thus, we believe that, under our proposals, fund managers would be incentivized to mitigate the potential direct costs of the proposals for investors, and we further believe that they would be successful in so doing in all but the most extreme circumstances, but that this mitigation may come at a cost to fund yield and profitability as managers shift to shorter dated or more liquid securities.
Investors' demand for stability in the value of the money market fund investment could provide an incentive for sponsors to support their money market funds in the event a particular portfolio security would negatively affect the NAV of the fund (
As this analysis reflects, the economic implications of our floating NAV and liquidity fees and gates proposals depend on investors' preferences, and the attractiveness of investment alternatives.
None of the surveys discussed above considered the exemptions we are proposing that would permit both government money market funds (under both proposals) and retail money market funds (under the floating NAV proposal) to continue to maintain a stable price without restrictions. In addition, none of the surveys addressed how investors would respond to our specific liquidity fees and gates proposal. Finally, the surveys did not consider how available alternatives to floating NAV money market funds might satisfy money market fund investors' expressed desires for stable, liquid, and safe investments. Indeed, some commenters have suggested that the mass exodus from money market funds as a result of further reforms is unlikely and that money market fund investors may not necessarily seek out investment alternatives.
We request comment on what effects our floating NAV or liquidity fees and gates proposals would have on current money market fund investments.
• Do commenters believe that the likely effect of either our floating NAV proposal or our liquidity fees and gates proposal would be to cause some investors to shift their money market fund investments to alternative products and thus reduce the amount of money market fund assets under management? If so, to what extent and why? To what extent would these shifts vary depending on whether the investor was retail or institutional and why?
• Would either of our proposals result in any reduction in the number of money market funds and/or consolidation of the money market industry? How many funds and what types of money market funds would leave the industry? What would be the effect on assets under management of different types of money market funds if we adopt either our floating NAV or liquidity fees and gates proposal?
• To what extent under each alternative would retail and institutional money market fund investors shift to investment alternatives, including managing their cash themselves?
• Would certain investment alternatives that have significant restrictions on their investor base be unavailable for current money market fund investors? If so, which alternatives and to what extent?
• Do commenters agree with our analysis of the likelihood that certain shareholders would seek out particular investment alternatives in the event we adopted either of our floating NAV or liquidity fees and gates proposals? For example, would institutional investors be unlikely to shift assets to bank deposits (because of depository insurance limits) or local government investment pools, short-term investment funds, or offshore money market funds (because of the significant investment restrictions)? Do commenters agree with our analysis with respect to some or all of these alternatives? Why or why not?
• Are there aspects of any investment alternatives other than operational costs discussed in sections III.A.7 and III.B.6 above or the factors we have identified in this section that would affect whether money market fund investors would be likely to use other investment alternatives in lieu of money market funds under either of our proposals? We request that commenters differentiate between short-term effects that would occur as the industry transitions to one in which money market funds use floating NAVs or liquidity fees and gates and the long-term effects that would persist thereafter.
• Under each of the two proposals, what fraction of prime money market fund assets might be moved to government money market funds, retail funds, or to other alternatives (and to which alternatives)? How would these answers differ for retail investors and institutional investors?
• What would be the net effect of our proposal on competition in the money market fund industry?
As noted above, we understand that some institutional investors may be prohibited by board-approved guidelines or internal policies from investing certain assets in money market funds unless they have a stable value per share or do not have redemption restrictions, and we understand that other investors, including 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 value per share or that do not have any redemption restrictions.
• How would these guidelines and other constraints affect investors' use of floating NAV money market funds or those that could impose fees or gates?
• Could institutional investors change their guidelines or policies to invest in either floating NAV money market funds or funds that could impose fees or gates, if appropriate? If not, why not? If so, what costs might institutional investors incur to change these guidelines and policies?
• Do the guidelines or statutory or regulatory constraints precluding investment in floating NAV money market funds permit investments in investment products that can fluctuate in value, such as direct investments in money market instruments or Treasury securities?
Although we currently do not have estimates of the amount of assets money market fund investors might migrate to investment alternatives, we recognize that shifts from money market funds into other choices could affect issuers of short-term debt securities and the short-term financing markets. The effects of these shifts, including any effect on efficiency, competition, and capital formation, would depend on the size of reallocations to investment alternatives and the nature of the alternatives,
The extent to which money market fund investors might choose to reallocate their assets to investment alternatives as a result of money market fund reforms would likely drive the effect on issuers and the short-term financing markets. As discussed in the RSFI Study, prime money market funds managed approximately $1.7 trillion as of March 31, 2012, holding approximately 57% of the total assets of all registered money market funds. The chart below provides information about prime (and other) money market funds as of December 31, 2012. Even a modest shift could represent a sizeable increase in other investments.
Because prime money market funds' holdings are large and their investment strategies differ from some investment alternatives, a shift by investors from prime money market funds to investment alternatives could affect the markets for short-term securities. The magnitude of the effect will depend on not only the size of the shift but also the extent to which there are portfolio investment differences between prime money market funds and the chosen investment alternatives. If, for example, investors in prime money market funds were to choose to manage their cash directly rather than invest in alternative cash management products, they might invest in securities that are similar to those currently held by prime funds. In this case, the effects on issuers and the short-term financing markets would likely be minimal.
If, however, capital flowed from money market funds, which traditionally have been large suppliers of short-term capital, to bank deposits, which tend to fund longer-term lending and capital investments, issuers and the short-term financing markets may be affected to a greater extent. Similarly, if capital flowed from prime money market funds to government money market funds because government money market funds are exempt from further reforms, issuers that primarily issue to prime funds (and thus the short-term financing markets) would be affected. To put these potential shifts in context, on December 31, 2012, prime money market funds held approximately 46% of financial-company commercial paper outstanding and approximately 9% of Treasury bills outstanding, whereas Treasury money market funds held approximately 19% of Treasury bills outstanding but no financial company commercial paper.
Historically, money market funds have been a significant source of financing for issuers of commercial paper, especially financial commercial paper, and for issuers of short-term municipal debt.
As discussed in the RSFI Study, the 2008–2012 increase in bank deposits coupled with the contraction of the money market funds presents an opportunity to examine how capital formation can be affected by a reallocation of capital among different funding sources. According to Federal Reserve Board flow of funds data, money market funds' investments in commercial paper declined by 45% or $277.7 billion from the end of 2008 to the end of 2012. Contemporaneously, funding corporations reduced their holdings of commercial paper by 99% or $357.7 billion.
Although the decline in funds' commercial paper holdings was large, it is important to place commercial paper borrowing by financial institutions into perspective by considering its size compared with other funding sources. As with non-financial businesses, financial company commercial paper is a small fraction (3.2%) of all credit market instruments.
Municipalities also could be affected if our proposals caused the money market fund industry to contract. As shown in Panel C of the table immediately above, money market funds held approximately 9% of outstanding municipal debt securities as of December 31, 2012. Between the end of 2008 and the end of 2012, money market funds decreased their holdings of municipal debt by 34% or $172.8 billion.
To make their issues attractive to alternative lenders, municipalities lengthened the terms of some of their debt securities. Most municipal debt securities held by money market funds are variable rate demand notes (“VRDNs”), in which long-term
Additionally, our floating NAV proposal has an explicit exemption for retail funds that will permit sponsors to offer retail funds that seek to maintain a stable price and invest in municipal securities. We expect that the net investment in municipal money market funds will not change in response to the floating NAV proposal because we understand that few institutional investors invest in retail funds today and believe that most retail investors would not object to the daily $1,000,000 redemption limit. Investment in retail money market funds may in fact increase, if investors see stable price retail funds as an attractive cash management tool compared to other alternatives.
Both the floating NAV proposal and the requirement of increased disclosure under each alternative regarding the fund's market-based value and liquidity as well as any sponsor support or defaults in portfolio securities, among other matters, should improve informational efficiency. The floating NAV alterative as well as the proposed shadow NAV disclosure requirement under the liquidity fees and gates alternative provide greater transparency to shareholders regarding the daily market-based value of the fund. This should improve investors' ability to allocate capital efficiently across the economy. Under the liquidity fees and gates proposal, if a fund imposes a liquidity fee or redemption gate, this may hamper allocative efficiency and hence capital formation to the extent that investors are unable to reallocate their assets to their preferred use while the fee or gate is in place.
Our proposals may or may not affect competition within the short-term financing markets. On the one hand, the competitive effects are likely to be small or negligible if shareholders either remain in money market funds or move to alternatives that, in turn, invest in similar underlying assets. On the other hand, the effects may be large if investors reallocate (whether directly or through intermediaries) their investments into substantively different assets. In that case, issuers are likely to offer higher yields to attract capital, whether from the smaller money market fund industry or from other investors. Either way, issuers that are unable to offer the required higher yield may have difficulties raising their required capital, at least in the short-term financing markets.
We request comment on what effects our proposals would have on issuers and the short-term financing markets for issuers. In particular, we request that commenters discuss whether the effects would be different between the floating NAV alterative and the liquidity fees and gates alternative and to provide analysis of the magnitude of the difference.
• How would either reform proposal affect issuers in the short-term financing markets, whether through a smaller money market fund industry or through fewer highly risk-averse investors holding money market funds shares?
• Would either reform proposal result in increased stability in money market funds and hence enhance stability in the short-term financing markets and the willingness of issuers to rely on short-term financing because the issuers would be less exposed to volatility in the availability of short-term financing from money market funds?
• What effect would either proposal have on the issuers of commercial paper and short-term municipal debt? How would either proposal affect the market for short-term government securities?
• What would be the long-term effect from either alternative on the economy? Please include empirical data to support any conclusions.
We expect that yields in prime money market funds under the floating NAV alternative could be higher than yields under our fees and gates alternative. Under the fees and gates proposal, prime money market funds would have an incentive to closely manage their weekly liquid assets, which they could do by holding larger amounts of such assets, which tend to have comparatively low yields. If so, this would provide a competitive advantage for issuers that are able and willing to issue assets that qualify as weekly liquid assets, and it might result in the overall short-term financing markets being tilted toward shorter-term issuances. We believe that prime money market funds under this proposal would not meet the increased demand for weekly liquid assets solely by increasing their investments in Treasury securities because investors that want the risk-return profile that comes from Treasury securities would probably prefer to invest in Treasury funds, which would be exempt from key aspects of either of our provisions of the proposal. Under the floating NAV proposal, prime money market funds might not have an incentive to reduce portfolio risk if the relatively more risk-averse investors avoid prime money market funds and invest in government money market funds or retail funds, which would continue to maintain a stable price. If so, this would provide a competitive advantage for issuers of higher-yielding 2a–7-eligible assets. The potential differing portfolio composition of money market funds under our two reform proposals, therefore, could have an effect on issuers and the short-term financing markets through differing levels of money market fund demand for certain types of portfolio securities.
We request comment on this aspect of our proposal and how the effect on money market fund yields, short-term debt security issuers, and the short-term financing markets would differ depending on which alternative we adopted.
We request comment on our assumptions, expectations, and estimates described in this section.
• Are they correct?
• Do commenters agree with our analyses of certain effects on efficiency, competition, and capital formation that may arise from our floating NAV and liquidity fees and gates proposals? Do commenters agree with our analysis of potential additional implications of these proposals on current investments in money market funds and on the short-term financing markets?
• Are there alternative assumptions, expectations, or estimates that we have
• Are there any other economic effects associated with our proposed alternatives that we have not discussed? Please quantify and explain any assumptions used in response to these questions (and any others) to the extent possible.
• What would have been the effect on money market funds, investors, the short-term financing markets, and capital formation if our floating NAV proposal or our liquidity fees and gates proposal had been in place in 2007 and 2008?
We are proposing amendments to rule 2a–7 and Form N–1A that would require money market funds to provide additional disclosure in certain areas to provide greater transparency regarding money market funds, so that investors have an opportunity to better evaluate the risks of investing in a particular fund and that the Commission and other financial regulators obtain important information needed to administer their regulatory programs. As discussed in more detail below, these amendments would require enhanced registration statement and Web site disclosure
In addition, we are proposing a new rule
Throughout the history of money market funds, and in particular during the 2007–2008 financial crisis, money market fund sponsors and other fund affiliates have, on occasion, provided financial support to money market funds.
For these reasons, we propose requiring money market funds to disclose current and historical instances of sponsor support. We believe that these disclosure requirements would clarify, to current and prospective money market fund investors as well as to the Commission, the frequency, nature, and amount of financial support provided by money market fund sponsors. We believe that the disclosure of historical instances of sponsor support would allow investors, regulators, and the fund industry to understand better whether a fund has required financial support in the past. Currently, when sponsor support is provided during circumstances in which a money market fund experiences stress but does not “break the buck,” and sponsor support is not immediately disclosed, investors may be unaware that their money market fund has come under stress.
Accordingly, we are proposing amendments to Form N–1A that would require money market funds to provide SAI disclosure
Because past analyses of financial support provided to money market funds have differed in their assessment of what actions constitute such support,
We request comment on the proposed amendments to Form N–1A that would require money market funds to provide disclosure regarding historical instances in which the fund has received financial support from a sponsor or other fund affiliate.
• Would the proposed disclosure regarding historical instances of financial support provided to money market funds assist investors in appreciating the risks of investing in money market funds generally, and/or in particular money market funds? Do investors already appreciate the extent of financial support that money market funds sponsors and other affiliates have historically provided, and that such support has been provided on a discretionary basis?
• We request comment on the specific disclosure items contemplated by the proposed SAI disclosure requirement. Is there any additional information, with respect to the historical instances in which a money market fund has received financial support from a sponsor or other fund affiliate, that funds should be required to disclose? Would all of the items included in the proposed SAI disclosure assist shareholders' understanding of the historical financial support provided to a fund? If not, which items should we not include, and why?
• Instead of, or in addition to, requiring funds to disclose historical information about financial support received from a sponsor or fund affiliate on the fund's SAI, should we require fund sponsors to publicly disclose their financial statements, in order to permit non-shareholders to evaluate the sponsor's capacity to provide support? Why or why not?
• We request comment on the proposed instruction clarifying the meaning of the term “financial support” by providing a non-exclusive list of examples of actions that would be deemed to be “financial support” for purposes of the proposed disclosure requirement. Should the proposed instruction be expanded or limited, and if so, how and why?
• We request comment on the 10-year look-back period contemplated by the proposed SAI disclosure requirement. Should the proposed disclosure requirement include a longer or shorter look-back period, and if so, why?
• We request comment on the list of persons whose financial support of a fund would necessitate disclosure under the proposed SAI disclosure requirement. Should this list of persons be expanded or limited, and if so, why?
• We request comment on the proposed instruction requiring disclosure of any financial support provided to a predecessor fund. Are there other situations, besides those identified in this instruction, in which disclosure of financial support provided
• Would it be useful for shareholders for the Commission to require prospective prospectus and/or SAI disclosure regarding the circumstances under which a money market fund's sponsor, or an affiliated person of the fund, may offer any form of financial support to the fund, as well as any limits to this support? If so, what kind of disclosure should be required?
We believe it is important for money market funds to inform existing and prospective shareholders of any present occasion on which the fund receives financial support from a sponsor or other fund affiliate. We believe that this disclosure could influence prospective shareholders' decision to purchase shares of the fund, and could inform shareholders' assessment of the ongoing risks associated with an investment in the fund. We believe that it is possible that shareholders would interpret prior support as a sign of fund strength, as it demonstrates the sponsor's willingness to backstop the fund. However, we also recognize that this disclosure could potentially make shareholders quicker to redeem shares if they believe the provision of financial support to be a sign of weakness, or an indication that the fund may not continue in business in the future (for instance, if providing financial support to a fund were to weaken the sponsor's own financial condition, possibly affecting its ability to manage the fund).
We are proposing an amendment to rule 2a–7 that would require a fund to post prominently on its Web site substantially the same information that the fund is required to report to the Commission on Form N–CR regarding the provision of financial support to the fund.
We request comment on the proposed amendment to rule 2a–7 that would require money market funds to inform current and prospective shareholders, via Web site, of any present occasion on which the fund receives financial support from a sponsor or other fund affiliate.
• Should any more, any less, or any other information be required to be posted on the fund's Web site than that disclosed on Form N–CR? Is the fund's Web site the best place for us to require such disclosure?
• As proposed, should we require this information to be posted “prominently” on the fund's Web site? Should we provide any other instruction as to the presentation of this information, in order to highlight the information and/or lead investors efficiently to the information, for example, should we require that the information be posted on the fund's home page or be accessible in no more than two clicks from the fund's home page?
• Should this information be posted on the fund's Web site for a longer or shorter period than one year following the occurrence of any event specified in Part C of Form N–CR?
• How would the requirement for money market funds to disclose current instances of financial support affect the behavior of fund shareholders and/or the market as a whole? For instance, could this disclosure make shareholders quicker to redeem shares if they believe the provision of financial support to be a sign of portfolio weakness?
The qualitative benefits and costs of the proposed requirements regarding the disclosure of financial support received by a fund from its sponsor or a fund affiliate are discussed above. The Commission staff has not measured the quantitative benefits of these proposed requirements at this time because of uncertainty regarding how the proposed disclosure may affect different investors' behavior.
We believe that the proposed requirements could increase informational efficiency by providing additional information to investors and the Commission about the frequency, nature, and amount of financial support provided by money market fund sponsors. This in turn could assist investors in analyzing the risks associated with particular funds, which could increase allocative efficiency
The proposed disclosure requirements also could have additional effects on capital formation, depending on if investors interpret financial support as a sign of money market fund strength or weakness. If sponsor support (or the lack of need for sponsor support) were understood to be a sign of fund strength, the proposed requirements could enhance capital formation by promoting stability within the money market fund industry. On the other hand, the proposed disclosure requirements could detract from capital formation if sponsor support were understood to indicate fund weakness and made money market funds more susceptible to heavy redemptions during times of stress, or if money market fund investors decide to move their money out of money market funds entirely as a result of the proposed disclosure. Accordingly, because we do not have the information necessary to provide a reasonable estimate, we are unable to determine the effects of this proposal on capital formation. Finally, the required disclosure could assist the Commission in overseeing money market funds and developing regulatory policy affecting the money market fund industry, which might affect capital formation positively if the resulting more efficient or more effective regulatory framework encouraged investors to invest in money market funds.
We request comment on this economic analysis:
• Are any of the proposed disclosure requirements unduly burdensome, or would they impose any unnecessary costs?
• We request comment on the staff's estimates of the operational costs associated with the proposed disclosure requirements.
• We request comment on our analysis of potential effects of these proposed disclosure requirements on efficiency, competition, and capital formation. In particular, would the proposed disclosure increase informational efficiency by increasing awareness of sponsor support? If so, would the disclosure requirements for sponsor support make money market funds more or less susceptible to heavy redemptions in times of fund and market stress?
We are proposing amendments to rule 2a–7 that would require money market funds to disclose prominently on their Web sites the percentage of the fund's total assets that are invested in daily and weekly liquid assets, as well as the fund's net inflows or outflows, as of the end of the previous business day.
We believe that daily disclosure of money market funds' daily liquid assets and weekly liquid assets would promote transparency regarding how money market funds are managed, and thus may permit investors to make more efficient and informed investment decisions. Additionally, we believe that this enhanced disclosure may impose external market discipline on portfolio managers, in that it may encourage fund managers to carefully manage their daily and weekly liquid assets, which may decrease portfolio risk and promote stability in the short-term financing markets.
While investors will be able to access historical information about money market funds' daily liquid assets and weekly liquid assets if the proposed amendments to Form N–MFP are adopted,
We request comment on the proposed amendments to rule 2a–7 that would require money market funds to disclose daily the percentages of fund assets invested in daily and weekly liquid assets, as well as the fund's net inflows or outflows.
• Would the proposed amendments be useful in assisting shareholders in better understanding how money market funds are managed and in assessing a fund's risk? Would the proposed amendments promote the goals of enhancing transparency and encouraging market discipline on money market funds in a way that increases stability in the short-term financing markets? How, if at all, would the proposed amendments affect the amount of liquid assets that a money market fund's investment adviser purchases on behalf of the fund? Would disclosing information about net shareholder flows assist investors in understanding the significance of the reported liquidity information?
• Should we require that any more, any less, or any other information regarding portfolio liquidity be posted on money market funds' Web sites?
• As proposed, should we require this information to be posted “prominently” on the fund's Web site? Should we provide any other instruction as to the presentation of this information, in order to highlight the information and/or lead investors efficiently to the information? For example, should we require that the information be posted on the fund's home page or be accessible in no more than two clicks from the fund's home page?
• Should we require information regarding the percentage of money market fund assets invested in daily liquid assets and weekly liquid assets to be posted less frequently than daily? Should we require funds to maintain this information on their Web sites for a period of more or less than 6 months?
• Would the proposed amendments incentivize a money market fund, in certain circumstances, to sell assets that are not weekly liquid assets rather than weekly liquid assets? Will this harm non-redeeming shareholders?
• How would the requirement for money market funds to disclose the percentages of fund assets invested in daily liquid assets and weekly liquid assets affect the behavior of fund shareholders and/or the market as a whole? For instance, could this disclosure make shareholders quicker to redeem shares upon a decrease in portfolio liquidity, or generally increase the volatility of a fund's flows? Would this disclosure result in reducing the chances that better-informed shareholders may redeem ahead of retail or less informed shareholders? If the liquidity fees and gates proposal is adopted, would transparency of fund liquidity be important to permit investors in funds other than the one imposing a fee to assess the liquidity position of their fund before determining whether to redeem? Would such transparency affect investors' redemptions in normal market conditions or just in periods when liquidity is costly? Would such transparency affect investors' willingness to buy shares? How are these factors related to what motivates money market fund investors to redeem?
• Would disclosure of money market funds' liquidity levels, coupled with portfolio holdings reported on Form N–MFP (and more frequent portfolio holdings disclosure on funds' Web sites, to the extent the Commission determines to require this
The qualitative benefits and costs of the proposed requirements regarding disclosure of the percentage of a money market fund's assets that are invested in daily liquid assets and weekly liquid assets, as well as the fund's net inflows or outflows, are discussed above.
The proposed requirements could also have effects on capital formation. The required disclosure could assist the Commission in overseeing money market funds and developing regulatory policy affecting the money market fund industry, which might affect capital formation positively if the resulting regulatory framework more efficiently or more effectively encouraged investors to invest in money market funds. The proposed requirements also may impose external market discipline on portfolio managers, which in turn could create market stability and enhance capital formation, if the resulting market stability encouraged more investors to invest in money market funds. However, the proposed requirements could detract from capital formation by decreasing market stability if investors became quicker to redeem during times of stress as a result of the proposed disclosure requirements. Accordingly, we do not have the information necessary to provide a reasonable estimate the effects of these proposed requirements on capital formation.
Costs associated with these disclosure requirements include initial, one-time costs, as well as ongoing costs. Initial costs include the costs to design the schedule, chart, graph, or other depiction showing historical liquidity information in a manner that clearly communicates the required information and to make the necessary software programming changes to the fund's Web site to present the depiction in a manner that can be updated each business day. We estimate that the average one-time costs for each money market fund to design and present the historical depiction of daily liquid assets and weekly liquid assets would be $20,150.
We request comment on this economic analysis:
• Are any of the proposed disclosure requirements unduly burdensome, or would they impose any unnecessary costs?
• We request comment on the staff's estimates of the operational costs associated with the proposed disclosure requirements.
• We request comment on our analysis of potential effects of these proposed disclosure requirements on efficiency, competition, and capital formation.
We are proposing amendments to rule 2a–7 that would require each money market fund to disclose daily, prominently on its Web site, the fund's current NAV per share, rounded to the fourth decimal place in the case of a fund with a $1.0000 share price of an equivalent level of accuracy for funds with a different share price
If we were to adopt the floating NAV alternative, the proposed amendments would effectively require a money market fund to publish historical information about the sale and redemption price of its shares each business day as of the end of each preceding business day.
Whether we adopt either of the proposed reform alternatives, we believe that daily disclosure of money market funds' current NAV per share would increase money market funds' transparency and permit investors to better understand money market funds' risks.
Although current and prospective shareholders may presently obtain historical information about money market funds' month-end shadow prices on Form N–MFP, we believe that requiring a six-month record of the fund's daily current NAV on the fund's Web site would permit shareholders to access more detailed information in a more convenient manner than comparing monthly Form N–MFP filings. We believe that investors should be able to compare recent NAV information with previous information from which they (or others analyzing the data) may discern trends. Because money market funds are presently required to maintain a six-month record of portfolio holdings on the fund Web site,
There has been a significant amount of industry support for the more frequent disclosure of money market funds' current NAV per share. In January and February of 2013, a number of money market fund sponsors of large funds began voluntarily disclosing their funds' daily current NAV per share, calculated using available market quotations.
• Would daily disclosure of money market funds' current NAV per share be useful to assist shareholders in increasing money market funds' transparency and better understanding money market funds' risks? Would the proposed amendments promote the goals of enhancing transparency and encouraging fund managers to manage portfolios in a manner that increases stability in the short-term financing markets? Would the daily disclosure of market prices encourage funds to invest in easier-to-price securities or less volatile securities? How, if at all, would the effects of the proposed disclosure requirement differ for stable price funds (which would be required to disclose their market-based current NAV per share) and floating NAV funds (which would be required to disclose the sale and redemption price of their shares)?
• How, if at all, have shareholders responded to the monthly disclosure of funds' current NAV per share, as required by the 2010 amendments? Would shareholders respond differently to the proposed daily disclosure than they have to historical monthly disclosure?
• Should information regarding money market funds' current NAV per share be required to be posted to a fund's Web site less frequently than the proposed amendments would require? Should funds be required to maintain this information on their Web sites for a period of more or less than 6 months?
• As proposed, should we require this information to be posted “prominently” on the fund's Web site? Should we provide any other instruction as to the presentation of this information, in order to highlight the information and/or lead investors efficiently to the information, for example, should we require that the information be posted on the fund's home page or be accessible in no more than two clicks from the fund's home page?
• How would the requirement for money market funds to disclose their current NAV per share daily affect the behavior of fund shareholders and/or the market as a whole? For instance, could this disclosure make shareholders quicker to redeem shares upon a decrease in current NAV, or generally increase the volatility of a fund's flows?
The qualitative benefits and costs of the proposed requirements regarding daily disclosure of a money market fund's current NAV per share are discussed above.
The proposed requirements could also have effects on capital formation. On one hand, the proposed requirements may impose external market discipline on portfolio managers, which in turn could create market stability and enhance capital formation, if the resulting market stability encouraged more investors to invest in money market funds. On the other hand, the proposed requirements could detract from capital formation by decreasing market stability if investors became quicker to redeem during times of stress as a result of the proposed disclosure
Costs associated with these disclosure requirements include initial, one-time costs, as well as ongoing costs.
We request comment on this economic analysis:
• Are any of the proposed disclosure requirements unduly burdensome, or would they impose any unnecessary costs?
• We request comment on the staff's estimates of the operational costs associated with the proposed disclosure requirements.
• We request comment on our analysis of potential effects of these proposed disclosure requirements on efficiency, competition, and capital formation.
Money market funds are currently required to file information about the fund's portfolio holdings on Form N–MFP within five business days after the end of each month, and to disclose much of the portfolio holdings information that Form N–MFP requires on the fund's Web site each month with 60-day delay.
Because the new information that a fund would be required to present on its Web site overlaps with the information that a fund would be required to disclose on Form N–MFP, we anticipate that the costs a fund will incur to draft and finalize the disclosure that will appear in its Web site will largely be incurred when the fund files Form N–MFP, as discussed below in section III.H.6. In addition, we estimate that a fund would incur annual costs of $2,484 associated with updating its Web site to include the required monthly disclosure.
• We request comment on the Web site disclosure that we propose to harmonize with the disclosure proposed to be reported on Form N–MFP. Should any of the information that is proposed to be reported on Form N–MFP, and that we propose to require funds to disclose on the fund's Web site, not be required to appear on the fund's Web site?
• We request comment on the staff's estimates of the operational costs associated with the proposed disclosure requirements.
Because certain money market funds have high portfolio turnover rates, the monthly disclosure requirement described above may not permit fund investors to fully understand a fund's portfolio composition and its attendant
We are considering whether to require more frequent disclosure of money market funds' portfolio holdings on a fund's Web site, including the market value of individual portfolio securities.
On the other hand, more frequent disclosure of portfolio holdings could make investors quicker to redeem when these holdings show signs of deterioration, and also could encourage money market funds to use less differentiated investment strategies.
In addition, such Web site disclosures would also address issues related to selective disclosure of portfolio holdings.
We request comment on whether we should require money market funds to disclose portfolio holdings via their Web site more frequently than monthly.
• Would more frequent disclosure of money market funds' portfolio holdings be useful to assist shareholders in assessing a fund's risk? Would more frequent disclosure promote the goals of enhancing transparency, permitting shareholders to differentiate between money market funds, and encouraging fund managers to manage portfolios in a manner that increases stability in the short-term financing markets? How, if at all, would more frequent disclosure of portfolio holdings affect the portfolio assets that a money market fund's investment adviser purchases on behalf of the fund?
• What type of investors would be most likely to benefit from more frequent disclosure of money market funds' portfolio holdings? Would this disclosure allow more attentive investors to disadvantage less attentive investors?
• If more frequent disclosure of money market funds' portfolio holdings would be useful, how frequently should such disclosure be required? Daily? Weekly?
• During the 2007–2008 financial crisis, some funds voluntarily chose to disclose portfolio information more frequently than usual, while other funds did not change their disclosure practices. How and why did funds make these decisions, and how did investors respond? How would the benefits and costs of disclosure be affected by moving from a voluntary system to a mandated system? What would be the benefits of retaining a voluntary system? Would investors view voluntary disclosure as a signal regarding the level of transparency of a fund?
• Should any requirement for more frequent disclosure of portfolio holdings be limited to a certain type or types of money market fund (
• How would more frequent disclosure of money market funds' portfolio holdings affect the behavior of fund shareholders and/or the market as a whole? For instance, would this disclosure increase or decrease funds' susceptibility to runs, affect money market funds' ability to use differentiated investment strategies, or lead to “front running” or “free riding”?
• If we were to require more frequent Web site disclosure of money market funds' portfolio holdings, should we also require more frequent filing of Form N–MFP (which includes certain portfolio information that we do not currently require, and do not currently propose to require, funds to disclose on their Web sites) with the Commission? If so, should we require Form N–MFP to be filed as frequently as we require Web site disclosure of portfolio holdings? What impact would this have, if any, on analysts who use Form N–MFP data?
We are proposing amendments to rule 2a–7 that would require stable price funds (including government and retail funds under the floating NAV proposal, and all funds under the fees and gates proposal) to calculate the fund's current NAV per share based on current market factors at least once each business day.
We request comments on the proposed amendments to rule 2a–7 that would require money market funds to calculate their current NAV daily if the we were to adopt the liquidity fees and gates alternative.
• Would the proposed daily calculation requirement affect what assets a money market fund purchases? For example, would the requirement make funds less willing to invest in assets that are more difficult to value, or in more volatile assets?
• Rule 2a–7 currently requires a money market fund's board of directors to review the amount of deviation between the fund's market-based NAV per share and the fund's amortized cost per share “periodically.”
The qualitative benefits and costs of the proposed requirement for money market funds to calculate the fund's current NAV per share daily are discussed above.
The costs associated with this proposed requirement include the costs for funds to determine the current values of their portfolio securities each day. We estimate that 25% of active money market funds, or 147 funds, will incur new costs to comply with this requirement.
All money market funds are presently required to disclose their market-based NAV per share monthly on Form N–MFP, and if the proposed amendments to Form N–MFP are adopted, the frequency of this disclosure would increase to weekly.
We request comment on this economic analysis:
• Are any of the proposed requirements unduly burdensome, or would they impose any unnecessary costs?
• We request comment on the staff's estimates of the operational costs
• We request comment on our analysis of potential effects of these proposed requirements on efficiency, competition, and capital formation.
Rule 10b–10 under the Securities Exchange Act of 1934 (the “Confirmation Rule”) addresses broker-dealers' obligations to confirm their customers' securities transactions. The rule provides an exception for transactions in money market funds that attempt to maintain a stable net asset value and where no sales load or redemption fee is charged.
The floating NAV proposal, if adopted, would negate applicable exemptions that have historically permitted money market funds to maintain a stable net asset value. Instead, money market funds, like other mutual funds, would sell and redeem shares at prices that reflect the current market values of their portfolio securities. Given the likelihood that share prices of money market funds that are not exempt from the floating NAV proposal will fluctuate, broker-dealers may not be permitted under the Confirmation Rule to provide money market fund shareholders transaction information on a monthly basis.
The Confirmation Rule was designed to provide customers with the relevant information relating to their investment decisions at or before the completion of a transaction. The Confirmation Rule exception was adopted because the Commission believed that in cases where funds maintain a constant net asset value per share and no load is charged, monthly statements were adequate to ensure investor protection due to the stable pricing of the fund shares.
• Should broker-dealers be required to provide immediate confirmations to shareholders of funds with a floating NAV, or should broker-dealers be permitted to continue to provide confirmations for these transactions on a monthly basis? What are the advantages and disadvantages of requiring broker-dealers to provide fund shareholders with immediate confirmations of transactions in floating NAV money market funds rather than monthly confirmations?
• If a floating NAV were implemented, what are the reasons why shareholders might prefer to receive this information immediately? Are there any additional costs to broker-dealers associated with providing immediate confirmations? If so, what are the nature and magnitude of such costs? Should the Commission consider alternative exceptions to the Confirmation Rule in the context of a floating NAV, such as permitting confirmations to be provided to shareholders for some different time period (
• How, if at all, do the proposed amendments that require money market funds to disclose daily market-based NAV per share affect the need for immediate confirmations?
We are proposing a new rule that would require money market funds to file new Form N–CR with the Commission when certain events occur.
Under both the floating NAV alternative and the liquidity fees and gates alternative, we are proposing to require that money market funds file a current report on new Form N–CR within a specified period of time after the occurrence of certain events.
An instrument subject to a demand feature or guarantee would not be deemed to be in default, and an event of insolvency with respect to the security would not be deemed to have occurred, if: (i) in the case of an instrument subject to a demand feature, the demand feature has been exercised and the fund has recovered either the principal amount or the amortized cost of the instrument, plus accrued interest; (ii) the provider of the guarantee is continuing, without protest, to make payments as due on the instrument; or (iii) the provider of a guarantee with respect to an unrated, first-tier asset-backed security, as defined by rule 2a–7, is continuing, without protest, to provide credit, liquidity, or other support as necessary to permit the asset-backed security to make payments as due.
We would require funds to file a report on Form N–CR within one business day after the default or event of insolvency occurs, which time frame balances, we believe, the exigency of the report with the time it will reasonably take a fund to compile the required information.
Additionally, we believe that current reports of occasions on which a money market fund receives financial support from a sponsor or other fund affiliate would provide important transparency to shareholders and the Commission, and also could help shareholders better understand the ongoing risks associated with an investment in the fund.
In addition, if an affiliated person, promoter, or principal underwriter of the fund, or an affiliated person of such a person, purchases a security from the fund in reliance on rule 17a–9, the money market fund would be required to provide the purchase price of the security, as well as certain other information. Instruction to proposed (FNAV) Form N–CR Part C; Instruction to proposed (Fees & Gates) Form N–CR Part C.
We would require funds to file a report on Form N–CR within one business day after a fund receives such financial support,
Today, when a sponsor supports a fund by purchasing a security pursuant to rule 17a–9, we require prompt disclosure of the purchase by email to the Director of the Commission's Division of Investment Management, but we do not otherwise receive notice of such support unless the fund needs and requests no-action or other relief.
Under either alternative proposal, we also would require funds that are permitted to transact at a stable price to file a report on proposed Form N–CR on the first business day after any day on which the fund's current NAV per share
We would require funds to file a report on Form N–CR within one business day following the reportable movement of the fund's current NAV, which time frame we believe balances the exigency of the report with the time it will reasonably take a fund to compile the required information.
We request comments on the proposed general disclosure requirements of new Form N–CR:
• Are there any other events that warrant a current report filing obligation for money market funds under either or both of the proposed reform alternatives? If so, what are they? Should we add any additional disclosure requirements to proposed Form N–CR? Should any proposed requirements not be included in Form N–CR?
• With respect to the proposed requirement for stable price money market funds to report certain deviations between the fund's current NAV and its intended stable price per share, is our proposed threshold of reporting (
• Do the proposed reporting deadlines for each part appropriately balance the Commission's and the public's need for information on current events affecting money market funds with the costs of preparing and submitting a report on Form N–CR? Should we require a longer or shorter time frame in which to file a report on any of the parts of Form N–CR?
• Would the particular information that we propose requiring funds to report in response to Parts B, C, and D of Form N–CR be useful to shareholders in understanding the events triggering the filing of Form N–CR, as well as certain of the risks associated with an investment in the fund? Should we require any more, any less, or any other information to be reported?
• How frequently do commenters anticipate that funds would file Form N–CR to report a default or event of insolvency with respect to portfolio securities, the provision of financial support to the fund, or a significant deviation between the fund's current per-share NAV and its intended stable price? For how many consecutive days do commenters anticipate that funds would likely report low current NAVs? Under what conditions would these reports trigger investor redemptions? Under what conditions would these reports affect investor purchases?
• Which types of investors (or other parties) would be most likely to monitor Form N–CR filings in real time?
• Would the proposed requirement to file a report in response to Part C of Form N–CR make funds less likely to request sponsor support? Why or why not? How would this affect the sponsor's willingness to provide support?
• Would the requirement to file a report in response to Part D of Form N–CR make funds more likely to request sponsor support? Why or why not? How would this affect the sponsor's willingness to provide support?
• How would the requirement to file Form N–CR affect the fund's investment decisions? Would the reporting requirement make the fund more
We propose to require that money market funds file a report on Form N–CR if a fund reaches the threshold triggering board consideration of a liquidity fee or redemption gate, if we adopt the proposed liquidity fees and gates alternative. This report would include a description of the fund's response (such as whether and why a fee was not imposed, as rule 2a–7 requires by default, or whether any why a gate was imposed).
Similarly, if a money market fund whose weekly liquid assets fall below 15% of total fund assets suspends the fund's redemptions pursuant to [rule 2a–7(c)(2)(ii)], we would require the fund to disclose the following information: (i) the date on which the fund's weekly liquid assets fell below 15% of total fund assets; (ii) the date on which the fund initially suspended redemptions; (iii) a brief description of the facts and circumstances leading to the fund's weekly liquid assets falling below 15% of total fund assets; and (iv) a short discussion of the board of directors' analysis supporting its decision to suspend the fund's redemptions. Proposed (Fees & Gates) Form N–CR Part F.
We would also require money market funds to file a report on Form N–CR when the board lifts the fee or resumes redemptions of fund shares.
Proposed (Fees & Gates) Form N–CR Part G would not require an amendment after its initial filing, because Part G simply requires a fund to disclose the date on which the fund lifted liquidity fees and/or resumed fund redemptions.
The Commission and shareholders also have a substantial interest in receiving the information that a fund would submit in amending an initial report filed in response to events specified in Part E or Part F. However, we believe that receiving an analysis of the factors leading to the imposition of fees and/or gates, as well as the board's determination whether to impose a fee and/or gates, would be of less immediate concern to the Commission and shareholders. Also, the disclosure in the amendment would require more time to compose and compile than the information required to be submitted in the initial report. Because funds would be required to submit a moderate amount of explanatory information in amending initial Part E or Part F reports, and because the personnel of a fund required to file a Part E or Part F report will likely simultaneously be occupied resolving fund liquidity pressures, we propose to permit funds to submit amendments to initial Part E or Part F reports within four business days.
We request comments on the proposed additional requirements in new Form N–CR specific to the proposed liquidity fees and gates alternative:
• Should we add any additional disclosure requirements to proposed Form N–CR specific to the proposed liquidity fees and gates alternative? Should any of the proposed requirements not be included in Form N–CR?
• Should we require reporting not just when a fund reaches the thresholds that trigger consideration of board action, but also before those triggers are reached? If so, when should we require reporting? When weekly liquid assets reach 25% of portfolio assets? Some other number? What additional
• Should we require reporting not just when a fund reaches the thresholds that trigger consideration of board action, but also at some threshold after those triggers are reached? If yes, when should we require the additional reporting? When weekly liquid assets reach 10% of portfolio assets? Some other number? Should we require similar reporting when daily liquid assets drop below a certain threshold? If so, what threshold should we require? When daily liquid assets reach 0%, or should we set a higher threshold such as 5%?
• Would the particular information that we propose requiring funds to report in response to Parts E, F, and G of Form N–CR be useful to shareholders in understanding the events triggering the filing of Form N–CR? Should we require any more, any less, or any other information to be reported?
• How frequently do commenters anticipate that funds would file reports on proposed Form N–CR in response to the proposed requirements specific to the proposed liquidity fees and gates alternative? What average length of time do commenters anticipate transpiring between a fund's initial report in response to Part E or Part F of Form N–CR, and a fund's report in response to Part G of Form N–CR?
• Do the proposed reporting deadlines appropriately balance the Commission's and the public's need for information on current events affecting money market funds with the costs of preparing and submitting a report on Form N–CR? Does the proposed requirement to file an initial report on Form N–CR for Parts E and F within one business day following a triggering event, and then to file an amended report within four business days following the event, appropriately balance the exigency of the reports with the time that it will reasonably take a fund to compile the required information for each part? Should we require a longer or shorter time frame in which to file a report on Form N–CR for any of the parts?
• Are there any other events that warrant a current report filing obligation under the proposed liquidity fees and gates alternative?
• How, if at all, would the requirement to file Form N–CR affect the fund's investment decisions, including the fund's decision to invest in weekly liquid assets?
• How, if at all, would the requirement to file Form N–CR affect the fund's decisions with respect to accepting investments from certain groups of shareholders? For example, would funds be less likely to accept investments from large shareholders or short-term shareholders?
• How, if at all, would the requirement to file Form N–CR affect the board's decisions surrounding the imposition of liquidity fees and gates? Would the Form N–CR filing requirement affect the board's willingness to deviate from the default liquidity fee requirements? Why or why not?
As discussed above, we believe that the Form N–CR reporting requirements would provide important transparency to investors and the Commission, and also could help investors better understand the risks associated with a particular money market fund, or the money market fund industry generally. The Form N–CR reporting requirements would permit investors and the Commission to receive information about certain money market fund material events consistently and relatively quickly. As discussed above, we believe that investors and the Commission have a significant interest in receiving this information because it would permit investors and the Commission to monitor indicators of stress in specific funds or fund groups, as well as the money market fund industry, and also to analyze the economic effects of certain material events. The Form N–CR reporting requirements could give investors and the Commission a greater understanding of the circumstances leading to events of stress, and also how a fund's board handles events of stress. We believe that investors could find all of this information to be material and helpful in determining whether to purchase fund shares, or remain invested in a fund. However, we recognize that the Form N–CR reporting requirements have operational costs (discussed below), and also may result in opportunity costs, in that personnel of a fund that has experienced an event that requires Form N–CR reporting may lose a certain amount of time that could be used to respond to that event because of the need to comply with the reporting requirement. However, as discussed above, we believe that the proposed time frames for filing reports on Form N–CR balance the exigency of the report with the time it will reasonably take a fund to compile the required information.
We believe that the proposed Form N–CR reporting requirements may complement the benefits of increased transparency of publicly available money market fund information that have resulted from the requirement that money market funds report their portfolio holdings and other key information on Form N–MFP each month. The RSFI Study found that the additional disclosures that money market funds are required to make on Form N–MFP improve fund transparency (although funds file the form on a monthly basis with no interim updates, and the Commission currently makes the information public with a 60-day lag).
We believe that the proposed reporting requirements may positively affect regulatory efficiency because all money market funds would be required to file information about certain material events on a standardized form, thus improving the consistency of information disclosure and reporting, and assisting the Commission in overseeing individual funds, and the money market fund industry generally, more effectively. The proposed requirements also could positively affect informational efficiency. This could assist investors in understanding various risks associated with certain
The operational costs of filing Form N–CR in response to the events specified in Parts B–G of Form N–CR are discussed below.
We have estimated that the costs of filing a report in response to an event specified on Part B of Form N–CR would be higher than the costs that money market funds currently incur in complying with rule 2a–7(c)(7)(iii)(A), which requires money market funds to report defaults or events of insolvency to the Commission by email.
Likewise, we have estimated that the costs of filing a report in response to an event specified on Part C of Form N–CR in part by reference to the costs that money market funds currently incur in complying with rule 2a–7(c)(7)(iii)(B), which requires disclosure to the Commission by email when a sponsor supports a money market fund by purchasing a security in reliance on rule 17a–9. However, because Part C of Form N–CR defines “financial support” more broadly than the purchase of a security from a fund in reliance on rule 17a–9, and because the requirements of Part C of Form N–CR are more extensive than the requirements of rule 2a–7(c)(7)(iii)(B), we expect that the costs associated with filing a report in response to a Part C event would be higher than the current costs of compliance with rule 2a–7(c)(7)(iii)(B). We estimate the costs of filing a report in response to an event specified on Part C of Form N–CR to be $1,708 per filing,
As discussed in more detail in section IV below, we have estimated the costs associated with filing a report on Form N–CR in response to an event specified on Part D, E, F, or G on a broad average basis. In particular, in an event of filing, the staff believes a fund's particular circumstances that gave rise to a reportable event would be the predominant factor in determining the time and costs associated with filing a report on Form N–CR. Accordingly, on average, we estimate the costs of filing a report in response to an event specified on Part D of Form N–CR to be $1,708 per report.
We request comment on this economic analysis:
• Would any of the proposed disclosure requirements impose unnecessary costs? Why or why not?
• How many filings would be made each year in response to the events specified on each of Part B, Part C, Part D, Part E, Part F, and Part G of Form N–CR?
• Please comment on our analysis of the potential effects of these proposed disclosure requirements on efficiency, competition, and capital formation.
The Commission is proposing to amend Form N–MFP, the form that money market funds use to report to us their portfolio holdings and other key information each month. We use the information to monitor money market funds and support our examination and regulatory programs. Each fund must file information on Form N–MFP electronically within five business days after the end of each month. We make the information public 60 days after the end of the month.
We are proposing to amend Form N–MFP to reflect amendments to rule 2a–7 discussed above, as well as request certain additional information that would be useful for our oversight of money market funds, and make other improvements to the form based on our experience with filings submitted during the past two and a half years. As discussed below in section III.H.1, our proposed amendments related to rule 2a–7 changes proposed elsewhere in this Release would be adopted under either regulatory alternative. Regardless of the regulatory alternative adopted, or if neither alternative is adopted, we anticipate that we would adopt the other amendments that we propose to make to the Form described in this section relating to new reporting requirements, clarifying amendments, and public availability of information (sections III.H.2–III.H.4 below) because they would be relevant to the Commission's efforts to oversee the stability of money market funds and compliance with rule 2a–7.
Under our floating NAV proposal or our liquidity fees and gates proposal, we would revise Form N–MFP to reflect certain proposed amendments to rule 2a–7. Because both alternative proposals would require that all money market funds (including government and retail money market funds otherwise exempt) value portfolio securities using market-based factors and/or fair value pricing (not amortized cost
Accordingly, without amortized cost, funds would not have a “shadow price” to disclose. Therefore, we also propose to eliminate the items in Form N–MFP that require disclosure of “shadow prices.”
We also propose to amend the definition of “money market fund” to conform to our proposed amendment. As proposed, a money market fund means a fund that holds itself out as a money market fund and meets all of the requirements of rule 2a–7 (eliminating the specific reference to rule 2a–7's maturity, quality, and diversification requirements).
Our proposed amendment to require that each monthly report include the net asset value per share as of the close of business on each Friday during the month reported would be consistent with other actions taken by the Commission and fund industry participants to increase the frequency of disclosure of funds' NAV per share (on funds' Web sites).
We believe that the proposed revised form will be easier for investors to understand because the simplifications allow investors to focus on a single market-based valuation for individual portfolio securities and the fund's overall NAV per share. This approach is also consistent with today's standard practice for mutual funds that are not money market funds. We expect that the overall effects will be to increase efficiency for not only investors but also the funds themselves. As discussed above, the floating NAV proposal and the liquidity fees and gates proposal will affect both competition and capital formation. Because we believe that investors are likely to make at least incremental changes to their trading patterns in money market funds due to the proposed changes to Form N–MFP, it is likely that the changes will affect competition and capital formation. Although it is difficult to quantify the size of these effects without better knowledge about how investors will respond, we believe that the effects from the proposed changes to Form N–MFP will be small relative to the effects of the underlying alternative proposals. We seek comment on this aspect of our proposal.
• Should money market funds be required to include in each monthly Form N–MFP filing the NAV per share as of the close of business on each Friday during the month reported? Or should we require that money market funds report market-based NAV per share data daily on Form N–MFP? Would the costs be significantly different from reporting monthly data, as is currently required? Would the costs to funds be significantly different from reporting weekly data, as we propose above? Please describe the associated costs.
• Do commenters agree with our analysis of potential effects on efficiency, competition, and capital formation?
We are also proposing (regardless of the alternative proposal adopted, if any) several new items to Form N–MFP that we believe will improve our (and investors') ability to monitor money market funds.
Several proposed amendments are designed to help us and investors better identify fund portfolio securities.
We also propose amendments that are designed to help the staff (and investors) better identify certain risk characteristics that the form currently does not capture. Responses to these new items, together with other information reported, would improve the staff's (and investors') understanding of a fund and its potential risks. First, we propose to require funds to report whether a security is categorized as a level 1, level 2, or level 3 measurement in the fair value hierarchy under U.S. Generally Accepted Accounting Principles.
We understand that most money market fund portfolio securities are categorized as level 2. Although we understand that very few of a money market fund's portfolio securities are currently valued using unobservable inputs, information about any such securities would enable our staff to identify individual securities that may be more susceptible to wide variations in pricing.
• Would our new proposed requirements help us better identify certain risk characteristics that the form currently does not capture?
• Would information about each security's categorization as a level 1, level 2, or level 3 measurement better enable our staff to identify individual securities that may be more susceptible to wide variations in pricing?
• Is our understanding about how fund sponsors value most money market fund portfolio securities (
• Do our assumptions about fund valuation procedures and access to the nature of portfolio security valuation inputs correspond to fund practices? Is this information readily available to a fund?
• Are there other ways in which a fund could identify and disclose securities that do not have readily available market quotations or observable inputs?
• Do commenters agree that this information will help the Commission and investors better identify risk characteristics?
Second, we would require that funds disclose additional information about each portfolio security, including, in addition to the total principal amount,
• Do commenters agree that our proposed additional requirements would facilitate price discovery? Would any of our proposed additional requirements not facilitate price discovery? Are there other requirements than those proposed that would be helpful?
• Should we require a different convention for pricing fixed income securities? If so, what?
In addition, we would require funds to report the amount of cash they
Our proposed amendments would provide Commission staff and others with more relevant data to efficiently monitor fund risk, such as the likelihood that a fund might trip a liquidity-based trigger (
• Would reporting the daily and weekly liquid asset levels and gross subscriptions and redemptions as of the close of business each Friday during the reporting period conflict with the fund's other disclosure requirements, which are required only as of the last business day or any later calendar day in the month? Should we require that this information be provided to the Commission more or less frequently, or at a different time or day each week?
• Would reporting on expense waivers help us and investors better understand potential financial strains on a fund's investment adviser?
• Do commenters agree that increased transparency will lead to greater market discipline on portfolio managers and lead investors to make more informed decisions?
We also propose to require that funds disclose the total percentage of shares outstanding, to the nearest tenth of one percent, held by the twenty largest shareholders of record.
• Would the total percentage of shares outstanding held by the fund's twenty largest shareholders help us and investors identify funds with significant potential redemption risk stemming from shareholder concentration?
• Would the use of omnibus accounts reduce the value of information about shareholder concentration? If so, is there other data we could require that would yield more useful information?
• Could funds or shareholders “game” this reporting requirement by splitting a large investment into smaller pieces? Are there reasonable rules the Commission could adopt to address this potential “gaming?”
• Should we require that funds report the total holdings of a different number of top shareholders (
• Should we require the reporting of this information only if the top shareholders of record own in the aggregate at least a certain total percentage of the fund's outstanding shares? If so, how many shareholders should we consider, and what should that threshold be (
• Is there a better way to assess the risks associated with shareholder concentration? Should we require aggregation of holdings by affiliates?
In addition, we propose that funds report the maturity date for each portfolio security using the maturity date used to calculate the dollar-weighted average life maturity (“WAL”) (
• Do commenters agree that disclosure of each security's WAL will assist the Commission and investors in evaluating credit spread risk? We note that Form N–MFP currently requires that funds disclose each security's WAM and final legal maturity date.
• Would our proposed amendments to the category of investment increase the accuracy of how securities are categorized currently? Should we include other investment categories?
As detailed above, our proposed new reporting requirements are intended to address gaps in the reporting regime that Commission staff has identified through two and a half years of experience with Form N–MFP and to enhance the ability of the Commission and investors to monitor funds. Although the potential benefits are difficult to quantify, they would improve the ability of the Commission and investors to identify (and analyze) a fund's portfolio securities (
Our proposed new reporting requirements may improve informational efficiency by improving the transparency of potential risks in money market funds and promoting better-informed investment decisions, which, in turn, will lead to a better allocation of capital. Similarly, the increased transparency may promote competition as fund managers are exposed to external market discipline and better-informed investors who may be more likely to select an alternative investment if they are not comfortable with the risk-return profile of their fund. The newly disclosed information may cause some money market fund investors to exchange their assets between different money market funds, but because we do not have the information necessary to provide a reasonable estimate, we are unable to estimate this with specificity. In addition, some investors may exchange assets between money market funds and alternative investments or other segments of the short-term financing markets, but we are unable to estimate how frequently this will happen with specificity and we do not know how the other underlying assets compare with those of money market funds. Therefore, we are unable to estimate the overall net effect on capital formation. Nevertheless, we believe that the net effect will be small, especially during normal market conditions.
We request general comment on our proposed new reporting requirements.
• Do commenters agree that the information we would require is readily available to funds as a matter of general business practice? If not, are there other types of readily available data that would provide us with similar information?
• Are there costs associated with our proposed new reporting requirements (other than to make systems modifications discussed below) that we have not considered? If so, please describe the nature and amounts of those costs.
• Is there additional information that we have not identified that could be useful to us or investors in monitoring money market funds? How should such information be reported?
We are proposing (regardless of the alternative proposal adopted, if any) several amendments to clarify current instructions and items of Form N–MFP. Revising the form to include these clarifications should improve the ability of fund managers to complete the form and improve the quality of the data they submit to us.
We understand that some fund managers compile the fund's portfolio holdings information as of the last calendar day of the month, even if that day falls on a weekend or holiday. To provide flexibility, we propose to amend the instructions to Form N–MFP to clarify that, unless otherwise specified, a fund may report information on Form N–MFP as of the last business day
We also are proposing to amend the reporting requirements for repurchase agreements by restating the item's requirements as two distinct questions.
As discussed above, our proposed clarifying amendments are intended to improve the quality of the data we receive on Form N–MFP by clarifying a number of reporting obligations so that all funds report information on Form N–MFP in a consistent manner. Accordingly, we do not believe that our proposed clarifying amendments would impose any new costs on funds other than those required to modify systems used to aggregate data and file reports on Form N–MFP. These costs are discussed in section III.H.6 below. Because our proposed clarifying amendments would not change funds' current reporting obligations, we believe there would be no effect on efficiency, competition, or capital formation.
We request comment on our proposed clarifying amendments.
• Is our understanding about current fund practices correct?
• Would our proposed amendments provide greater clarity and flexibility to funds? Are they consistent with current fund practices?
• Would our proposed amendments alter the manner in which data is currently reported to us on Form N–MFP, or alter the amount of data reported?
• Are there other clarifying amendments that we should consider that would improve the consistency and utility of the information reported on Form N–MFP to Commission staff and others?
• Should we adopt our proposed clarifying amendments even if we do not adopt either the floating NAV or liquidity fees and gates proposals?
Currently, each money market fund must file information on Form N–MFP electronically within five business days after the end of each month and that information is made publicly available 60 days after the end of the month for which it is filed. We propose (regardless of the alternative proposal adopted, if any) to make Form N–MFP publicly available immediately upon filing.
Eliminating the 60-day delay would provide more timely information to the public and greater transparency of money market fund information, which could promote efficiency. This disclosure could also make the monthly disclosure on Form N–MFP more relevant to investors, financial analysts, and others by improving their ability to more timely assess potential risks and make informed investment decisions. In other words, investors may be more likely to use the reported information because it is more timely and informative. In response to this potential heightened sensitivity of investors to the reported information, some funds might move toward more conservative investment strategies to reduce the chance of having to report bad outcomes. Because, as discussed above, shadow prices (which were a primary reason why we adopted the 60-day delay in making filings public) have been disclosed by a number of money market funds since February 2013 without incident, we do not believe that eliminating the 60-day delay would affect capital formation. We request comment on this aspect of our proposal.
• Do commenters believe that our five-day filing deadline continues to be appropriate? Should the filing delay be shorter or longer? Please provide support for any suggested change to the filing deadline.
• Do commenters agree that there have not been adverse impacts from recent publication of daily shadow NAVs by a number of large money market funds?
• Is a 60-day delay in making the information public still necessary to protect against possible “front running” or “free riding?” Have any developments occurred that should cause us to reconsider our 2010 decision that the information required to be disclosed would not be competitively sensitive?
• Would a shorter delay (45, 30, or 15 days) be more appropriate? If so, why?
• Do commenters agree with our estimated impact on efficiency, competition, and capital formation?
• Should we adopt our proposed amendment to eliminate the 60-day delay even if we do not adopt either the floating NAV or liquidity fees and gates proposals?
To increase further the transparency of money market funds and the utility of information disclosed, the Commission requests comment (regardless of the alternative proposal adopted, if any) on increasing the frequency of filing Form N–MFP from monthly to weekly. Given the rapidly changing composition of money market fund portfolios and increased emphasis on portfolio liquidity (
We request comment on increasing the frequency of the filing of Form N–MFP.
• Do commenters agree with our analysis of the benefits and costs associated with increasing the frequency of disclosure of reports on Form N–MFP? Why or why not?
• Would increasing the frequency of reporting affect the investment strategies employed by fund managers, for example, causing managers to increase risk taking?
• Would fund managers be more likely to “front-run” or reverse engineer another fund's portfolio strategy?
• Would increasing the frequency of disclosure affect the costs or benefits associated with our proposed amendment to eliminate the 60-day delay in public availability? If so, how?
• What types of costs would funds incur to change from monthly to weekly filing of reports on Form N–MFP? Would funds have sufficient time to evaluate and validate data received from outside vendors?
• Should we increase the filing frequency even if we do not adopt either the floating NAV or liquidity fees and gates proposals?
We anticipate that fund managers would incur costs to gather the new items of information we propose to require on Form N–MFP. To reduce costs, we have decided to propose needed improvements to the form at the same time we are proposing amendments necessitated by the amendments to rule 2a–7 we are proposing. We note that our proposed clarifying amendments should not affect, or should only minimally affect, current filing obligations or the information content of the filings.
We expect that the operational costs to money market funds to report the information required in proposed Form N–MFP would be the same costs we discuss in the Paperwork Reduction Act analysis in section IV of the Release, below. As discussed in more detail in that section, our staff estimates that our proposed amendments to Form N–MFP would result in, at the outside range, a first-year aggregate additional 49,810 burden hours at a total cost of $12.9 million plus $373,680 in total external costs (which represent fees to license a software solution and fees to retain a
We request comment on our analysis of operational implications summarized above and described in detail in sections IV.A.3 and IV.B.3 below. We also request comment on the costs and benefits described above, including whether any proposed disclosure requirements are unduly burdensome or would impose unnecessary costs.
The Commission is proposing to amend Form PF, the form that certain investment advisers registered with the Commission use to report information regarding the private funds they manage, including “liquidity funds,” which are private funds that seek to maintain a stable NAV (or minimize fluctuations in their NAVs) and thus can resemble money market funds.
We share the concern expressed by some commenters that, if further money market fund reforms cause investors to seek alternatives to money market funds, including private funds that seek to maintain a stable NAV but that are not registered with the Commission, this shift could reduce transparency of the potential purchasers of short-term debt instruments, and potentially increase systemic risk.
Our proposal would apply to large liquidity fund advisers, which generally are SEC-registered investment advisers that advise at least one liquidity fund
• The name of the issuer;
• The title of the issue;
• The CUSIP number;
• The legal entity identifier or LEI, if available;
• At least one of the following other identifiers, in addition to the CUSIP and LEI, if Available: ISIN, CIK, or any other unique identifier;
• The category of investment (
• If the rating assigned by a credit rating agency played a substantial role in the liquidity fund's (or its adviser's) evaluation of the quality, maturity or liquidity of the security, the name of each credit rating agency and the rating each credit rating agency assigned to the security;
• The maturity date used to calculate weighted average maturity;
• The maturity date used to calculate weighted average life;
• The final legal maturity date;
• Whether the instrument is subject to a demand feature, guarantee, or other enhancements, and information about any of these features and their providers;
• For each security, reported separately for each lot purchased, the total principal amount; the purchase date(s); the yield at purchase and as of the end of each month during the reporting period for floating or variable rate securities; and the purchase price as a percentage of par;
• The value of the fund's position in the security and, if the fund uses the amortized cost method of valuation, the amortized cost value, in both cases with and without any sponsor support;
• The percentage of the liquidity fund's assets invested in the security;
• Whether the security is categorized as a level 1, 2, or 3 asset or liability on Form PF;
• Whether the security is an illiquid security, a daily liquid asset, and/or a weekly liquid asset, as defined in rule 2a–7; and
• Any explanatory notes.
We also propose to remove current Questions 56 and 57 on Form PF. These questions generally require large liquidity fund advisers to provide information about their liquidity funds' portfolio holdings broken out by asset class (rather than security by security). We and FSOC would be able to derive the information currently reported in response to those questions from the new portfolio holdings information we propose to require advisers to provide. We also are proposing to require large liquidity fund advisers to provide information about any securities sold by their liquidity funds during the reporting period, including sale and purchase prices.
The amendments that we propose today are designed to enhance FSOC's ability to fulfill its mission, and thereby to facilitate FSOC's ability to take measures to protect the U.S. economy from significant harm from future financial crises.
We believe, based on our staff's consultations with staff representing the members of FSOC, that the additional information we propose to require advisers to report on Form PF will assist FSOC in carrying out these responsibilities. FSOC and the
We propose to require only large liquidity fund advisers to report this additional information for the same reason that we previously determined to require these advisers to provide more comprehensive information on Form PF: So that the group of private fund advisers filing more comprehensive information on Form PF will be relatively small in number but represent a substantial portion of the assets of their respective industries.
This threshold also should minimize the costs of our proposed amendments because large liquidity fund advisers already are required to make quarterly reports on Form PF and, as of February 28, 2013, virtually all either advise a money market fund or have a related person that advises a money market fund. Requiring large liquidity fund advisers to provide substantially the same information required by Form N–MFP therefore may reduce the burdens associated with our proposal, which we discuss below, because large liquidity fund advisers generally already have (or may be able to obtain access to) the systems, service providers, and/or staff necessary to capture and report the same types of information for reporting on Form N–MFP. These same systems, service providers, and/or staff may allow large liquidity fund advisers to comply with our proposed changes to Form PF more efficiently and at a reduced cost than if we were to require advisers to report information that differed materially from that which the advisers must file on Form N–MFP.
In addition to our concerns about FSOC's ability to assess systemic risk, we also are concerned about losing transparency regarding money market fund investments that may shift into liquidity funds if we were to adopt the money market reforms we propose today and our ability effectively to formulate policy responses to such a shift in investor assets.
Finally, this increased information on liquidity funds managed by large liquidity fund advisers also would be useful to us and FSOC even absent a shift in money market fund investor assets. Collecting this information about these liquidity funds would, when combined with information collected on Form N–MFP, provide us and FSOC a more complete picture of the short-term financing markets, allowing each of us to more effectively fulfill our statutory
For example, if a particular security or issuer were to come under stress, our staff today would be unable to determine which liquidity funds, if any, held that security. This is because advisers currently are required only to provide information about the types of assets their liquidity funds hold, rather than the individual positions.
Position level information for liquidity funds managed by large liquidity fund advisers also could allow our staff more efficiently and effectively to identify longer-term trends in the industry and at particular liquidity funds or advisers. The aggregated position information that advisers provide today may obscure the level of risk in the industry or at particular advisers or liquidity funds that, if more fully understood by our staff, could allow the staff to more efficiently and effectively target their examinations and enforcement efforts, and could better inform the staff's policy recommendations.
Indeed, our experience with the portfolio information money market funds report on Form N–MFP—which was limited at the time we adopted Form PF—has proved useful in our regulation of money market funds in these and other ways and has informed this proposal.
For all of these reasons and as discussed above, we expect that requiring large liquidity fund advisers to report their liquidity funds' portfolio information on Form PF as we propose would provide substantial benefits for us and FSOC, including positive effects on efficiency and capital formation. If this additional information allows FSOC more effectively to monitor systemic risk as intended, our proposed amendments to Form PF could benefit the broader U.S. economy, with positive effects on capital formation, to the extent FSOC is better able to protect the U.S. economy from significant harm from future financial crises.
In addition, as we explained in more detail when adopting Form PF, requiring advisers to report on Form PF is intended to positively affect efficiency and capital formation, in part by enhancing our ability to evaluate and develop regulatory policies and to more effectively and efficiently protect investors and maintain fair, orderly and efficient markets.
The Form PF amendments that we propose today are designed to increase the same benefits we identified when we adopted Form PF, although we are unable to quantify them because their extent depends on future events that we cannot predict (
For these same reasons we believe that requiring large liquidity fund advisers to provide portfolio-level information is justified, and that it would be most beneficial and efficient to require large liquidity fund advisers to file virtually the same information for their liquidity funds as money market funds are required to file on Form N–MFP. We considered whether we and FSOC would be able as effectively to carry out our respective missions as discussed above using the information large liquidity fund advisers currently must file on Form PF. But as we discuss above, we expect that requiring large liquidity funds advisers to provide portfolio holdings information would provide a number of benefits and would allow us and FSOC to better understand the activities of large liquidity fund advisers and their liquidity funds than would be possible with the higher level, aggregate information that advisers file today on Form PF (
For the reasons discussed above we also considered, but ultimately chose not to propose, requiring advisers to file portfolio information about their liquidity funds that differs from the information money market funds are required to file on Form N–MFP. Generally, different portfolio holdings information could be less useful than the types of information money market funds file on Form N–MFP, given our experience with Form N–MFP data, and could be more difficult to combine with Form N–MFP data. Requiring advisers to file on Form PF virtually the same information money market funds file on Form N–MFP also could be more efficient for advisers and reduce the costs of reporting.
Finally, we considered whether to propose to require large liquidity fund advisers to provide their liquidity funds' portfolio information more frequently than quarterly. Monthly filings, for example, would provide us and FSOC more current data and could facilitate our combining the new information with the information money market funds file on Form N–MFP (which money market funds file each month). We balanced the potential benefits of more frequent reporting against the costs it would impose and believe, at this time, that quarterly reporting may be more appropriate.
We recognize, however, that our proposed amendments to Form PF, while limited to large liquidity fund advisers, would create costs for those advisers, and also could affect competition, efficiency, and capital formation. We expect that the operational costs to advisers to report the new information would be the same costs we discuss in the Paperwork Reduction Act analysis in section IV below. As discussed in more detail in that section, our staff estimates that our proposed amendments to Form PF would result in an annual aggregate additional 7,250 burden hours at a time cost of $1,836,500, plus $409,350 in total external costs (which represent fees to license a software solution and fees to retain a third-party service provider).
These estimates are based on our staff's estimates of the paperwork burdens associated with our proposed amendments to Form N–MFP because advisers would be required to file on Form PF virtually the same information about their large liquidity funds as money market funds would be required to file on Form N–MFP as we propose to amend it. We therefore expect that the paperwork burdens associated with Form N–MFP (as we propose to amend it) are representative of the costs that large liquidity fund advisers could incur as a result of our proposed amendments to Form PF. We note, however, that this is a conservative approach for several reasons. Large liquidity fund advisers may experience economies of scale because, as discussed above, virtually all of them advise a money market fund or have a related person that advises a money market fund. Large liquidity fund advisers therefore likely would pay a combined licensing fee or fee to retain the services of a third party that covers filings on both Forms PF and Form N–MFP. We expect that this combined fee likely would be less than the combined estimated PRA costs associated with Forms PF and Form N–MFP. Finally, increased burdens associated with providing the proposed portfolio holdings information should be considered together with the cost savings that would result from our removing current Form PF questions 56 and 57.
We also recognize that large liquidity fund advisers may have concerns about reporting information about their liquidity funds' portfolio holdings and may regard this as commercially sensitive information. Indeed, previously we have noted in response to similar concerns that Form PF data—even if it were inadvertently or improperly disclosed—generally could not, on its own, be used to identify individual investment positions, and thus provides a limited ability for competitors to use Form PF data to replicate a trading strategy or trade against an adviser.
Without diminishing advisers' concerns about the sensitive nature of certain of the information reported on Form PF, we note that position-level information for liquidity funds generally may not be as sensitive as position-level data for other types of private funds. For example, although some commenters on proposed Form PF confirmed that the information on Form PF is competitively sensitive or proprietary, these commenters did not address liquidity funds in particular. Further, liquidity funds, by definition, invest in “portfolio[s] of short term obligations.” This increases the likelihood that any inadvertently or improperly disclosed Form PF data, notwithstanding the controls and systems for handling the data, would relate to securities that already had matured or that would mature shortly thereafter. And because we understand that liquidity funds, like money market funds, tend to hold many of their securities to maturity—rather than selling them in the market—any inadvertent or improper disclosure of a liquidity fund's portfolio holdings generally should not adversely affect the value of the fund's position.
In addition to these considerations, and as we discussed in detail in the Form PF Adopting Release, we do not intend to make public Form PF information identifiable to any particular adviser or private fund, and indeed, the Dodd-Frank Act amended the Advisers Act to preclude us from being compelled to reveal this information except in very limited circumstances.
In addition to any concerns advisers may have about the sensitivity of their portfolio holdings, we note that although the increased transparency to regulators provided by our proposal could positively affect capital formation as discussed above, increased transparency, as we observed when adopting Form PF, could also have a negative effect on capital formation if it increases advisers' aversion to risk and, as a result, reduces investment in enterprises that may be risky but beneficial to the economy as a whole.
We also do not believe that our proposed amendments to Form PF would have a significant effect on competition because the information that advisers report on Form PF, including the new information we propose to require, generally will be non-public and similar types of advisers will have compatible burdens under the form as we propose to amend it.
We request comment on all aspects of our proposed amendments to Form PF, including our discussion of the benefits, costs, and effects on competition, efficiency, and capital formation.
• Would the portfolio holdings information we propose to require large liquidity fund advisers to file on Form PF, together with the other information that advisers already must file on the form, appropriately identify the ways in which their liquidity funds might generate systemic risk? Are there ways these liquidity funds could create systemic risk, particularly if we were to adopt any of the money market fund reforms we are proposing today, that would not be reflected in the additional information?
• Should we require large liquidity fund advisers to file additional or different information about their liquidity funds? If so, which information and how would that information be useful to FSOC and the Commission? Do commenters expect they would derive efficiencies from our requiring large liquidity fund advisers to file the same types of information that must be reported on Form N–MFP?
• Is our proposal to require more comprehensive liquidity fund reporting by large liquidity fund advisers appropriate? Should we, instead, create a new subcategory of large liquidity fund advisers who would be subject to these additional reporting requirements? If so, how should we define that subcategory? Would requiring only those large liquidity fund advisers with a more substantial amount of combined liquidity fund and money market fund assets under management—for example, $10, $25 or $50 billion—allow us to more effectively achieve our goals?
• Rather than require all large liquidity fund advisers to file portfolio holdings information with respect to each of their liquidity funds, should we define “qualifying” liquidity funds and require any adviser to such a fund, potentially including advisers that are not large liquidity fund advisers, to file this more comprehensive information? If so, why, and how should we define such a qualifying liquidity fund? Should we define a “qualifying liquidity fund” as a liquidity fund that, together with funds managed in parallel with the liquidity fund, is at least a certain size? What size would be appropriate (
• Should we retain our proposed approach but provide an exemption for
• Do commenters agree that the new information we propose to require advisers to provide would be useful to FSOC and the Commission for the reasons we discuss above? Do commenters believe that the information would have the effects on capital formation, competition, and efficiency that we discuss above? Why or why not? Would there be additional effects that we have not discussed here?
• Do commenters agree with our assessment of the potential sensitivity of the information we propose to require advisers to provide? Why or why not? To the extent, advisers view the proposed information as sensitive and are concerned about the information's inadvertent or inappropriate disclosure, is there other information the advisers view as less sensitive that would achieve our goals?
• We propose to require large liquidity fund advisers to provide this new information quarterly with the information broken out monthly. Should we instead require these advisers to file the information more or less frequently? Would a monthly reporting requirement, consistent with Form N–MFP, be more appropriate?
• As discussed above, our proposed amendments to Form PF are designed to enhance FSOC's ability to monitor and assess systemic risks in the short-term financing markets and to facilitate our oversight of those markets and their participants, particularly in the event that further money market fund reforms cause investors to seek alternatives to money market funds, including private funds. Further money market reforms also could incentivize investors to seek out money market fund alternatives that are registered with the Commission, such as ultra-short bond mutual funds. Information about these and similar funds' portfolio holdings also could be useful to us and FSOC, particularly when combined with (or considered together with) information money market funds and advisers would file on amended Forms N–MFP and PF. Should we therefore require registered investment companies that invest in the short-term financing markets to file the same information money market funds must file on Form N–MFP and in the same format and with the same frequency to facilitate comparisons? If so, how should we designate which funds would be subject to this new requirement?
Rule 2a–7 requires a money market fund's portfolio to be diversified, both as to the issuers of the securities it acquires and providers of guarantees and demand features related to those securities.
As further explained below, we are concerned that the diversification requirements in rule 2a–7 today may not appropriately limit money market fund risk exposures. We therefore propose, as discussed below, to: (1) require money market funds to treat certain entities that are affiliated with each other as single issuers when applying rule 2a–7's 5% issuer diversification requirement; (2) require funds to treat the sponsors of asset-backed securities as guarantors subject to rule 2a–7's diversification requirements unless the fund's board makes certain findings; and (3) remove the twenty-five percent basket.
The diversification requirements in rule 2a–7 apply to money market funds' exposures to issuers of securities (as well as providers of demand features and guarantees), as discussed above. Rule 2a–7, however, does not require a money market fund to aggregate its exposures to entities that are affiliated with each other when measuring its exposure for purposes of these requirements. As a result, a money market fund could be in compliance with rule 2a–7 while assuming a concentrated amount of risk to a single economic enterprise. For example, although a money market fund would not be permitted to invest more than 5% of its assets in the securities issued by a single bank holding company, the fund could invest well in excess of 5% of its assets in securities issued by the bank holding company together with its affiliates. Under current rule 2a–7, for example, a money market fund could invest 5% of its assets in Bank XYZ,
Financial distress at an issuer can quickly spread to affiliates through a number of mechanisms. Firms within an affiliated group, for example, may issue financial guarantees, whether implicit or explicit, of each other's securities, effectively creating contingent liabilities whose values depend on the value of other firms in the group. These guarantees can be “upstream,” whereby a subsidiary guarantees its parent's debt; “downstream,” whereby a parent guarantees a subsidiary's debt; or “cross stream,” whereby one subsidiary guarantees another subsidiary's debt. Affiliates may be separate legal entities, but their valuations and the creditworthiness of their securities may depend on the financial well-being of other firms in the group. As an example, a firm may issue debt securities that would be considered to be in default if one of the firm's affiliates is unable to meet its financial obligations.
Alternatively, the value of a firm's securities may depend, implicitly or explicitly, on the strength of the affiliate group's consolidated financial statements. If an affiliate in the group experiences financial distress and the affiliate group's consolidated financials therefore suffer, then the value of the securities of the other firms in the group may decline. Indeed, bank holding companies are required to act as a source of financial strength to their bank subsidiaries, providing a means for financial distress at a bank subsidiary to affect the parent banking holding company.
Rule 2a–7 today thus can allow a fund to take on highly concentrated risks, risks that appear inconsistent with the purposes of the diversification requirements and that may be inconsistent with investors' expectations of the level of risk posed by a money market fund. Indeed, we have explained that “[d]iversification limits investment risk to a fund by spreading the risk of loss among a number of securities.”
We propose, therefore, to amend rule 2a–7's diversification requirements to require that money market funds limit their exposure to affiliated groups, rather than to discrete issuers in isolation. Specifically, we propose to require money market funds to aggregate their exposures to certain entities that are affiliated with each other when applying rule 2a–7's 5% issuer diversification limit.
This approach is consistent with some of the circumstances under which affiliated entities must be consolidated on financial statements prepared in accordance with GAAP, under which a parent generally must consolidate its majority-owned subsidiaries.
A majority ownership test also should mitigate the costs to money markets funds of complying with the proposed amendment. Our understanding is that money market funds generally would be able to determine issuer affiliations, defined with a majority ownership test, as part of their evaluation of whether a security presents minimal credit risks, or that money market funds could readily obtain this information from issuers or the broker-dealers marketing the issuance. In this regard we note that, although some companies that sell their securities to money market funds will have a relatively large number of such affiliates, we expect that only a relatively small subset of these affiliates will be companies in which a money market fund could invest (
We also are concerned that the other approaches we considered could limit money market funds' investment flexibility unnecessarily and could be more difficult to apply. For example, we considered the approach we are proposing today but with the definition of “control” set at an ownership threshold lower than 50%.”
We are concerned that either of these alternative approaches could unnecessarily limit a money market fund's flexibility. Our goal is to require money market funds to limit their exposure to particular economic enterprises without unnecessarily limiting money market funds' investments in other persons whose connection to the economic enterprise may be sufficiently attenuated that they may not be highly correlated with the enterprise. We are concerned that either of these alternative approaches could restrict money market funds from investing in securities whose issuers had only an attenuated connection to the economic enterprise. For example, if a parent owned only 5% of the voting stock of one of its subsidiaries, the risks posed by investing in the parent and minority-owned subsidiary likely would be less correlated than if the parent owned more than 50% of the subsidiary's voting stock. These other approaches also could be more difficult to apply in that they would require a money market fund to conduct a more extensive analysis for each investment (
We also considered proposing to require a money market fund to treat as affiliates
We request comment on our approach.
• Do commenters agree that the exposures to risks of issuers who would be treated as affiliates under this proposal would be highly correlated? Is our proposed approach to delineating affiliates too broad or too narrow and why? Do commenters believe that our proposed approach would limit money market funds' investment flexibility unnecessarily, and if so, to what extent? Should we, instead, use any of the alternative approaches to delineating a group of affiliates we discuss above? Are there other approaches we should consider? Should we, for example, require money market funds to aggregate exposures to parent companies and any of their “majority-owned subsidiaries,” as defined in the Investment Company Act? A parent's majority-owned subsidiaries under this definition would be any company “50 per centum or more of the outstanding voting securities of which are owned by [the parent], or by a company which . . . is a majority-owned subsidiary of such person.”
• Do commenters agree that a more than 50% (
• Do commenters agree that money market funds generally would be able to determine these affiliations, defined with a majority ownership test, as part of their evaluation of whether a security
• Is our understanding that money market funds today attempt to identify and measure their exposure to entities that are affiliated with each other as part of their risk management or stress testing processes correct? If so, how do they determine affiliations for these purposes?
• Do commenters agree with our expectation that, although some issuers that sell their securities to money market funds will have a relatively large number of affiliates, only a relatively small subset of these affiliates will be companies in which a money market fund could invest? Why or not?
• Should we require a money market fund to treat as entities that are affiliated with each other those that must be consolidated on a balance sheet, including “variable interest entities” (in addition to majority-owned subsidiaries that would be treated as affiliates under our proposal)? Why or why not? Do commenters agree that, in light of the large variety of entities that may be variable interest rate entities, it is more appropriate to address them (as needed) through more targeted reforms? Should we, instead, require money market funds to treat entities that are affiliated with each other as if they were a single entity when applying rule 2a–7's 10% diversification limit (for providers of demand features and guarantees) as well? If so, should we use the same approach for determining when entities would be affiliated with each other as we propose for purposes of the rule's 5% issuer diversification limit (
We expect that this proposal, and our diversification proposals collectively, would provide a number of benefits. These proposals are designed to diversify the risks to which money market funds may be exposed and thereby reduce the impact of any single issuer's (or guarantor's or demand feature provider's) financial distress on a fund under either of our floating NAV or liquidity fees and gates proposals. Requiring money market funds to more broadly diversify their risks should reduce the volatility of fund returns (and hence NAVs) and limit the impact of an issuer's distress (or guarantor's or demand feature provider's distress) on fund liquidity. By reducing money market funds' volatility and making their liquidity levels more resilient, our diversification proposals are designed to mitigate the risk of heavy shareholder redemptions from money market funds in times of financial distress and promote capital formation by making money market funds a more stable source of financing for issuers of short-term credit instruments. Reducing money market funds' volatility and making their liquidity levels more resilient also should cause money market funds to attract further investments, increasing their role as a source of capital in the short-term financing markets for issuers. We are not able to quantify these benefits (although we do provide quantitative information concerning certain impacts), primarily because we believe it is impractical, if not impossible, to identify with sufficient precision the marginal decrease in risk and increase in stability we expect these diversification proposals would provide.
More fundamentally, this proposal is designed to more effectively achieve the diversification of risk contemplated by the rule's current 5% issuer diversification requirement. As noted above, we have explained that “[d]iversification limits investment risk to a fund by spreading the risk of loss among a number of securities.”
We recognize, however, that this proposal could impose costs on money market funds and could affect competition, efficiency, and capital formation. To help us evaluate these effects, RSFI staff analyzed the diversification and concentration in the money market fund industry, as described in detail in RSFI's memo “Issuances by Parents and Exposures by Parents in Money Market Funds,” which will be placed in the comment file for this Release (“RSFI Diversification Memo”). That memo shows, among other things, that some money market funds invested more than 5% of their assets in the issuances of specific corporate groups, or “parents” (as defined in the RSFI Diversification Memo) between November 2010 and November 2012. For example, the analysis shows that the largest average fund-level exposure of at least 5% to the issuances of a single parent is 31. In other words, 31 money market funds, on average, invest at least 5% of their portfolios in the issuances of the largest parent. The analysis also shows that the largest average fund-level exposure of at least 7% to the issuances of one parent is 14 while the largest average fund-level exposure of at least 10% to the issuances of one parent is 3. We expect, therefore, that this proposal would increase the diversification of at least some money market funds. For example, a money market fund that had invested more than 5% of its assets in a parent or corporate group would, when those investments matured, have to reinvest
The effect of this reinvestment on competition, efficiency, or capital formation would depend in part on how money market funds choose to reinvest their assets. It seems reasonable to expect that a divestment by one money market fund (because its exposure to a particular group of affiliates is too great) might become a purchasing opportunity for another money market fund whose holdings in that affiliated group do not constrain it. If the credit qualities of the investments were similar, there should be no net effect on fund risk and yield, issuers, or the economy. It is possible, however, that some money market funds would reinvest some or all of their excess exposure in securities of higher risk, albeit within the restrictions in rule 2a–7. In these instances, funds' portfolio risk would increase, their NAVs and fund liquidity would likely become more volatile, and yields would rise. Money market funds in this instance could become less stable than they are today, investor demand for the funds could fall (to the extent increased volatility in money market funds is not outweighed by any increase in fund yield), and capital formation could be reduced. Alternatively, money market funds could reinvest excess exposure in securities of lower risk. In these instances, portfolio risk would fall, fund NAVs and liquidity would likely become less volatile, and yields would fall. In this scenario, money market funds would become more stable than they are today, investor demand for the funds could rise (to the extent increased stability in money market funds is not outweighed by any decrease in fund yield), and capital formation might be enhanced. We cannot predict how money market funds would invest in response to this proposal and we thus do not have a basis for determining money market funds' likely reinvestment strategies, and we accordingly seek comment on these issues below.
It also is important to note that money market funds' current exposures in excess of what our proposal would permit may reflect the overall risk preferences of their managers. To the extent that this proposal would reduce the concentration of issuer risk, fund managers that have particular risk tolerances or preferences may shift their funds' remaining portfolio assets, within rule 2a–7's restrictions, to higher risk assets. If so, portfolio risk, although more diversified, would increase (or remain constant), and we would expect portfolio yields to rise (or to remain constant). If yields were to rise, money market funds might be able to compete more favorably with other short-term investment products (to the extent the increased yield is not outweighed by any increased volatility).
At this time, we cannot predict or quantify the precise effects this proposal would have on competition, efficiency, or capital formation. The effects would depend on how money market funds, their investors, and companies who issue securities to money market funds would adjust on a long-term basis to our proposal. The ways in which these groups could adjust, and the associated effects, are too complex and interrelated to allow us to predict them with specificity or to quantify them at this time.
For example, if a money market fund must reallocate its investments under our proposal, whether that would affect capital formation would depend on whether there are available alternative investments the money market fund could choose and the nature of any alternatives. Assuming there are alternative investments, the effects on capital formation would depend on the amount of yield the issuers of the alternative investments would be required to pay as compared to the amount they would have paid absent our proposal. For example, this proposal could cause money market funds to seek alternative investments and this increased demand could allow their issuers to pay a lower yield than they would absent this increase in demand. This would decrease issuers' financing costs, enhancing capital formation. But it also could decrease the yield the money market fund paid to its shareholders, potentially making money market funds less attractive and leading to reduced aggregate investments by the money market fund which, in turn, could increase financing costs for issuers of short-term debt. The availability of alternative investments and the ease with which they could be identified could affect efficiency, in that money market funds might find their investment process less efficient if they were required to expend additional effort identifying alternative investments. These same factors could affect competition if more effort is required to identify alternative investments under our proposals and larger money market funds are better positioned to expend this additional effort or to do so at a lower marginal cost than smaller money market funds. These factors also could affect capital formation in other ways, in that money market funds could choose to invest in lower quality securities under our proposal if they are not able to identify alternative investments with levels of risk equivalent to the funds' current investments.
In addition to these effects, we recognize that this proposal could require money market funds to update the systems they use to monitor their compliance with rule 2a–7's 5% issuer diversification requirement in order to aggregate exposures to affiliates. Although we understand that most money market funds today consider their exposures to entities that are affiliated with each other for risk management purposes, any systems money market funds currently have in place for this purpose may not be suitable for monitoring compliance with a diversification requirement, as opposed to a risk management evaluation (which may entail less regular or episodic monitoring).
Because money market funds differ significantly in their current practices and systems, we do not have the information necessary to provide a point estimate of the costs associated with this proposal. But based on the activities typically involved in making systems modifications, and recognizing that money market funds' existing systems currently have varying degrees of functionality, we estimate that the one-time systems modifications costs (including modifications to related procedures and controls) for a money market fund associated with this proposal would range from approximately $600,000 to $1,200,000.
As we discuss above, we expect that money market funds generally would be able to determine affiliations under our proposal, which uses a majority ownership test, as part of their evaluation of whether a security presents minimal credit risks, or that money market funds could readily obtain this information from issuers or the broker-dealers marketing the issuance. We therefore do not expect that money market funds would be required to spend additional time determining affiliations under our proposal, or if an additional time commitment would be required, we expect that it would be minimal. We estimate that the costs of this minimal additional time commitment to a money market fund, if it were to occur, would range from approximately $5,000 to $105,000 annually.
We request comment on this analysis, including the analysis contained in the RSFI Diversification Memo.
• Do commenters expect that they would incur operational costs in addition to, or that differ from, the costs we estimate above? Do commenters expect they would be required to expend additional time determining affiliations, or that they would incur additional or different costs in doing so?
• Do commenters expect that money market funds would encounter any difficulties in finding alternative investments under our proposal? Why or why not? In what types of assets are money market funds likely to invest if they are required to aggregate their investments in entities that are affiliated with each other as we propose? Are money market funds likely to reinvest excess exposure in assets that are similar, more risky or less risky than their original portfolios?
• How would this proposal (and our diversification proposals collectively) affect fund yields and the stability of fund NAVs and liquidity? How would they affect competition, efficiency, or capital formation?
• Do commenters expect this proposal would change the financing costs of companies who issue their securities to money market funds? If so, why, and to what extent? If financing costs increase, to what extent would that increase be passed on to money market fund investors in the form of higher yields? Would any higher yields then result in increased investments by money market funds in the aggregate? Would any aggregate increase offset or mitigate any increase in issuers' financing costs? Would the inverse occur if issuers' financing costs decreased because of increased demand from money market funds? How would any associated increases or decreases in money market funds' volatility affect investor demand for money market funds and, in turn, capital formation and issuers' financing costs?
• Are there any benefits, costs, or effects on competition, efficiency, and capital formation that we have not identified or discussed?
In 2007, a number of money market funds were exposed to substantial losses resulting from investments in asset-backed commercial paper issued by structured investment vehicles (“SIVs”), a type of ABS.
Thus, in addition to being exposed to the SIVs directly, money market funds also were exposed to the risk that the SIVs' sponsors would no longer support the value of the funds' troubled SIV investments. In many cases, the sponsors were banks to which money market funds were already exposed because the funds owned securities issued by or subject to guarantees or demand features from the banks. Money market funds' reliance on and exposure to SIV sponsors regarding the SIVs' ABCP in 2007 suggests a potential weakness in the way in which rule 2a–7's diversification provisions apply to ABSs, potentially permitting money market funds to become overexposed to sponsors of SIVs and ABS sponsors more generally. We therefore propose to amend rule 2a–7's diversification provisions to limit the amount of exposure money market funds can have to ABS sponsors that provide express or implicit support for their ABSs.
In the 2009 Proposing Release, we expressed concern about the substantial number of money market funds that owned ABCP and other asset-backed debt securities issued by SIVs in 2007 and the stresses those SIV holdings placed on many money market funds' stable share prices.
We are concerned that the experience with SIVs suggests a potential weakness in rule 2a–7's diversification requirements. The rule's diversification provisions require no diversification of exposure to ABS sponsors because special purpose entities (“SPEs”)—rather than the sponsors themselves—issue the ABS, and the support that ABS sponsors provide, implicitly or explicitly,
Because under rule 2a–7 each SPE is considered a separate issuer and because money market funds are not required to diversify against implicit ABS sponsor support (and even some forms of explicit support), a money market fund's portfolio could consist entirely of commercial paper issued by multiple SPEs, all with a single sponsor on which the fund could seek to rely to provide liquidity and capital support, if necessary. Such a result is inconsistent with the purposes of rule 2a–7's diversification requirements and permits funds to assume a substantial concentration of risk to a single economic enterprise, which may be inconsistent with investors' expectations of the level of risks posed by a money market fund.
We propose, therefore, to amend rule 2a–7 to provide that, subject to an exception, money market funds investing in ABSs, including ABCP, rely on the ABSs sponsors' financial strength or their ability or willingness to provide liquidity, credit, or other support to the
As discussed above, we understand that money market funds investing in ABS, including some types of ABCP (and potentially other types of ABSs that may be developed in the future for which sponsor support may be particularly relevant), rely on sponsors' financial strength or their ability or willingness to provide liquidity, credit or other support to evaluate both the creditworthiness and liquidity of ABSs.
• Is our understanding correct? If not, is there a way to distinguish the situations described by the authors of the academic articles and comment letters we refer to above?
• If funds do not rely significantly on ABS sponsor support as described in these sources, why not, and what other factors do they consider? If funds do not receive any significant information about the underlying assets or obligors, which we understand they generally do not for ABCP, then on what are they relying other than the ABS sponsor's support? How do funds evaluate any mismatch between the time when the SPE's assets will be paid and the shorter duration of the ABCP issued by the SPE?
• This proposal assumes that, if an ABS has support (implicit or explicit), the support generally would be provided by the ABS sponsor.
• Do money market funds today follow internal guidelines to limit their exposure to ABS sponsors beyond what rule 2a–7 requires?
We propose to require that, subject to an exception, all ABS sponsors be deemed to guarantee their ABSs. We have proposed to apply this requirement to all ABS sponsors because we are concerned that a proposal that applied only to sponsors of certain types of ABSs could become obsolete as new forms of ABSs are introduced. We recognize, however, that it may not be appropriate to require money market funds to treat ABS sponsors as guarantors in all cases. Accordingly, under our proposal, an ABS sponsor would not be deemed to guarantee the ABS if the money market fund's board of directors (or its delegate) determines that the fund is not relying on the ABS sponsor's financial strength or its ability or willingness to provide liquidity, credit, or other support to determine the ABS's quality or liquidity.
• Should we instead specify that only certain types of ABS sponsors, such as sponsors of ABCP, should be deemed to guarantee the ABS? If so, which kinds of ABS and why?
• Would the exception appropriately identify situations in which a money market fund should not be required to treat an ABS sponsor as a guarantor?
• Are there other exceptions we should consider? Should we, for example, provide that an ABS sponsor will not be deemed to guarantee the ABS if the fund's board of directors (or its delegate) determines that the sponsor's financial strength or its ability or willingness to provide liquidity, credit, or other support did not play a
• Do commenters agree that any incremental burden to determine if the fund is relying on the ABS sponsor's financial strength or its ability or willingness to provide liquidity, credit, or other support to determine the ABS's quality or liquidity should be minimal? If not, why not in light of the analysis the money market fund would be required to conduct of the ABS's credit quality and liquidity?
• Should we take a different approach, and require a money market fund to treat as a guarantor any provider of liquidity or credit support, whether to an ABS or any other type of security? Would a focus on the nature of any support, as opposed to the type of security subject to the support, be more effective than our proposed approach in requiring money market funds to treat as guarantors only providers of liquidity or credit support on which they rely in a way that is analogous to reliance on a guarantor? If we were to take this approach, should we include an exception under which some providers of liquidity or credit support would not be treated as guarantors? Should we use the same exception we propose for ABS sponsor support?
We discuss and seek comment on the economic effects of our ABS proposal together with the effects of our proposal
We also propose to amend rule 2a–7 to tighten the diversification requirements applicable to guarantors and providers of demand features. The amendments would eliminate the so-called “twenty-five percent basket,” under which as much as 25% of the value of securities held in a fund's portfolio may be subject to guarantees or demand features from a single institution.
Since 2007, a number of events have highlighted the risks to money market funds caused by their substantial exposure to providers of demand features and guarantees. For example, during the 2007–2008 financial crisis, many funds, particularly tax-exempt funds, were heavily exposed to bond insurers. In 2008, as much as 30% of the municipal securities held by tax-exempt money market funds were supported by bond insurance issued by monoline insurance companies.
Some money market funds also were heavily exposed to a few major financial institutions that served as liquidity providers, including funds that owned variable-rate demand notes and tender option bonds as discussed above.
Our diversification proposals, including the proposal to remove the twenty-five percent basket,
The principal effect of the amendments may be to restrain some managers of money market funds from making use of the twenty-five percent basket in the future, under perhaps different market conditions.
Eliminating the twenty-five percent basket also may increase the costs of monitoring the credit risk of funds' portfolios or make that monitoring less efficient, to the extent they are more diversified under our proposal and money market fund advisers must expend additional effort to monitor the credit risks posed by a greater number of guarantors and demand feature providers. We are unable to quantify these costs, however, because we do not have the information necessary to provide a reasonable estimate to predict whether funds would be required to expend more effort under our proposals (or if so, how much more). A money market fund that could not acquire a particular guarantee or demand feature under our proposal could, for example, be able to acquire a guarantee or demand feature from another institution in which the fund already was invested, at no additional monitoring costs to the fund.
Our proposed amendments would require funds that use the twenty-five percent basket, or that would use it in the future, to either choose not to acquire certain demand features or guarantees (if the fund could not assume additional exposure to the provider of the demand feature or guarantee) or to acquire them from different institutions. Funds that choose the latter course could thereby increase demand for providers of demand features and guarantees and increase competition among their providers. If new entrants do not enter the market for demand features and guarantees in response to this increased demand, eliminating the twenty-five percent basket could result in money market funds acquiring guarantees and demand features from lower quality providers than those the funds use today. If new entrants do enter the market (or if current participants increase their participation), the effect on money market funds would depend on whether these new entrants (or current participants) are of high or low credit quality as compared to the providers money market funds would use absent our proposal.
Although we recognize that money market funds could use lower credit quality guarantors and demand feature providers under our proposals, our data show that most funds do not use the twenty-five percent basket (and funds that use it do so to a limited extent) and thus we believe that this negative effect is unlikely to occur. And under our proposals, money market funds would not be required to include more than 10 guarantors or demand feature providers in their portfolios, suggesting it is unlikely that they would be forced to resort to low credit quality guarantors or demand feature providers. Indeed, our staff's review of Form N–MFP data shows that, as of February 28, 2013, the assets in money market funds' twenty-five percent baskets (
Issuers also could incur costs if they were required to engage different providers of demand features or guarantees under our proposal, which could negatively affect capital formation. This could occur because an issuer might otherwise have sought a guarantee or demand feature from a particular bank, but might choose not to use that bank because the money market funds to which the issuer hoped to market its securities could not assume additional exposure to the bank. If issuers were unable to receive demand features or guarantees from banks (or other institutions) to which they would have turned absent our amendments, they would have to engage different banks, which could make the offering process less efficient and result in higher costs if the different banks charged higher rates. Issuers of securities with guarantees or demand features (
We request comment on the impact on portfolio management of our proposed elimination of the twenty-five percent basket together with our proposal to remove the twenty-five percent basket.
• As noted above, our review of Form N–MFP data suggests that most funds do not use the twenty-five percent basket. Is this correct?
• Would our proposals increase demand for providers of demand features and guarantees?
• Would there be a significant impact on fund yield, and if so, how significant? Our review of Form N–MFP data also suggests that our proposal would have very little impact on funds that use the twenty-five percent basket today. Is this correct?
• To what extent might a money market fund use lower credit quality or higher cost guarantors and demand feature providers in order to meet the stricter diversification requirements that we propose? Are there enough guarantors and demand feature providers to allow money market funds to meet these diversification limitations?
• As discussed in section III.E above, concerns about the creditworthiness of guarantors and demand feature providers have reduced the amount of VRDNs outstanding since 2010, and this trend is likely to continue irrespective of changes in the money market fund industry because of potential downgrades to credit and liquidity enhancement providers and potential bank regulatory changes may increase the cost to financial institutions of providing such guarantees.
• How should we evaluate the tradeoff between providing funds flexibility and limiting the risks to funds posed by concentrated exposures and how might we quantify it? We request commenters asserting that we retain the twenty-five percent basket provide data to help us evaluate these competing considerations. We also request those commenters to address the extent to which their assets exceed the limits our proposals would establish, and what difficulties they would encounter in identifying alternative securities with credit qualities comparable to their existing investments.
• To what extent would issuers of securities with guarantees or demand features (
• Would eliminating the twenty-five percent basket make it difficult for issuers of ABSs and securities subject to demand features or guarantees to find money market fund investors to purchase their securities? As noted above, most funds do not use the twenty-five percent basket and, in addition, many money market funds as of February 28, 2013, had invested only a small portion of their assets in ABSs and securities subject to demand features or guarantees, suggesting that issuers have a ready supply of money market fund investors eligible to purchase their securities. Indeed, Form N–MFP data as of February 28, 2013, shows that over 99% of total money market fund assets are not in funds' twenty-five percent baskets. To the extent issuers or underwriters believe they would have any difficultly in identifying money market investors as a result of our proposal, we request that they explain why and quantify any resulting costs. As noted above, data on Form N–MFP shows that many funds would be eligible to purchase ABSs and securities subject to demand features and guarantees under our proposals.
• In assessing the impacts of our ABS proposal and our proposal to eliminate the twenty-five percent basket we have considered, as noted above, that some funds had investments as of February 28, 2013 in excess of the limits our proposals would impose. We request comment from any funds with investments in excess of these limits on whether their investments exceeded these limits upon acquisition (which would not be permitted under our proposed amendments) or if the funds' investments were below the limits at the time of acquisition but the fund later decreased in size (which would be permitted under our proposed amendments). For example, under our proposal, a fund would not be permitted to acquire ABCP sponsored by a bank if immediately thereafter more than 10% of its assets were invested in securities issued by or subject to demand features or guarantees from that bank. But the investment would be permitted if immediately after the investment the fund was below the 10% limit, even if the fund later decreased in size and the investment later exceeded the 10% limit.
• Although our proposal would remove the twenty-five percent basket, we are not proposing to change the application of rule 2a–7's 5% issuer limit to single state funds, which today applies only to 75% of a single state fund's total assets.
We do not expect that our ABS and twenty-five percent basket diversification proposals would result in operational costs for funds. We understand that money market funds generally have systems to monitor their exposures to guarantors (among other things) and to monitor the funds' compliance with rule 2a–7's current 10% demand feature and guarantee diversification limit. We expect that money market funds could use those systems to track exposures to ABS sponsors under our proposal and could continue to track the funds' compliance with a 10% demand feature and guarantee diversification limit. To the extent a money market fund did have to modify its systems as a result of our ABS and 25% basket diversification proposals, we expect that the money market fund would make those modifications when modifying its systems in response to our proposal to require money market funds to aggregate exposure to affiliated issuers for purposes of rule 2a–7's 5% diversification limit, for which we provide cost estimates above.
Finally, we note that Investment Company Act rule 12d3–1 also refers to the twenty-five percent basket. That rule generally permits investment companies to purchase certain securities issued by companies engaged in securities-related activities notwithstanding section 12(d)(3)'s limitations on these kinds of transactions. Among other things, rule 12d3–1 provides that the acquisition of a demand feature or guarantee as defined in rule 2a–7 will not be deemed to be an acquisition of the securities of a securities-related business provided that “immediately after the acquisition of any Demand Feature or Guarantee, the company will not, with respect to 75 percent of the total value of its assets, have invested more than ten percent of the total value of its assets in securities underlying Demand Features or Guarantees from the same institution.”
• Should we revise rule 12d3–1 to apply this diversification requirement with respect to all of an investment company's total assets, rather than just 75% of them, for consistency with our amendments to rule 2a–7?
• Would conforming rule 12d3–1 to rule 2a–7 as we propose to amend it affect investment companies other than money market funds, which also may use rule 12d3–1? If so, how and to what extent?
We could require money market funds to be more diversified by reducing rule 2a–7's current 5% and 10% diversification limits.
Nonetheless, there could be benefits in reducing these limits. For example, the 10% limit permits a money market fund to have twice as much exposure to a single provider of a demand feature or guarantee than if the fund were to invest in securities directly issued by the provider, which direct investments would be subject to the rule's 5% limit. Rule 2a–7 permits a money market fund to take on greater indirect exposures to providers of demand features and guarantees (as opposed to direct investments in them) because, rather than looking solely to the issuer, the money market fund would have two potential sources of repayment—the issuer whose securities are subject to the demand features or guarantees and the providers of those features if the issuer defaults. Both the issuer and the demand feature provider or guarantor would have to default at the same time for the money market fund to suffer a loss. And if a guarantor or demand feature provider were to come under stress, the issuer may be able to obtain a replacement.
As discussed in more detail in section III.K below, however, rule 2a–7 permits a money market fund, when determining if a security subject to a guarantee meets the rule's credit quality standards, to rely exclusively on the credit quality of the guarantor.
And although an issuer could attempt to obtain a substitute guarantor or demand feature provider if its current provider came under stress, there is no assurance the issuer would be successful. Certain providers of
We also considered proposing industry concentration limits.
Defining various industry sectors with sufficient precision for a new industry diversification requirement could be difficult, however. In deciding not to propose industry concentration limits today, we also considered the comments we received in response to our request for comment in 2009 on whether to reduce rule 2a–7's current diversification limits and whether to introduce new industry diversification requirements.
We are proposing enhancements to money market funds' stress testing processes, as discussed in more detail in section III.L, below. Those enhancements are designed, together with all of the other changes we propose today, to address some of the risk that may result from a money market fund concentrating its investments in particular industries, or having exposures within the rule's 5% and 10% diversification limits. For example, we propose to require money market funds' advisers to assume as part of their stress testing that the funds' portfolio securities will present correlated risks. Our structural reforms are designed to better position a money market fund to bear a credit loss. Our liquidity fees and gates proposal is designed to provide the fund with tools to mitigate the harm that can result from a credit event. Our floating NAV proposal is designed to more fairly apportion such a loss, thereby reducing the incentive to redeem in anticipation of it.
We request comment on the alternative approaches we considered.
• Should we reduce rule 2a–7's current 5% diversification limits? If so, to what extent? Would lower diversification limits increase the likelihood of a default or other credit event affecting a money market fund while diminishing the impact of such an event on the fund? We request that commenters address the tradeoffs of lower diversification limits for different types of money market funds.
• Should we reduce rule 2a–7's current 10% diversification limits on securities with a guarantee or demand feature from any one provider? Would lowering this limit increase the likelihood of a default or other credit event affecting a money market fund or diminish the impact of such an event on the fund?
• Should we continue to distinguish between a fund's exposure to guarantors and demand feature providers and direct issuers by providing different diversification limitations for these exposures? Does the difference in the nature of a fund's exposure to a guarantor or demand feature provider as opposed to a direct issuer warrant disparate diversification requirements? If we were to adopt a single diversification limitation that aggregated direct investments and guarantees and demand features, should we use the rule's current 5% threshold for direct investments? If not, should it be higher or lower? At what level and why? Should we continue to apply different diversification limitations but use limitations other than 5% (direct investments) and 10% (securities subject to demand features and guarantees)?
• What types of providers that are not affiliated with the issuer of a security provide such guarantees or demand features? To what extent do providers of guarantees and demand features limit themselves to providing features for
• Should we impose industry diversification requirements on money market funds? If so, what level of concentration in a single industry would be appropriate? How would we define industries for this purpose?
• We request that commenters address how any risks that may result from a money market fund concentrating its investments to an extent in particular industries, or from having exposures within the rule's 5% and 10% diversification limits, would (or would not) be mitigated by the other amendments that we propose today.
• If we were to reduce rule 2a–7's current diversification limits, could that result in more homogeneity and increased correlation among money market fund portfolios? If so, what effect, if any, would there be on systemic risk?
In 2008, monoline insurers that provided bond insurance to municipal issuers were downgraded, forcing some advisers to tax-exempt money market funds to quickly obtain information about issuers of VRDNs and other municipal securities they held to determine whether the securities continued to present minimal credit risks (and whether to exercise demand features).
Rule 2a–7 permits a money market fund when determining if a security subject to a guarantee meets the rule's credit quality standards to rely exclusively on the credit quality of the guarantor.
• If we were to require money market funds to obtain financial data about the issuers of securities subject to guarantees, should we specify in detail the data a fund must obtain? If the security is an ABS, what kind of information should we require funds to obtain about the assets held by the SPE that issued the ABS? Should we only require a money market fund to obtain the financial data when the security is subject to a guarantee from a guarantor to which the fund has a greater than 5% exposure?
• Should we require money market funds to obtain this data only when it is available? Such an approach would prevent money market funds from forgoing investment opportunities solely because financial data is not available. Should we specify when financial data would be available for this purpose? If so, in what circumstances do commenters expect financial data would be readily available? In what ways could they make better use of that data? Should we specify, for example, that financial data would be available for this purpose if it were available on the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system? Have money market funds found data currently available on that system to be helpful? If so, in what ways do money market funds use that data?
• Should we specify how current any financial data must be? Should we specifically require money market funds to review the data when the fund acquires the security or simply to retain it for use should there be a problem with the guarantor? Would money market funds have to hire additional credit analysts to meet such a requirement? What costs would this impose?
• Would requiring money market funds to have financial data about these issuers support our continuing to provide different diversification limitations for direct and indirect exposures, as discussed above? Would the data be useful to money market funds if a guarantor came under stress? Should we adopt a more stringent diversification limit (
In 2010, we adopted amendments to rule 2a–7 that, for the first time, required the board of directors of each money market fund to adopt procedures providing for periodic stress testing of the money market fund's portfolio, which we refer to as the stress testing requirements.
Under these amendments, we required that the fund adopt procedures providing for periodic testing of the fund's ability to maintain a stable price per share based on (but not limited to) certain hypothetical events.
Since 2010, we and our staff have continued to monitor the stress testing requirement and how different fund groups are approaching its implementation in the marketplace. Through our staff's examinations of money market fund stress testing procedures, we have observed disparities in the quality and comprehensiveness of stress tests, the types of hypothetical circumstances tested, and the effectiveness of materials produced by the fund's manager to explain the stress testing results to the board. For example, although some funds actively embrace the spirit of the requirement by testing a variety of additional hypothetical events and tailoring their stress testing to the particular market conditions and potential risks that they may face, other funds test only for the events specifically listed in the rule. Some funds test for combinations of events, as well as for correlations between events and between portfolio holdings, whereas others do not. We also have examined how funds share information about stress testing results with their boards.
Since adopting the stress testing requirement in 2010, we have had several opportunities to assess its effectiveness during periods of market stress, including the 2011 Eurozone debt crisis and the 2011 U.S. debt ceiling impasse. Our staff observed, for example, that during the 2011 Eurozone debt crisis, funds that had strong stress testing procedures were able to use the results of those tests to better manage their portfolios and minimize the risks associated with the crisis.
After considering this information and experience, we believe that certain enhancements to our stress testing requirements may be warranted. We also note that our floating NAV proposal and our liquidity fees and gates proposal may have different implications regarding the need for and nature of stress testing of a money market fund's portfolio. Accordingly, we are proposing a variety of amendments and enhancements to our stress testing requirements. The amendments and enhancements we are proposing to the stress testing requirements would largely be identical under either reform alternative we might adopt, except that for floating NAV money market funds we would remove the standard to test against preserving a stable share price if we were to adopt the floating NAV alternative, as further discussed below.
As discussed above, we acknowledge that requiring that money market funds transact with a floating NAV mitigates but does not eliminate the possibility of heavy shareholder redemptions. We understand that in times of broad financial market stress, shareholders in floating NAV money market funds may still have an incentive to redeem shares because of funds' limited internal liquidity or because of overall flights to quality, liquidity, or transparency. Accordingly, stress testing the liquidity of floating NAV funds could enhance a fund board's understanding of risks and fund management of those risks.
If we adopt the floating NAV alternative, we propose to amend the current stress testing requirement as it would apply to floating NAV money market funds to require that such funds test the impact of certain market conditions on fund liquidity, instead of requiring that they test the fund's ability to maintain a stable price per share.
For a money market fund that would be exempt from the floating NAV requirement under our proposal (a government or retail money market fund), we propose requiring that it stress test for both its ability to avoid having its weekly liquid assets fall below 15% of its total assets and its ability to maintain a stable share price.
We request comment on this proposed amendment to the stress-testing requirement for money market funds under the floating NAV alternative.
• Should we continue to require funds with a floating NAV to stress test their portfolio? If not, why not?
• Is the level of weekly liquid assets an appropriate measure of risk for floating NAV funds to stress test against? Should it also (or alternatively) stress test against the level of daily liquid assets? If so, what daily liquid asset threshold should be tested: 5%, 2%, or some other number?
• Is the threshold of 15% weekly liquid assets the right level to test stress on the fund? Should it be higher or lower, such as 10% weekly liquid assets or 20%?
• Should we require that government and retail money market funds test against both their ability to maintain a stable share price and falling below 15% weekly liquid assets? Are there other stress testing factors that would be more appropriate for these exempt funds?
• Are we correct in concluding that funds already stress test their liquidity when testing their ability to maintain a stable NAV? Would there be any costs for a fund to switch to using a weekly liquid asset test instead?
Instead of amending the current stress testing requirement to test liquidity, we could require a floating NAV money market fund to stress test its ability to meet other or additional metrics or standards. For example, we could require testing a floating NAV fund's ability to meet its investment objective, avoid significant losses, or maintain low volatility. If we were to require stress testing for a fund's ability to meet its investment objectives, funds might be able to craft tests that are particularly suited to their particular circumstances. On the other hand, funds investment objectives may be too general for an appropriate test to be created. In addition, requiring testing against investment objectives may create significant disparities in stress tests between similar funds. Requiring testing against the ability for a fund to avoid significant losses or maintaining low volatility may have the advantage of directly testing for the circumstances with which fund investors may be most concerned, but may create difficulties in establishing the appropriate metrics applicable to all funds. We expect that a floating NAV fund might regularly experience minor fluctuations in its NAV, and establishing a meaningful stress test standard related to losses or volatility while still accommodating these potential fluctuations may not be workable.
We request comment on whether instead of amending the current stress testing requirement for floating NAV money market funds to focus only on liquidity, we should replace it (or supplement it) with a requirement to stress test to a different or additional metric or standard.
• Are there alternative or additional metrics or standards other than liquidity that would provide sufficient guidance for a fund to run effective stress tests?
• Should we instead use a metric, such as the ability for a floating NAV fund to avoid losses greater than 25 or 50 basis points in a certain period of time? If we were to use a different metric, what should it be and how should it be set? Are there any other potential metrics or standards that we could use? The fund's ability to minimize principal volatility or losses?
We also are proposing that money market funds include factors such as correlations among securities returns and concurrences of events in their stress tests.
As noted above, we observe that although some funds test for likely concurrences of events and potential correlations among securities returns, others do not. We believe that an evaluation of such correlations and concurrences is an important part of a fund's stress testing, and accordingly are proposing to require that they be included as part of the required stress testing procedures.
As part of our effort to ensure that funds consider portfolio correlations, we also propose to revise the stress testing requirement relating to the effect of downgrades or defaults of portfolio securities to require an evaluation of the effect that such an event could have on other securities held by the fund.
We also are proposing to require that funds test not just for increases in redemptions in isolation, but also reflect how the fund will likely meet the redemptions, taking into consideration assumptions regarding the prices for which portfolio securities could be sold, historical experience in handling redemptions, the relatively liquidity of the fund's securities, and any other relevant factors.
In addition to the enhancements described above, we also are proposing certain clarifications of our stress testing requirements, based on our experience in money market fund use of these requirements since 2010, that would enhance the usefulness of stress testing as a monitoring tool for funds. First, we propose to clarify that a fund is required only to stress test for increases (rather than changes) in the general level of short-term interest rates.
Second, we propose to require that funds stress test for the “widening or narrowing of spreads among the indexes to which interest rates of portfolio securities are tied.”
Finally, we are proposing to add another related hypothetical event for funds to test, namely “[o]ther movements in interest rates that may affect fund portfolio securities, such as parallel and non-parallel shifts in the yield curve.”
We do not intend the enhancements and clarifications to stress testing procedures that we are proposing today to serve as a comprehensive list of events to consider when funds engage in stress testing, but as a minimum set. Funds should carefully consider if any other events not described in the rule may affect their ability to maintain at least 15% weekly liquid assets, and test for those as well.
We request comment on our proposed enhancements and clarifications to money market fund stress testing procedures.
• Are the proposed clarifications appropriate? Are there other clarifying changes that we should consider?
• Should we include any other required hypothetical events in the rule? If so, which other events should we include and why?
• Should we require funds to test for combinations of hypothetical events in their stress testing? Instead of leaving it to the discretion of the fund, should we specify which events should be combined (
• Should we make any other changes to the stress testing requirements, such as requiring a minimum frequency that funds should conduct their stress tests?
In addition to the enhancements to the specific hypothetical events that money market funds' stress testing would have to include, we are proposing a clarification to the requirement that a fund's adviser provide the fund's board an assessment of the results of the stress tests. We propose to require that the adviser provide not only such an assessment, but also “such information as may reasonably be necessary for the board of directors to evaluate the stress testing conducted by the adviser and the results of the testing.”
• Are fund boards receiving sufficient context and necessary information about money market funds' stress testing? Is there additional information that they should receive?
• How many funds would need to change their stress test information dissemination procedures to their boards?
Finally, we are requesting comment on certain aspects of money market fund stress testing as it relates to our obligation under section 165(i)(2) of the Dodd-Frank Act to specify certain stress testing requirements for financial companies
• How should we define what set of events qualify as baseline, adverse, or severely adverse? Should we require funds to use or look to the scenarios published annually by the Federal Reserve?
• Are the scenarios published by the Federal Reserve appropriate for money market funds? Should we specify more or fewer or different scenarios than the 3 scenarios specified in section 165(i)(2) of the Dodd-Frank Act?
• To what extent should we provide guidance regarding what might reasonably constitute each of these scenarios with regards to money market funds?
• How should such a stress testing requirement be specifically tailored to money market funds as opposed to banks or other types of funds? Should money market funds have to assess the impact of such a scenario given the fund's investment profile and its historical pattern of shareholder redemptions?
If we adopt our liquidity fees and gates alternative proposal, we are proposing that money market funds stress test against the potential for a money market fund's level of weekly liquid assets to fall below 15% of its total assets, in addition to stress testing against the fund's ability to maintain a stable share price.
Money market funds currently must stress test their ability to maintain a stable NAV per share, because failing to maintain such stability may result in significant adverse consequences for its investors, as discussed above.
Generally, we expect that a fund would use similar hypothetical circumstances when testing its ability to avoid triggering fees and gates that it uses when stress testing its ability to maintain a stable price. However, some funds may identify different circumstances that are more relevant to testing one standard than another, and thus may use different versions of the hypothetical scenarios, or weigh them differently for each. For example, certain events, such as significant shareholder redemptions in a short time period, may more strongly affect the ability of a fund to avoid crossing the 15% weekly liquid asset threshold than the ability to maintain a stable price. Other events, such as a credit default in a portfolio security, may more strongly affect the ability of a fund to maintain a stable price than avoid crossing the liquidity threshold. Stress tests should thus account for a variety of circumstances that affect the ability of a fund to meet each standard.
We request comment on our proposed inclusion of a fund's ability to maintain at least 15% weekly liquid assets as an additional stress testing metric.
• Should we include this additional metric? Why or why not? Would the proposed requirement help fund managers better manage the risks of a stable price fund with standby liquidity fees and gates? Should we include any other metrics or standards for stress testing? If so, which ones and why?
• Should a fund also (or alternatively?) stress test against the level of daily liquid assets? If so, what daily liquid asset threshold should be tested: 5%, 2%, or some other number?
• Is the threshold of 15% weekly liquid assets the right level to test stress on for a fund? Should it be higher or lower, such as 10% weekly liquid assets or 20%?
If we were to adopt the liquidity fees and gates alternative, we would also adopt the same enhancements and clarifications to the stress testing requirements described in our floating NAV alternative.
We request comment on whether we should include these enhancements to a fund stress testing procedures if we were to adopt our liquidity fees and gates alternative.
• Should we revise any of the proposed enhancements to account for the circumstances of a fund with standby liquidity fees and gates? If so, how? Should we include any additional enhancements? Should we eliminate any of the proposed enhancements?
• Should we adopt these enhancements even if we do not add the additional liquidity metric? Should we adopt these enhancements even if we do not adopt the liquidity fees and gates or floating NAV proposals at all? Why or why not?
As previously discussed, we expect that the costs and benefits of the proposed stress testing amendments would be largely identical under both alternatives.
Because funds are currently required to meet a stress testing requirement, we do not anticipate significant additional costs to funds under either proposed requirement. We note, however, that under our floating NAV alternative, we would replace the requirement to test for a stable NAV for floating NAV money market funds and replace it with a liquidity test, but under our liquidity fees and gates alternative funds would be required to test for both conditions. The cost of the proposed requirement therefore, would depend on the difference in cost of stress testing for liquidity rather than NAV. We ask below for comment on differences in cost. We believe that there likely would be no difference in costs in testing to either metric.
Generally, we expect that funds would use similar hypothetical circumstances when testing their ability to avoid going below 15% weekly liquid assets that they use when stress testing their ability to maintain a stable price. We understand that although some funds currently test for all the new and amended hypothetical circumstances we are proposing today, others do not. Funds that would need to alter their stress testing procedures to include the new and amended hypothetical circumstances we are proposing would incur some additional costs. For example, we understand that some funds do not currently stress test for correlations among portfolio securities returns and concurrences of events. These funds may incur greater costs in modifying their stress testing procedures and systems to add such tests, than those who already include those circumstances in their tests.
The staff estimates that a fund that currently already tests for all of the amendments and enhancements to the hypothetical circumstances that we are proposing today would incur no new additional costs to comply. On the other hand, the staff estimates that a fund that does not currently stress test for any of the new and amended hypothetical circumstances would incur one-time costs to implement our proposed amendments. These paper-related costs are discussed in greater detail in section IV below. As we discuss there, our staff estimates that the proposed amendments to stress testing would involve 8,464 burden hours, at an average one-time cost of $3.9 million for all money market funds and funds would not incur any additional ongoing costs.
At this time, we believe any new costs for stress testing would be so small as compared to the fund's overall operating expenses, that any effect on competition would be insignificant. This new requirement may increase allocative efficiency if the information it provides to the fund manager, adviser, and board of directors improves the fund manager's and adviser's ability to manage the fund's risk and the board's oversight of fund risk management. Money market fund investors also may view positively enhanced stress testing requirements, and this could increase investors' demand for money market funds and correspondingly the level of the funds' investment in the short-term financing markets. We do not have the information necessary to provide a reasonable estimate of the effects the proposed amendments would likely have on capital formation because we do not know to what extent these proposed changes would result in increases or decreases in investments in money market funds or in money market funds' allocation of investments among different types of short-term debt securities.
We request comment on our assumptions about the costs of implementing our proposed changes to money market fund stress testing procedures and the effects of the proposed stress testing amendments on efficiency, competition, and capital formation.
• Would there be any increase in costs for firms to stress test against a liquidity metric instead of a stable share price test? If so, what would they be?
• Are our estimates for the range of operational costs of adding the new and amended hypothetical circumstances to a funds stress testing procedures correct? Are they too high or too low, and if so, why? Would these costs only be one-time costs as we estimate or would there also be ongoing costs? If there are ongoing costs, what would they be?
• How many funds would need to change their stress tests for:
○ weekly liquidity levels,
○ factors such as correlations among securities returns and concurrences of events,
○ hypothetical events that might occur to issuers that operate in a similar industry, are based in a similar geographic region, or have other related attributes,
○ the effect of downgrades or defaults of portfolio securities on the performance of other securities held by the fund,
○ shareholder redemptions,
○ risks that may affect specific asset classes of portfolio securities (
• What impact would amending this requirement have on efficiency, competition, or capital formation?
Finally, we note that in section III.C we request comment on whether we should combine our floating NAV and liquidity fees and gates proposals. This raises the question of what we would require regarding stress testing if we combined these alternatives, given that under the floating NAV alternative we have proposed stress testing for a loss of liquidity for floating NAV funds, whereas under the liquidity fees and gates alternative we have proposed to include a liquidity test as well as a test relating to maintaining the current stable price. If we were to pursue a combined approach, we would likely not include any stress testing requirements related to maintaining a stable price for floating NAV funds. Instead, we would only require those funds to stress test against their ability to avoid imposing liquidity fees and redemption gates under a number of hypothetical scenarios. We would also expect to adopt the enhancements and clarifications to fund stress testing procedures discussed previously.
We request comment on what we should require regarding stress testing under a combined approach.
• If we were to adopt a combined approach, would funds stress testing liquidity be useful? Should we instead not require funds to stress test at all? If so, why not?
• Alternatively, under a combined approach should we require floating NAV funds to also stress test their ability to minimize principal volatility or losses or against some other additional metric or standard? If so, to what extent and against which metric or standard?
Since our adoption of amendments to rule 2a–7 in 2010, a number of questions have arisen regarding the application of certain of those amendments. We are taking this opportunity to propose a number of amendments to clarify the operation of these provisions. In addition, we are also proposing an additional amendment to state more clearly a limit we imposed on money market funds' investments in second tier securities in 2010.
We are proposing amendments to clarify certain characteristics of instruments that qualify as a “daily liquid asset” or “weekly liquid asset.” First, we are proposing to make clear that money market funds cannot use the maturity-shortening provisions in current paragraph (d) of rule 2a–7 regarding interest rate readjustments
Second, we propose to require that an agency discount note with a remaining maturity of 60 days or less qualifies as a “weekly liquid asset” only if the note is issued without an obligation to pay additional interest on the principal amount.
Finally, we propose to include in the definitions of daily and weekly liquid assets amounts receivable that are due unconditionally within one or five business days, respectively, on pending sales of portfolio securities.
We understand that the instruments that most, if not all, money market funds currently hold as daily and weekly liquid assets currently conform
We do not believe there would be any costs associated with our proposed amendments to the definitions of daily and weekly liquid assets. We do not anticipate that there would be operational costs for any funds that currently hold securities that would no longer qualify as daily or weekly assets because those securities likely would mature before the proposed compliance date for our proposal.
• Do the proposed amendments comport with current fund practices?
• Would there be any costs to funds that may not conform to these proposed amendments?
• Would the amendments have any effect on efficiency, competition, or capital formation?
We are proposing to amend the definition of demand feature in rule 2a–7 to mean a feature permitting the holder of a security to sell the security at an exercise price equal to the approximate amortized cost of the security plus accrued interest, if any, at the time of exercise, paid within 397 calendar days of exercise.
Eliminating the requirement that a demand feature be exercisable at any time on no more than 30 days' notice would clarify the operation of rule 2a–7 by removing a provision that has become obsolete. In 1986, the Commission expanded the notice period from seven days to 30 days for all types of demand features and emphasized that the notice requirement was at least in part designed to ensure that money market funds maintain adequate liquidity.
Eliminating the 30-day notice requirement may improve efficiency by simplifying the operation of rule 2a–7 regarding demand features and providing issuers with more flexibility. Our proposed amendment may also promote competition between issuers and facilitate capital formation by permitting funds to purchase securities with demand features from a larger pool of issuers. We do not expect that our proposed amendment would impose costs on funds.
We request comment on our proposed amendment to eliminate the 30-day notice requirement and specific reference to asset-backed securities.
• Do commenters agree that the 30-day notice requirement is unnecessary when considering the enhanced liquidity requirements adopted as part of our 2010 amendments? Why or why not?
• Do commenters agree with our economic analysis? Would our proposal have other economic effects, other than those we describe above? If so, please describe.
We are also proposing to clarify the method for determining WAL for short-term floating rate securities.
Despite the difference in wording of the maturity-shortening provisions for floating rate and variable rate securities, the Commission has always intended for these provisions to work in parallel and provide the same results.
We understand that most money market funds currently determine maturity for short-term floating rate securities consistent with the proposed amendment.
• Is our assumption that money market funds currently determine maturity for short-term floating rate securities consistent with our proposed amendment correct? If so, would our proposed amendment have any impact on fund efficiency? If not, how would our proposed amendment affect efficiency?
• Do commenters agree that our proposed amendment would likely not result in a cost to funds? Is our analysis of costs and benefits, including the effects on competition and capital formation accurate?
In 2010, we amended rule 2a–7 to limit money market funds to acquiring second tier securities with remaining maturities of 45 days or less.
We understand that most money market funds currently determine the remaining maturity for second tier securities consistent with the proposed amendment. Accordingly, we believe that our proposed amendment would likely not result in costs to funds or impact competition, efficiency, or capital formation. Any funds that currently hold securities that would no longer qualify as second tier securities would not incur costs because those securities likely would mature before the proposed compliance date for our proposal.
Currently, we anticipate the following compliance dates for our proposed amendments as set forth below.
If we were to adopt our floating NAV proposal, we expect that 2 years should provide an adequate period of time for money market funds, intermediaries, and other service providers
Accordingly, if we were to adopt the floating NAV alternative, the compliance date would be 2 years after the effective date of the adoption with respect to any amendments specifically related to the floating NAV proposal,
If we were to adopt the standby liquidity fees and gates alternative, we expect that 1 year should allow sufficient time for money market funds and their sponsors and service providers to conduct the requisite operational changes to their systems to implement these provisions, in particular the ability to impose standby liquidity fees and gates, and for fund sponsors to restructure or establish new money market funds if they chose to rely on any exemptions available. It would also provide a substantial amount of time for money market fund shareholders to consider the reforms and make any corresponding changes to their investments and for any resulting impacts on the short-term financing markets and capital formation to be gradually absorbed.
Accordingly, if we were to adopt our standby liquidity fees and redemption gates alternative, the compliance date would be 1 year after the effective date of the adoption with respect to any amendments specifically related to the standby liquidity fees and gates alternative,
With respect to any amendments not specifically related to either of the two proposed alternatives, we expect that 9 months should allow sufficient time for money market funds and their sponsors and service providers to implement any applicable disclosure requirements and conduct any applicable requisite operational changes to their systems to implement these provisions.
Accordingly, except as otherwise discussed above, we propose a general compliance date of 9 months after the effective date of adoption for all other proposed amendments to money market fund regulation not specifically related to either proposed alternative.
We request comment on the proposed compliance period for money market funds to comply with the proposed amendments.
• Should we provide a longer or shorter compliance period with respect to any of our proposed amendments? If so, why and of what length? How long would it take to implement each provision of our proposed amendments? Are there any provisions that should go into effect immediately? Others that should be provided an even longer compliance period?
• Would our proposed compliance periods and transition times provide sufficient time for fund groups to determine their preferred approach to implementing any regulatory changes and conduct any necessary operational changes?
• Would our anticipated compliance dates and transition times allow investors sufficient time to evaluate the changes and determine their preferred course of action?
• If any of the proposed amendments were to result in investors substantially reallocating capital, are there other steps we could take that we have not considered to mitigate any adverse effects on the short-term financing markets and capital formation during the transition?
The Commission requests comment on the amendments proposed in this Release. Commenters are requested to provide empirical data to support their views. The Commission also requests suggestions for additional changes to existing rules or forms, and comments on other matters that might have an effect on the proposals contained in this Release.
We specifically request comment on the feasibility of any alternatives to our proposed amendments that would minimize reporting and recordkeeping burdens on funds, the utility and necessity of the additional information we propose to require in relation to the associated costs and in view of the public benefits derived, and the effects that additional recordkeeping requirements would have on internal compliance policies and procedures.
We request comment on the potential impact of our proposals on the economy on an annual basis. Commenters are requested to provide empirical data and other factual support for their views to the extent possible.
Certain provisions of the proposed amendments contain “collections of information” within the meaning of the Paperwork Reduction Act of 1995 (“PRA”).
We are proposing two alternatives as part of our money market reform proposal, discussed separately below. Under the first alternative, we are proposing to require that certain money market funds have a floating NAV. Under the second alternative, we propose to require money market funds whose liquidity levels fell below a specified threshold to impose a liquidity fee unless the fund's board of directors determines such a fee would not be in the best interest of the fund, and permit the funds to suspend redemptions temporarily,
Under our floating NAV proposal, money market funds (other than government and retail money market funds) would no longer be permitted to use amortized cost or penny-rounding to maintain a stable price per share; instead, money market funds would be required to compute their share price by rounding the fund's current price per share to the fourth decimal place (in the case of a fund with a $1.0000 share price). Under this first alternative, we are proposing to amend rule 2a–7 (and consequently, amend or establish new collection of information burdens) by: (a) Requiring that retail money market funds seeking to rely on the exemption from our floating NAV proposal implement policies and procedures reasonably designed to allow the conclusion that Omnibus Account Holders do not permit beneficial owners of the fund from redeeming more than the permissible daily amount; (b) requiring money market funds to be diversified with respect to the sponsors of asset-backed securities by deeming the sponsor to guarantee the asset-backed security unless the fund's board of directors makes a special finding otherwise; (c) replacing the requirement that funds promptly notify the Commission via electronic mail of defaults and other events with disclosure on new Form N–CR; (d) eliminating the required procedure that money market funds' boards adopt written procedures that include shadow pricing; (e) amending the stress testing requirements; and (f) amending the disclosures that money market funds are required to post on their Web sites. Unless otherwise noted, the estimated burden hours discussed below are based on estimates of Commission staff with experience in similar matters. Several of the proposed amendments would create new collection of information requirements. The respondents to these collections of information would be money market funds, investment advisers and other service providers to money market funds, including financial intermediaries, as noted below. The currently approved burden for rule 2a–7 is 517,228 hours.
Under our floating NAV proposal, retail money market funds would be exempt from floating their price per share; instead, retail funds would be permitted to maintain a stable price per share by computing its current price per share using the penny-rounding method. A retail money market fund would mean a money market fund that does not permit any shareholder of record to redeem more than $1 million each business day.
For purposes of the PRA, staff estimates that approximately 100 money market fund complexes would rely on the proposed retail fund exemption and
Under the proposed amendments, funds would be required to treat the sponsor of an SPE issuing ABS as a guarantor of the ABS subject to rule 2a–7's diversification limitations applicable to guarantors and demand feature providers, unless the fund's board of directors (or its delegate) determines that the fund is not relying on the sponsor's financial strength or its ability or willingness to provide liquidity.
Based on its review of reports on Form N–MFP, Commission staff estimates that approximately 183 money market funds hold asset-backed securities and would be required to adopt written procedures regarding the periodic evaluation of determinations made by the fund as to ABS not subject to guarantees. Staff estimates that it would take approximately eight hours of a fund attorney's time to prepare the procedures and one hour for a board to adopt the procedures. Therefore, staff estimates the one-time burden to prepare and adopt these procedures would be approximately nine hours per money market fund, at a time cost of approximately $7,032 per fund.
Rule 2a–7 currently requires that money market funds promptly notify the Commission by electronic mail of any default or event of insolvency with respect to the issuer of one or more portfolio securities (or any issuer of a demand feature or guarantee) where immediately before the default the securities comprised one half of one percent or more of the fund's total assets.
We are proposing to eliminate the rule 2a–7 requirements that money market funds provide electronic notice of any event of default or insolvency of a portfolio security and any purchase by a fund of a portfolio security by an affiliate in reliance on rule 17a–9.
Rule 2a–7 currently requires that money market funds establish written procedures designed to stabilize the fund's NAV
The Commission is proposing to eliminate the requirement that money market funds establish written procedures providing for the board's periodic review of the fund's shadow price, the methods used for calculating the shadow price, and what action, if any, the board should initiate if the fund's shadow price exceeds amortized cost by more than
We are proposing to amend the stress testing provision of rule 2a–7 to enhance the hypothetical events for which a fund (or its adviser) is required to stress test, including: (i) Increases (rather than changes) in the general level of short-term interest rates; (ii) downgrades or defaults of portfolio securities, and the effects these events could have on other securities held by the fund; (iii) “widening or narrowing of spreads among the indexes to which interest rates of portfolio securities are tied”; (iv) other movements in interest rates that may affect the fund's portfolio securities, such as shifts in the yield curve; and (v) combinations of these and any other events the adviser deems relevant, assuming a positive correlation of risk factors.
We understand that most money market funds, in their normal course of risk management, include the elements we are proposing in their stress testing. Nevertheless, some smaller funds that perform their own stress testing (rather than use a third party service provider) may incur a one-time internal burden to reprogram an existing system to provide the required reports of stress testing results based on our proposed amendments. Staff estimates that each
We are proposing four amendments to the information money market funds are required to disclose on their Web sites. These amendments would promote transparency to investors of money market funds' risks and risk management by:
• Harmonizing the specific portfolio holdings information that rule 2a–7 currently requires funds to disclose on the fund's Web site with the corresponding portfolio holdings information proposed to be reported on Form N–MFP
• Requiring that a fund disclose on its Web site a schedule, chart, graph, or other depiction showing the percentage of the fund's total assets that are invested in daily and weekly liquid assets, as well as the fund's net inflows or outflows, as of the end of each business day during the preceding six months (which depiction must be updated each business day as of the end of the preceding business day)
• Requiring that a fund disclose on its Web site a schedule, chart, graph, or other depiction showing the fund's daily current NAV per share,
• Requiring a fund to disclose on its Web site substantially the same information that the fund is required to report to the Commission on Form N–CR regarding the provision of financial support to the fund.
These new collections of information would be mandatory for money market funds that rely on rule 2a–7, and to the extent that the Commission receives confidential information pursuant to these collections of information, such information would be kept confidential, subject to the provisions of applicable law.
Because the new information that a fund would be required to disclose on its Web site overlaps with the information that a fund would be required to disclose on Form N–MFP, we anticipate that the burden for each fund to draft and finalize the disclosure that would appear on its Web site would largely be incurred when the fund files Form N–MFP.
The burdens associated with the proposed requirement for a fund to disclose on its Web site a schedule, chart, graph, or other depiction showing the percentage of the fund's total assets that are invested in daily and weekly liquid assets, as well as the fund's net inflows or outflows, include one-time burdens as well as ongoing burdens. Commission staff expects that each money market fund would incur a one-time burden of 70 hours,
Because we do not have the information necessary to provide a point estimate, we are unable to estimate the costs to modify a particular fund's systems and thus have provided ranges of estimated costs in our economic analysis.
Because we do not have the information necessary to provide a point estimate of the costs to modify a particular fund's systems we thus have provided ranges of estimated costs in our economic analysis.
The burdens associated with the proposed requirement for a fund to disclose on its Web site a schedule, chart, graph, or other depiction showing the fund's daily current NAV
Commission staff expects that each money market fund would incur a one-time burden of 70 hours,
Because we do not have the information necessary to provide a point estimate of the costs to modify a particular fund's systems we thus have provided ranges of estimated cost in our economic analysis.
Because we do not have the information necessary to provide a point estimate of the costs to modify a particular fund's systems we thus have provided ranges of estimated costs in our economic analysis.
Because floating NAV money market funds would be required to calculate their redemption price each day, these funds should incur no additional burdens in obtaining this data for purposes of the proposed disclosure requirements. Stable price money market funds (including government money market funds and retail funds if
Commission staff estimates that the Commission would receive 40 reports per year filed in response to an event specified on Part C (“Provision of financial support to Fund”) of Form N–CR.
The aggregate additional annual burden associated with the proposed Web site disclosure requirements discussed above is 59,422 hours
The currently approved burden for rule 2a–7 is 517,228 hours. The net aggregate additional burden hours associated with the proposed amendments to rule 2a–7 would increase the burden estimate to 540,892 hours annually for all funds.
Rule 22e–3 under the Investment Company Act exempts money market funds from section 22(e) of the Act to permit them to suspend redemptions and postpone payment of redemption proceeds in order to facilitate an orderly liquidation of the fund, provided that certain conditions are met.
The rule requires a money market fund to provide prior notification to the Commission of its decision to suspend redemptions and liquidate.
The current approved annual aggregate collection of information for rule 22e–3 is approximately 30 minutes to provide the required notification under the rule. To provide shareholders with protections comparable to those currently provided by the rule while also updating the rule to make it consistent with our proposed amendments to rule 2a–7, we are proposing to amend rule 22e–3 under our floating NAV proposal to allow a money market fund to invoke the exemption in rule 22e–3 if: (1) The fund, at the end of a business day, has invested less than 15% of its total assets in weekly liquid assets; or (2) in the case of a fund relying on the exemption for government money market funds or retail money market funds, the money market fund's price per share has deviated from the stable price established by the board of directors or the fund's board of directors, including a majority of directors who are not interested persons of the fund, determines that such a deviation is likely to occur.
These amendments are designed to permit a money market fund to suspend redemptions under our floating NAV proposal when the fund is under significant stress, as the funds may do today under rule 22e–3. We do not expect that money market funds would invoke the exemption provided by rule 22e–3 more frequently under our floating NAV proposal than they do today because, although we propose to change the circumstances under which a money market fund may invoke the exemption provided by rule 22e–3, the rule as we propose to amend it still
Therefore, we are not revising rule 22e–3's current approved annual collection of information. The rule's current approved annual aggregate burden is approximately 30 minutes, as discussed above, and is based on our staff's estimates that: (1) on average, one money market fund would break the buck and liquidate every six years;
Rule 30b1–7 under the Investment Company Act currently requires money market funds to file electronically a monthly report on Form N–MFP within five business days after the end of each month. The information required by the form must be data-tagged in XML format and filed through EDGAR. The rule is designed to improve transparency of information about money market funds' portfolio holdings and facilitate Commission oversight of money market funds. Preparing a report on Form N–MFP is a collection of information under the PRA.
For the reasons discussed in detail in section III.H above, we are proposing a number of amendments to Form N–MFP which would include new and amended collections of information. These changes include:
The current approved collection of information for Form N–MFP is 45,214 annual aggregate hours and $4,424,480 in external costs.
Staff understands that approximately 35% of the 586
Staff also understands that software service providers (whether provided by a licensor or third-party service provider) are likely to incur additional external costs to modify their software and may pass those costs down to money market funds in the form of higher annual licensing fees. Although we do not have the information necessary to provide a point estimate of the external costs or the extent to which the software service providers will pass down any external costs to funds, we can estimate a range of costs, from 5% to 10% of current annual licensing fees. Accordingly, staff estimates that 35% of funds (205 funds) would pay $336 in additional external licensing costs each year and 65% of funds (381 funds) would pay $800 in additional external licensing costs each year because of our proposed amendments.
Staff therefore estimates that our proposed amendments to Form N–MFP would result in a first-year aggregate additional 49,810 burden hours
As outlined above, proposed new rule 30b1–8 would require money market funds to file new Form N–CR with the Commission when certain events occur. Similar to Form 8–K under the Exchange Act,
The staff estimates that the Commission would receive, in the aggregate, an average of 20 reports
When filing a report on Form N–CR,
Rule 34b–1 under the Act is an antifraud provision governing sales material that accompanies or follows the delivery of a statutory prospectus. Among other things, rule 34b–1 deems to be materially misleading any advertising material by a money market fund required to be filed with the Commission by section 24(b) of the Act that includes performance data, unless such advertising also includes the rule 482(b)(4) risk disclosures already discussed in section IV.A.6 below. Because we are amending the wording of the rule 482(b)(4) risk disclosures, rule 34b–1(a) is indirectly affected by our proposed amendments. However, we are proposing no changes to rule 34b–1(a) itself.
We already account for the burdens associated with the wording changes to the risk disclosures in money market fund advertising when discussing our amendments to rule 482(b)(4).
Rule 482 applies to advertisements or other sales materials with respect to securities of an investment company registered under the Investment Company Act that is selling or proposing to sell its securities pursuant to a registration statement that has been filed under the Investment Company Act.
If implemented, the floating NAV alternative would change the investment expectations and experience of money market fund investors, rendering the current rule 482(b)(4) risk disclosures in advertisements for money market funds out of date. Accordingly, we are proposing to amend the particular wording of the rule 482(b)(4) risk disclosures in money market funds' advertisements (including requiring that they be disclosed prominently on a fund's Web site).
The current approved collection of information for rule 482 is 301,179 annual aggregate hours. Given that the proposed amendments are one-time updates to the wording of the risk disclosures already required under current rule 482(b)(4), staff estimates that, once funds have made these one-time changes, the amendments to rule 482(b)(4) would only require money market funds to incur the same costs and hour burdens on an ongoing basis as under current rule 482(b)(4).
For each money market fund, staff estimates that internal marketing staff and in-house counsel would spend, on a one-time basis,
Using an estimate of 586 money market funds that would be required to comply with the amendments to rule 482(b)(4),
We are also proposing amendments to Form N–1A in connection with our alternative proposal for money market funds to move to a floating NAV. These new collections of information would be mandatory for money market funds that rely on rule 2a–7, and to the extent that the Commission receives confidential information pursuant to these collections of information, such information would be kept confidential, subject to the provisions of applicable law.
The move to a floating NAV would be designed to change fundamentally the investment expectations and experience of money market fund investors. Because of the significance of this change, we propose to require that each money market fund, other than a government or retail fund, include a new bulleted statement disclosing the particular risks associated with investing in a floating NAV money market fund in the summary section of the statutory prospectus (and, accordingly, in any summary prospectus, if used). We also propose to include wording designed to inform investors about the primary general risks of investing in money market funds in this bulleted disclosure statement.
The proposed requirement that money market funds transition to a floating NAV would entail certain additional tax- and operations-related disclosure, which disclosure requirements would not necessitate rule and form amendments. However, we expect that, pursuant to current disclosure requirements, floating NAV money market funds would include disclosure in their prospectuses about the tax consequences to shareholders of buying, holding, exchanging, and selling the shares of the floating NAV fund. In addition, we expect that a floating NAV money market fund would update its prospectus and SAI disclosure regarding the purchase, redemption, and pricing of fund shares, to reflect any procedural changes resulting from the fund's use of a floating NAV.
For the reasons discussed above in section III.F.1.a, we are also proposing amendments to Form N–1A that would require all money market funds to provide SAI disclosure regarding historical instances in which the fund has received financial support from a sponsor or fund affiliate. Specifically, the proposed amendments would require each money market fund to disclose any occasion during the last ten years on which an affiliated person, promoter, or principal underwriter of the fund, or an affiliated person of such person, provided any form of financial support to the fund.
The current approved collection of information for Form N–1A is 1,578,689 annual aggregate hours and the total annual external cost burden is $122,730,472. The respondents to this collection of information are open-end management investment companies registered with the Commission. The entities that would be affected by the proposed amendments to Form N–1A discussed above include all money market funds. However, various aspects of these amendments would only affect floating NAV money market funds, or alternatively would only affect government and retail money market funds relying on the proposed government fund exemption and retail fund exemption from the floating NAV requirement. For purposes of the PRA, staff estimates that, of the estimated 586 total money market funds,
The burdens associated with the proposed amendments to Form N–1A include one-time burdens as well as ongoing burdens. Commission staff estimates that each floating NAV money market fund would incur a one-time burden of 5 hours,
Amortizing these one-time and ongoing hour and cost burdens over three years results in an average annual increased burden of approximately 2 hours per floating NAV fund,
Commission staff estimates that each government or retail money market fund would incur a one-time burden of 2 hours,
Amortizing these one-time and ongoing hour and cost burdens over three years results in an average annual increased burden of 1 hour per government or retail fund,
In total, the staff estimates that all money market funds (floating NAV funds, as well as government and retail funds that rely on the proposed government and retail exemptions) would incur an annual increased burden of 907 hours,
Commission staff calculates the external costs associated with the proposed Form N–1A disclosure requirements as follows: 2.5 pages (mid-
Advisers Act rule 204(b)–1 requires SEC-registered private fund advisers that have at least $150 million in private fund assets under management to report certain information regarding the private funds they advise on Form PF. The rule implements sections 204 and 211 of the Advisers Act, as amended by the Dodd-Frank Act, which direct the Commission (and the CFTC) to supply FSOC with information for use in monitoring systemic risk by establishing reporting requirements for private fund advisers. Form PF divides respondents into groups based on their size and the types of private funds they manage, with some groups of advisers required to file more information than others or more frequently than others. Large liquidity fund advisers—the only group of advisers that would be affected by today's proposed amendments to Form PF—must provide information concerning their liquidity funds on Form PF each quarter. Form PF contains a collection of information under the PRA.
Under the proposed amendments to Form PF, for each liquidity fund it manages, a large liquidity fund adviser would be required to provide, quarterly and with respect to each portfolio security, the following additional information for each month of the reporting period:
• The name of the issuer;
• The title of the issue;
• The CUSIP number;
• The legal entity identifier, or LEI, if available;
• At least one of the following other identifiers, in addition to the CUSIP and LEI, if available: ISIN, CIK, or any other unique identifier;
• The category of investment (
• If the rating assigned by a credit rating agency played a substantial role in the liquidity fund's (or its adviser's) evaluation of the quality, maturity or liquidity of the security, the name of each credit rating agency and the rating each credit rating agency assigned to the security;
• The maturity date used to calculate weighted average maturity;
• The maturity date used to calculate weighted average life;
• The final legal maturity date;
• Whether the instrument is subject to a demand feature, guarantee, or other enhancements, and information about any of these features and their providers;
• For each security, reported separately for each lot purchased, the total principal amount; the purchase date(s); the yield at purchase and as of the end of each month during the reporting period for floating or variable rate securities; and the purchase price as a percentage of par;
• The value of the fund's position in the security and, if the fund uses the amortized cost method of valuation, the amortized cost value, in both cases with and without any sponsor support;
• The percentage of the liquidity fund's assets invested in the security;
• Whether the security is categorized as a level 1, 2, or 3 asset or liability on Form PF;
• Whether the security is an illiquid security, a daily liquid asset, and/or a weekly liquid asset, as defined in rule 2a–7; and
• Any explanatory notes.
Our proposed amendments to Form PF are designed, as discussed in more detail in section III.I above, to assist FSOC in its monitoring and assessment of systemic risk; to provide information for FSOC's use in determining whether and how to deploy its regulatory tools; and to collect data for use in our own regulatory program. The additional information we are proposing to require large liquidity fund advisers to provide with respect to the liquidity funds they advise is virtually the same information that money market funds must file on Form N–MFP as we propose to amend it, and should be familiar to large liquidity fund advisers because, as of February 28, 2013, virtually all of the 25 large liquidity funds advisers already manage a money market fund or have a related person that manages a money market fund. Because advisers would be required to report this information about their portfolio holdings, the proposed amendments to Form PF also would remove current Questions 56 and 57 on Form PF, which generally require large liquidity fund advisers to provide information about their liquidity funds' portfolio holdings broken out by asset class (rather than security by security). We also proposing to require large liquidity fund advisers to provide information about any securities sold by their liquidity funds during the reporting period, including sale and purchase prices. Finally, the amendments would require large liquidity fund advisers to identify any money market fund advised by the adviser or its related persons that pursues substantially the same investment objective and strategy and invests side by side in substantially the same positions as a liquidity fund the adviser reports on Form PF.
The current approved collection of information for Form PF is 258,000 annual aggregate hours and $25,684,000 in aggregate external costs. In estimating these total approved burdens, Commission staff estimated that the amortized average annual burden of Form PF for large liquidity fund advisers in particular would be 290 hours per large liquidity fund adviser for each of the first three years, resulting in an aggregate amortized annual burden of 23,200 hours for large liquidity fund advisers for each of the first three years.
Our staff estimates that the paperwork burdens associated with Form N–MFP (as we propose to amend it) are representative of the burdens that large liquidity fund advisers could incur as a result of our proposed amendments to Form PF because advisers would be required to file on Form PF virtually the same information money market funds would file on Form N–MFP as we propose to amend it and because, as discussed above, virtually all of the 25 large liquidity funds advisers already manage a money market fund or have a related person that manages a money market fund. Therefore, we believe that large liquidity fund advisers—when required to compile and report for their liquidity funds generally the same information virtually all of them already report for their money market funds—likely will use the same (or comparable) staff and/or external service providers to provide portfolio holdings information on Form N–MFP and Form PF.
Our staff accordingly estimates that our proposed amendments to Form PF would result in paperwork burden hours and external costs determined as follows. First, as discussed in the PRA analysis for our amendments to Form N–MFP, our staff estimates that the average annual amortized burdens per money market fund imposed by Form N–MFP as we propose to amend it are 145 hours
As discussed above, we are proposing an alternative to our floating NAV proposal. Under this alternative, we propose to require that, in the event that a money market fund's weekly liquid assets fell below 15% of its total assets, the money market fund would be required to institute a liquidity fee and permitted to impose a redemption gate.
Under the proposed liquidity fees and gates proposal, if a money market fund's weekly liquid assets fall below 15% of total assets, the fund's board may be required to make and document a number of determinations, when in the best interest of the fund, regarding the imposition of liquidity fees and gates, including (i) whether to impose the liquidity fee, and if so, what the amount of the liquidity fee should be (not to exceed 2%); (ii) whether to impose a redemption gate; (iii) when to remove a liquidity fee put in place (subject to other rule requirements); and (iv) when
As discussed above, staff analysis of Form N–MFP data shows that, between March 2011 and October 2012, four prime money market funds had weekly liquid assets below 15% of total assets, the trigger for board determinations regarding the imposition of liquidity fees and gates. Commission staff estimates that the four money market funds we estimate would satisfy the triggering event would spend, on an annual basis, (i) four hours of a fund attorney's time to prepare materials for the board's determinations, (ii) two hours for the board to review those materials and make the required determinations, and (iii) one hour of a fund attorney's time per year, on average, to prepare the written records of such determinations.
As discussed above in section III.B.5, we are not proposing a retail money market fund exemption from our liquidity fees and gates proposal. Accordingly, there would be no collection of information burden related to the retail exemption.
As outlined above, we are proposing certain amendments relating to ABS securities that would be adopted if the first alternative (requiring money market funds to float their NAV per share) is adopted.
As outlined above, we propose to eliminate the requirements that money market funds provide electronic notice of any event of default or insolvency of a portfolio security and any purchase by a fund of a portfolio security by an affiliate in reliance on rule 17a–9.
As outlined above, we are proposing amendments to the stress testing provision of rule 2a–7 to enhance the hypothetical events for which a fund (or its adviser) is required to test. The amendments and enhancements we are proposing to the stress testing requirements would largely be identical under either reform alternative we might adopt, except that for floating NAV money market funds we would remove the standard to test against preserving a stable share price if we were to adopt the floating NAV alternative, as discussed above in more detail. Therefore, staff estimates that the aggregate one-time burden for all money market funds to implement the proposed amendments to stress testing would be the same as under our floating NAV alternative (8,464 hours at a total time cost of $3.9 million). Amortized over a three-year period, this would result in an average annual burden of 2,821 burden hours and $1.3 million total time cost for all funds.
We are proposing four amendments to the information money market funds are required to disclose on their Web sites. These amendments would promote transparency of money market funds' risks and risk management by:
• Harmonizing the specific portfolio holdings information that rule 2a–7
• Requiring that a fund disclose on its Web site a schedule, chart, graph, or other depiction showing the percentage of the fund's total assets that are invested in daily and weekly liquid assets, as well as the fund's net inflows or outflows, as of the end of each business day during the preceding six months (which depiction must be updated each business day as of the end of the preceding business day);
• Requiring that a fund disclose on its Web site a schedule, chart, graph, or other depiction showing the fund's daily current NAV per share, as of the end of each business day during the preceding six months (which depiction must be updated each business day as of the end of the preceding business day);
• Requiring a fund to disclose on its Web site substantially the same information that the fund is required to report to the Commission on Form N–CR regarding the provision of financial support to the fund, the imposition and removal of liquidity fees, and the suspension and resumption of fund redemptions.
As outlined above, we are proposing amendments to the portfolio holdings information that rule 2a–7 currently requires money market funds to disclose on the fund's Web site to harmonize this information with the corresponding portfolio holdings information proposed to be reported on Form N–MFP. We are proposing substantially similar amendments under both the floating NAV alternative and the liquidity fees and gates alternative. Therefore, the burdens associated with the proposed amendments would be the same as those discussed in section IV.A.1.f.i above (7,032 aggregate hours per year, at a total aggregate time cost of $1,455,624). There would be no external costs associated with this collection of information.
We are proposing to require money market funds to disclose on the fund's Web site a schedule, chart, graph, or other depiction showing the percentage of the fund's total assets that are invested in daily and weekly liquid assets, as well as the fund's net inflows or outflows, and to update this depiction each business day, as discussed above. We are proposing identical requirements under both the floating NAV alternative and the liquidity fees and gates alternative. Therefore, the burdens associated with the proposed requirements would be the same as those discussed in Section IV.A.1.f.ii above (26,175 aggregate hours per year, at a total aggregate time cost of $7,523,849). There would be no external costs associated with this collection of information.
We are proposing to require a money market fund to disclose on the fund's Web site a schedule, chart, graph, or other depiction showing the fund's daily current NAV as of the end of the previous business day, and to update this depiction each business day, as discussed above. We are proposing substantially similar requirements under both the floating NAV alternative and the liquidity fees and gates alternative. Therefore, the burdens associated with the proposed requirements would be the same as those discussed in Section IV.A.1.f.iii above (26,175 aggregate hours per year, at a total aggregate time cost of $7,523,849). There would be no external costs associated with this collection of information.
As outlined above, we are proposing to require money market fund to disclose on the fund's Web site substantially the same information that the fund is required to report to the Commission on Form N–CR regarding the provision of financial support to the fund. We are proposing identical requirements under both the floating NAV alternative and the liquidity fees and gates alternative. Therefore, the burdens associated with these proposed requirements would be the same as those discussed in Section IV.A.1.f.iv above (40 aggregate hours per year, at a total aggregate time cost of $8,280). There would be no external costs associated with this collection of information.
In connection with the fees and gates alternative, we are also proposing to require money market funds to disclose on the fund's Web site substantially the same information that the fund is required to report to the Commission on Form N–CR regarding the imposition and removal of liquidity fees, and the suspension and resumption of fund redemptions. Commission staff estimates that the Commission would receive, in aggregate, an average of 8 reports per year filed in response to events specified on Part E (“Imposition of liquidity fee”), Part F (“Suspension of Fund redemptions”), and Part G (“Removal of liquidity fees and/or resumption of Fund redemptions”) of Form N–CR.
However, this is a conservative estimate, because we expect that funds would be less likely to cross the 15% threshold if we adopt our proposal, since we expect that the funds would increase their risk management around their level of weekly liquid assets in response to the fee and gate requirements.
The aggregate additional annual burden associated with the proposed Web site disclosure requirements discussed above is 59,430 hours
The currently approved burden for rule 2a–7 is 517,228 hours. The net aggregate additional burden hours associated with the proposed amendments to rule 2a–7 would increase the burden estimate to 540,626 hours annually for all funds.
As outlined above, rule 22e–3 under the Investment Company Act exempts money market funds from section 22(e) of the Act to permit them to suspend redemptions and postpone payment of redemption proceeds in order to facilitate an orderly liquidation of the fund, provided that certain conditions are met. To provide shareholders with protections comparable to those currently provided by the rule while also updating the rule to make it consistent with our proposed amendments to rule 2a–7, we are proposing to amend rule 22e–3 under our fees and gates proposal to permit a money market fund to invoke the exemption in rule 22e–3 if the fund, at the end of a business day, has invested less than 15% of its total assets in weekly liquid assets.
The proposed amendments to rule 22e–3 under our fees and gates proposal, like the amendments we propose to rule 22e–3 under our floating NAV proposal, are designed to permit a money market fund to suspend redemptions when the fund is under significant stress, as the funds may do today under rule 22e–2. As with our proposed amendments to rule 22e–3 under our floating NAV proposal, we do not expect that money market funds would invoke the exemption provided by rule 22e–3 more frequently under our fees and gates proposal than they do today. Although we propose to change the circumstances under which a money market fund may invoke the exemption provided by rule 22e–3, the rule as we propose to amend it still would permit a money market fund to invoke the exemption only when the fund is under significant stress, and our staff estimates that a money market fund is likely to experience that level of stress and choose to suspend redemptions in reliance on rule 22e–3 with the same frequency that funds today may do so. Therefore, we are not revising rule 22e–3's current approved annual aggregate collection of information, which would remain approximately 30 minutes. There would be no change in the external cost burden associated with this collection of information.
As outlined above, we are also proposing that these amendments would be adopted if the second alternative, requiring money market funds whose liquidity levels fell below a specified threshold to consider imposing a liquidity fee and permit the funds to suspend redemptions temporarily, were adopted. Therefore, as discussed above under the floating NAV proposal, Commission staff estimates that, under our fees and gates proposal, our proposed amendments to Form N–MFP would result in all money market funds, incurring, in aggregate, 40,043 hours at a total time cost of $10.4 million plus $373,680 in external costs for all funds.
As discussed above, we are proposing to adopt new Form N–CR under the floating NAV alternative, which would require disclosure, by means of a current report filed with the Commission, of certain specific reportable events. Similarly, we are also proposing to adopt new Form N–CR if the liquidity fees and gates alternative is adopted. Albeit with some variations, under both alternatives the information reported on Form N–CR would include instances of portfolio security default, sponsor support of funds, and certain significant deviations in net asset value.
Under the liquidity fees and gates alternative, the staff estimates that on average the Commission would receive the same number of reports filed per year in response to the events specified on Parts B, C, and D as under the floating NAV alternative. In addition, the staff estimates that on average the Commission would an additional 8 reports per year filed in response to events specified on Parts E, F, and G of Form N–CR.
However, this is a conservative estimate, because the staff expects that funds would be less likely to cross the 15% threshold if the Commission adopts our proposal, since the staff expects that the funds would increase their risk management around their level of weekly liquid assets in response to the fee and gate requirements.
As discussed above, the staff estimates that a fund would spend on average approximately 5 hours
As outlined above,
We already account for the burdens associated with the wording changes to the risk disclosures in money market fund advertising when discussing our amendments to rule 482(b)(4).
As outlined above, we are proposing to amend the wording of the rule 482(b)(4) risk disclosures in money market funds' advertisements that would be adopted under the floating NAV alternative.
We are proposing amendments to Form N–1A in connection with the liquidity fees and gates alternative proposal. This new collection of information would be mandatory for money market funds that rely on rule 2a–7, and to the extent that the Commission receives confidential information pursuant to these collections of information, such information would be kept confidential, subject to the provisions of applicable law.
The Commission's fees and gates alternative proposal would permit funds to charge liquidity fees and impose redemption restrictions on money market fund investors. To inform investors about these potential restrictions, we propose to require that each money market fund (other than government money market funds that have chosen to rely on the proposed rule 2a–7 exemption for government money market funds from the fee and gate requirements) include a bulleted statement, disclosing the particular risks associated with investing in a fund that may impose liquidity fees or redemption restrictions, in the summary section of the statutory prospectus (and, accordingly, in any summary prospectus, if used). We also propose to include wording designed to inform investors about the primary general risks of investing in money market funds in this bulleted disclosure statement.
The liquidity fees and gates proposal would exempt government money market funds from any fee or gate requirement, but a government money market fund would be permitted to impose fees or gates if the ability to impose fees or gates were disclosed in the fund's prospectus. Accordingly, the proposed amendments to Form N–1A would require government money market funds that have chosen to rely on this exemption to include a bulleted disclosure statement in the summary section of the fund's statutory prospectus (and, accordingly, in any summary prospectus, if used) that does not include discussion of the risks of liquidity fees and gates, but that includes additional detail about the risks of investing in money market funds generally.
Currently, funds are required to disclose any restrictions on fund redemptions in their registration statements. We expect that, to comply with these requirements, money market funds (besides government money market funds that have chosen to rely on the proposed rule 2a–7 exemption from the fee and gate requirements) would disclose in the statutory prospectus, as well as in the SAI, as applicable, the effects that the potential imposition of fees and/or gates may have on a shareholder's ability to redeem shares of the fund. We also expect that, promptly after a money market fund imposes a redemption fee or gate, it would inform prospective investors of any fees or gates currently in place by means of a prospectus supplement.
For the reasons discussed above in section III.B.8.c, we are also proposing amendments to Form N–1A that would require all money market funds (except government money market funds that have chosen to rely on the proposed rule 2a–7 exemption from the fee and gate requirements) to provide SAI disclosure regarding the historical occasions in which the fund's weekly liquid assets have fallen below 15% or the fund has imposed liquidity fees or redemption gates.
Finally, for the reasons discussed above in section III.F.1.a, we are proposing amendments to Form N–1A that would require all money market funds to provide SAI disclosure regarding historical instances in which the fund has received financial support from a sponsor or fund affiliate. Specifically, the proposed amendments would require each money market fund to disclose any occasion during the last ten years on which an affiliated person, promoter, or principal underwriter of the fund, or an affiliated person of such person, provided any form of financial support to the fund.
The current approved collection of information for Form N–1A is 1,578,689 annual aggregate hours, and the total annual external cost burden is $122,730,472. The respondents to this collection of information are open-end management investment companies registered with the Commission. The entities that would be affected by the proposed amendments to Form N–1A discussed above include all money market funds. However, various aspects of these amendments would only affect those money market funds that are not government funds that rely on the proposed rule 2a–7 exemption from the fee and gate requirements, while others would only affect government funds relying on the proposed exemption. For purposes of the PRA, staff estimates that, of the estimated 586 total money market funds,
The burdens associated with the proposed amendments to Form N–1A include one-time burdens as well as ongoing burdens. Commission staff estimates that each money market fund (except government money market funds that have chosen to rely on the proposed rule 2a–7 exemption from the fee and gate requirements) would incur a one-time burden of 5 hours,
Amortizing these one-time and ongoing hour and cost burdens over three years results in an average annual increased burden of approximately 2 hours per fund (except government money market funds that have chosen to rely on the proposed rule 2a–7
Commission staff estimates that each government money market fund that has chosen to rely on the proposed rule 2a–7 exemption from the fee and gate requirements would incur a one-time burden of 2 hours,
Amortizing these one-time and ongoing hour and cost burdens over three years results in an average annual increased burden of 1 hour per government fund that has chosen to rely on the proposed rule 2a–7 exemption,
In total, the staff estimates that all money market funds would incur an average annual increased burden of 1,007 hours,
Commission staff calculates the external costs associated with the proposed Form N–1A disclosure requirements as follows: 5 pages (mid-point of 2 pages and 8 pages) × $0.045 per page × 27,863,000 money market fund registration statements printed annually = $6,269,175 one-time aggregate external costs. Amortizing these external costs over three years results in aggregate annual external costs of $2,089,725. Our estimate of potential printing ($0.045 per page: $0.035 for ink + $0.010 for paper) is based on data provided by Lexecon Inc. in response to Investment Company Act Release No. 27182 (Dec. 8, 2005) [70 FR 74598 (Dec. 15, 2005)].
We are proposing the same amendments to Form PF under both the floating NAV and fees and gates proposals. Staff estimates that the estimated paperwork burdens associated with our amendments to Form PF as discussed above in connection with our floating NAV proposal apply equally to our fees and gates proposal. Therefore, as discussed above under our floating NAV proposal, our staff estimates that the proposed amendments to Form PF under our fees and gates proposal also would result in (1) increased annual burdens per large liquidity fund advisers of 290 burden hours, at a total time cost of $73,460, and $16,374 in external costs;
We request comment on whether our estimates for the change in burden hours and associated costs, as well as any external costs for the proposed amendments described above under our first alternative proposal—floating NAV—are reasonable. We also request comment on whether our estimates for the change in burden hours associated costs, as well as any external costs for the proposed amendments described above under our second alternative proposal—liquidity fees and gates—are reasonable. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comments in order to: (i) Evaluate
The agency has submitted the proposed collection of information to OMB for approval. Persons wishing to submit comments on the collection of information requirements of the proposed amendments should direct them to the Office of Management and Budget, Attention Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, DC 20503, and should send a copy to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090, with reference to File No. S7–03–13. OMB is required to make a decision concerning the collections of information between 30 and 60 days after publication of this Release; therefore, a comment to OMB is best assured of having its full effect if OMB receives it within 30 days after publication of this Release. Requests for materials submitted to OMB by the Commission with regard to these collections of information should be in writing, refer to File No. S7–03–13, and be submitted to the Securities and Exchange Commission, Office of Investor Education and Advocacy, 100 F Street NE., Washington, DC 20549–0213.
Section 3(a) of the Regulatory Flexibility Act of 1980
The proposal would amend rule 2a–7 under the Investment Company Act to:
• Require money market funds other than government and retail money market funds: (a) to “float” their net asset values; or (b) under an alternative proposal, to impose, under certain circumstances, a liquidity fee, and permit funds to impose a redemption gate.
• Require that money market funds disclose on the fund's Web site daily and weekly liquidity, the funds' daily market-based NAV per share (or current NAV per share under our floating NAV proposal), and certain information that the fund is required to report to the Commission on new Form N–CR regarding the imposition and subsequent removal of liquidity fees or gates (where applicable).
• Require money market funds to treat certain affiliates as single issuers when applying rule 2a–7's 5% issuer diversification requirement.
• Require money market funds to treat the sponsors of asset-backed securities as guarantors subject to rule 2a–7's diversification requirements unless the fund's board of directors determines the fund is not relying on the sponsor's support when determining the asset-backed security's credit quality or liquidity.
• Require money market funds to apply rule 2a–7's diversification restrictions applicable to demand features and guarantees (including guarantees deemed issued by sponsors of asset-backed securities) to all of the funds' total assets, rather than 75% of the funds' total assets as provided in current rule 2a–7.
• Amend the stress testing requirements to require funds to adopt procedures providing for periodic testing (and reporting of results to fund boards) of money market funds' ability to maintain 15% of its total assets in weekly liquid assets (and, under the floating NAV proposal, eliminate the current requirement to test a fund's ability to maintain a stable NAV per share), based on specified amended hypothetical events.
• Make clarifying amendments to: (a) Certain characteristics of instruments that qualify as daily or weekly liquid assets; (b) the definition of demand feature; (c) the method for determining weighted average life for short-term floating rate securities; and (d) the method for determining the 45-day remaining maturity when complying with rule 2a–7's limitation on the acquisition of second tier securities.
We also are proposing to amend rule 22e–3, which exempts money market funds from section 22(e) to permit them to suspend redemptions in order to facilitate an orderly liquidation of fund assets. Under both proposals, we propose to amend the rule to provide that money market funds be permitted to suspend redemptions, when, among other requirements, the fund, at the end of a business day, has less than 15% of its total assets in weekly liquid assets.
We are also proposing new rule 30b1–8 that would require money market funds to file reports with the Commission on new Form N–CR upon the occurrence of specific events, which reports would immediately be made public. New Form N–CR would require all money market funds to make prompt public disclosure of instances of portfolio security default and sponsor support. If we adopt our liquidity fees and gates proposal, money market funds would be required to disclose a decline in the fund's weekly liquid assets below 15% of total assets, imposition and removal of liquidity fees and/or gates, and a decline in the market-based price of the fund below $0.9975. If we adopt our floating NAV proposal, money market funds would be required to disclose a decline in the market-based price of the fund below $0.9975 (for a government or retail money market fund that retains a stable price per share).
We also are proposing to amend rule 30b1–7 by (i) requiring that money market funds file Form N–MFP with the Commission, current as of the last business day or any subsequent calendar day of the preceding month; and (ii) making information filed on Form N–MFP publicly available immediately upon filing, rather than 60 days after the end of the month to which the information pertains. We also are proposing to amend Form N–MFP to reflect the proposed amendments to rule 2a–7 discussed above, request certain additional information that would be useful for our oversight of money market funds, and make technical and clarifying changes based on our experience with filings submitted during the past year and a half.
We are also proposing to amend Form PF to require registered investment advisers to certain “qualifying” liquidity funds to provide certain information with respect to those funds'
We are also proposing to amend rule 482 under the Securities Act of 1933 to require that money market funds amend any “advertisements” to notify investors that the fund may impose a liquidity fee and/or gate under certain circumstances and include specific language informing investors about the potential risks of investing in money market funds (under our proposed liquidity fees and gates proposal). Similarly, if we adopt our alternative floating NAV proposal, we would amend rule 482 to provide enhanced disclosure to investors about the potential for fluctuation in the value of the fund shares and the possibility for losses.
We also are proposing under either alternative proposal to amend Form N–1A to require that money market funds include the revised risk disclosures (discussed above in proposing to amend rule 482) pursuant to Item 4 and also disclose historic instances of sponsor support. In addition, if we adopt our liquidity fees and gates proposal, we propose to amend Item 3 of Form N–1A to make clear that “redemption fees” would not include any liquidity fee imposed.
Finally, we are proposing to amend rules 12d3–1, 18f–3, 31a–1, and 419, in each case simply to update cross references in those rules to reflect our proposed amendments to rule 2a–7.
Based on information in filings submitted to the Commission, we believe that there are no money market funds that are small entities.
We encourage written comments regarding this certification. We solicit comment as to whether new rule 30b1–8 and the proposed amendments to rules 2a–7, 12d3–1, 18f–3, 22e–3, 30b1–7, 31a–1, 419 and 482, and Forms N–CR, N–MFP, PF and N–1A could have an effect on small entities that has not been considered. We request that commenters describe the nature of any impact on small entities and provide empirical data to support the extent of such impact.
The Commission is proposing amendments to rule 419 under the rulemaking authority set forth in sections 3, 4, 5, 7, and 19 of the Securities Act [15 U.S.C. 77c, 77d, 77e, 77g, and 77s]. The Commission is proposing amendments to rule 482 pursuant to authority set forth in sections 5, 10(b), 19(a), and 28 of the Securities Act [15 U.S.C. 77e, 77j(b), 77s(a), and 77z–3] and sections 24(g) and 38(a) of the Investment Company Act [15 U.S.C. 80a–24(g) and 80a–37(a)]. The Commission is proposing amendments to rule 2a–7 under the exemptive and rulemaking authority set forth in sections 6(c), 8(b), 22(c), 35(d), and 38(a) of the Investment Company Act of 1940 [15 U.S.C. 80a–6(c), 80a–8(b), 80a–22(c), 80a–35(d), and 80a–37(a)]. The Commission is proposing amendments to rule 12d3–1 pursuant to the authority set forth in sections 6(c) and 38(a)] of the Investment Company Act [15 U.S.C. 80a–6(c) and 80a–37(a)]. The Commission is proposing amendments to rule 18f–3 pursuant to the authority set forth in sections 6(c) and 38(a) of the Investment Company Act [15 U.S.C. 80a–6(c) and 80a–37(a)]. The Commission is proposing amendments to rule 22e–3 pursuant to the authority set forth in sections 6(c), 22(e) and 38(a) of the Investment Company Act [15 U.S.C. 80a–6(c), 80a–22(e), and 80a–37(a)]. The Commission is proposing amendments to rule 30b1–7 and Form N–MFP pursuant to authority set forth in Sections 8(b), 30(b), 31(a), and 38(a) of the Investment Company Act [15 U.S.C. 80a–8(b), 80a–29(b), 80a–30(a), and 80a–37(a)]. The Commission is proposing new rule 30b1–8 and Form N–CR pursuant to authority set forth in Sections 8(b), 30(b), 31(a), and 38(a) of the Investment Company Act [15 U.S.C. 80a–8(b), 80a–29(b), 80a–30(a), and 80a–37(a)]. The Commission is proposing amendments to rule 31a–1 pursuant to authority set forth in sections 6(c) and 38(a)] of the Investment Company Act [15 U.S.C. 80a–6(c) and 80a–37(a)]. The Commission is proposing amendments to Form N–1A pursuant to authority set forth in Sections 5, 6, 7, 10, and 19(a) of the Securities Act [15 U.S.C. 77e, 77f, 77g, 77j and 77s(a)] and Sections 8, 24(a), 24(g), 30, and 38 of the Investment Company Act [15 U.S.C. 80a–8, 80a–24(a), 80a–24(g), 80a–29, and 80a–37]. The Commission is proposing amendments to Form PF pursuant to authority set forth in Sections 204(b) and 211(e) of the Advisers Act [15 U.S.C. 80b–4 and 15 U.S.C. 80b–11].
Investment companies, Reporting and recordkeeping requirements, Securities.
For reasons set out in the preamble, Title 17, Chapter II of the Code of Federal Regulations is proposed to be amended as follows:
15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z–3, 77sss, 78c, 78d, 78j, 78
(b) * * *
(4) Money market funds.
(i) An advertisement for an investment company that holds itself out to be a money market fund, and that is not subject to the exemption provisions of § 270.2a–7(c)(2) of this chapter or § 270.2a–7(c)(3) of this chapter, must include the following statement, presented as prescribed in Item 4(b) of Form N–1A (§ 274.11A of this chapter):
You could lose money by investing in the Fund.
You should not invest in the Fund if you require your investment to maintain a stable value.
The value of shares of the Fund will increase and decrease as a result of changes in the value of the securities in which the Fund invests. The value of the securities in which the Fund invests may in turn be affected by many factors, including interest
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
(ii) An advertisement for an investment company that holds itself out to be a money market fund, and that is subject to the exemption provisions of § 270.2a–7(c)(2) of this chapter or § 270.2a–7(c)(3) of this chapter, must include the following statement, presented as prescribed in Item 4(b) of Form N–1A (§ 274.11A of this chapter):
You could lose money by investing in the Fund.
The Fund seeks to preserve the value of your investment at $1.00 per share, but cannot guarantee such stability.
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
If an affiliated person, promoter, or principal underwriter of the Fund, or an affiliated person of such a person, has entered into an agreement to provide financial support to the Fund, the statement may omit the last sentence (“The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.”) for the term of the agreement. For purposes of this Note, the term “financial support” includes, for example, any capital contribution, purchase of a security from the Fund in reliance on § 270.17a–9, purchase of any defaulted or devalued security at par, purchase of Fund shares, execution of letter of credit or letter of indemnity, capital support agreement (whether or not the Fund ultimately received support), or performance guarantee, or any other similar action to increase the value of the fund's portfolio or otherwise support the fund during times of stress.
(b) * * *
(4) Money market funds.
(i) An advertisement for an investment company that holds itself out to be a money market fund (including any money market fund that is subject to the exemption provisions of § 270.2a–7(c)(2)(iii) of this chapter, but that has chosen not to rely on the exemption provided by rule § 270.2a–7(c)(2)(iii) of this chapter) must include the following statement, presented as prescribed in Item 4(b) of Form N–1A (§ 274.11A of this chapter):
You could lose money by investing in the Fund.
The Fund seeks to preserve the value of your investment at $1.00 per share, but cannot guarantee such stability.
The Fund may impose a fee upon sale of your shares when the Fund is under considerable stress.
The Fund may temporarily suspend your ability to sell shares of the Fund when the Fund is under considerable stress.
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
(ii) An advertisement for an investment company that holds itself out to be a money market fund, and that is subject to the exemption provisions of § 270.2a–7(c)(2)(iii) of this chapter and has chosen to rely on the exemption provided by § 270.2a–7(c)(2)(iii) of this chapter, must include the following statement, presented as prescribed in Item 4(b) of Form N–1A (§ 274.11A of this chapter):
You could lose money by investing in the Fund.
The Fund seeks to preserve the value of your investment at $1.00 per share, but cannot guarantee such stability.
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
If an affiliated person, promoter, or principal underwriter of the Fund, or an affiliated person of such a person, has entered into an agreement to provide financial support to the Fund, the statement may omit the last sentence (“The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.”) for the term of the agreement. For purposes of this Note, the term “financial support” includes, for example, any capital contribution, purchase of a security from the Fund in reliance on § 270.17a–9, purchase of any defaulted or devalued security at par, purchase of Fund shares, execution of letter of credit or letter of indemnity, capital support agreement (whether or not the Fund ultimately received support), or performance guarantee, or any other similar action to increase the value of the Fund's portfolio or otherwise support the Fund during times of stress.
15 U.S.C. 80a–1
(a)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(i) Fully and unconditionally guaranteed by a municipal issuer;
(ii) Payable from the general revenues of the municipal issuer or other municipal issuers (other than those revenues derived from an agreement or arrangement with a person who is not a municipal issuer that provides for or secures repayment of the security issued by the municipal issuer);
(iii) Related to a project owned and operated by a municipal issuer; or
(iv) Related to a facility leased to and under the control of an industrial or commercial enterprise that is part of a public project which, as a whole, is owned and under the control of a municipal issuer.
(8)
(i) Cash;
(ii) Direct obligations of the U.S. Government;
(iii) Securities that will mature, as determined without reference to the exceptions in paragraph (i) of this section regarding interest rate readjustments, or are subject to a demand feature that is exercisable and payable, within one business day; or
(iv) Amounts receivable and due unconditionally within one business day on pending sales of portfolio securities.
(9)
(10)
(i) The money market fund's board of directors:
(A) Has designated as an NRSRO whose credit ratings with respect to any obligor or security or particular obligors or securities will be used by the fund to determine whether a security is an eligible security; and
(B) Determines at least once each calendar year issues credit ratings that are sufficiently reliable for such use;
(ii) Is not an “affiliated person,” as defined in section 2(a)(3)(C) of the Act (15 U.S.C. 80a–2(a)(3)(C)), of the issuer of, or any insurer or provider of credit support for, the security; and
(iii) The fund discloses in its statement of additional information is a designated NRSRO, including any limitations with respect to the fund's use of such designation.
(11)
(i) A rated security with a remaining maturity of 397 calendar days or less that has received a rating from the requisite NRSROs in one of the two highest short-term rating categories (within which there may be sub-categories or gradations indicating relative standing); or
(ii) An unrated security that is of comparable quality to a security meeting the requirements for a rated security in paragraph (a)(11)(i) of this section, as determined by the money market fund's board of directors; provided, however, that: a security that at the time of issuance had a remaining maturity of more than 397 calendar days but that has a remaining maturity of 397 calendar days or less and that is an unrated security is not an eligible security if the security has received a long-term rating from any designated NRSRO that is not within the designated NRSRO's three highest long-term ratings categories (within which there may be sub-categories or gradations indicating relative standing), unless the security has received a long-term rating from the requisite NRSROs in one of the three highest rating categories.
(iii) In addition, in the case of a security that is subject to a demand feature or guarantee:
(A) The guarantee has received a rating from a designated NRSRO or the guarantee is issued by a guarantor that has received a rating from a designated NRSRO with respect to a class of debt obligations (or any debt obligation within that class) that is comparable in priority and security to the guarantee, unless:
(
(
(
(B) The issuer of the demand feature or guarantee, or another institution, has undertaken promptly to notify the holder of the security in the event the demand feature or guarantee is substituted with another demand feature or guarantee (if such substitution is permissible under the terms of the demand feature or guarantee).
(12)
(13)
(i) Is a rated security that has received a short-term rating from the requisite NRSROs in the highest short-term rating category for debt obligations (within which there may be sub-categories or gradations indicating relative standing);
(ii) Is an unrated security that is of comparable quality to a security meeting the requirements for a rated security in paragraph (a)(13)(i) of this section, as determined by the fund's board of directors;
(iii) Is a security issued by a registered investment company that is a money market fund; or
(iv) Is a government security.
(14)
(15)
(16)
(i) Means an unconditional obligation of a person other than the issuer of the security to undertake to pay, upon presentment by the holder of the guarantee (if required), the principal amount of the underlying security plus accrued interest when due or upon default, or, in the case of an unconditional demand feature, an obligation that entitles the holder to receive upon the later of exercise or the settlement of the transaction the approximate amortized cost of the underlying security or securities, plus accrued interest, if any. A guarantee includes a letter of credit, financial guaranty (bond) insurance, and an unconditional demand feature (other than an unconditional demand feature provided by the issuer of the security).
(ii) The sponsor of a special purpose entity with respect to an asset-backed security shall be deemed to have provided a guarantee with respect to the
(17)
(i) A person that, directly or indirectly, does not control, and is not controlled by or under common control with the issuer of the security subject to the guarantee (
(ii) A sponsor of a special purpose entity with respect to an asset-backed security if the money market fund's board of directors has made the findings described in paragraph (g)(6) of this section.
(18)
(19)
(20)
(i) The security has received a short-term rating from a designated NRSRO, or has been issued by an issuer that has received a short-term rating from a designated NRSRO with respect to a class of debt obligations (or any debt obligation within that class) that is comparable in priority and security with the security; or
(ii) The security is subject to a guarantee that has received a short-term rating from a designated NRSRO, or a guarantee issued by a guarantor that has received a short-term rating from a designated NRSRO with respect to a class of debt obligations (or any debt obligation within that class) that is comparable in priority and security with the guarantee; but
(iii) A security is not a rated security if it is subject to an external credit support agreement (including an arrangement by which the security has become a refunded security) that was not in effect when the security was assigned its rating, unless the security has received a short-term rating reflecting the existence of the credit support agreement as provided in paragraph (a)(20)(i) of this section, or the credit support agreement with respect to the security has received a short-term rating as provided in paragraph (a)(20)(ii) of this section.
(21)
(22)
(i) Any two designated NRSROs that have issued a rating with respect to a security or class of debt obligations of an issuer; or
(ii) If only one designated NRSRO has issued a rating with respect to such security or class of debt obligations of an issuer at the time the fund acquires the security, that designated NRSRO.
(23)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(i) Cash;
(ii) Direct obligations of the U.S. Government;
(iii) Government securities that are issued by a person controlled or supervised by and acting as an instrumentality of the government of the United States pursuant to authority granted by the Congress of the United States that:
(A) Are issued at a discount to the principal amount to be repaid at maturity without provision for the payment of interest
(B) Have a remaining maturity date of 60 days or less
(iv) Securities that will mature, as determined without reference to the exceptions in paragraph (i) of this section regarding interest rate readjustments, or are subject to a demand feature that is exercisable and payable, within five business days; or
(v) Amounts receivable and due unconditionally within five business days on pending sales of portfolio securities.
(b) Holding out and use of names and titles.
(1) It shall be an untrue statement of material fact within the meaning of section 34(b) of the Act (15 U.S.C. 80a–33(b)) for a registered investment company, in any registration statement, application, report, account, record, or other document filed or transmitted pursuant to the Act, including any advertisement, pamphlet, circular, form letter, or other sales literature addressed to or intended for distribution to prospective investors that is required to be filed with the Commission by section 24(b) of the Act (15 U.S.C. 80a–24(b)), to hold itself out to investors as a money market fund or the equivalent of a money market fund, unless such registered investment company complies with this section.
(2) It shall constitute the use of a materially deceptive or misleading name or title within the meaning of section 35(d) of the Act (15 U.S.C. 80a–
(3) For purposes of paragraph (b)(2) of this section, a name that suggests that a registered investment company is a money market fund or the equivalent thereof includes one that uses such terms as “cash,” “liquid,” “money,” “ready assets” or similar terms.
(c)
(1)
(2)
(3)
(i)
(ii)
(iii)
(A) A money market fund is exempt from the requirements of sections 18(f)(1) and 22(e) of the Act (15 U.S.C. 80a–18(f)(1) and 80a–22(e)) to the extent necessary to permit the money market fund to limit redemptions in excess of $1,000,000 of redeemable securities on any one business day as provided in paragraphs (c)(3)(i) and (ii) of this section.
(B) A registered separate account funding variable insurance contracts and the sponsoring insurance company of such account are exempt from the requirements of section 27(i)(2)(A) of the Act (15 U.S.C. 80a–27(i)(2)(A)) to the extent necessary to permit the separate account or the sponsoring insurance company of such account to apply the limitations on redemptions as provided in paragraphs (c)(3)(i) and (ii) of this section to contract owners who allocate all or a portion of their contract value to a subaccount of the separate account that is either a money market fund or that invests all of its assets in shares of a money market fund.
(d)
(1)
(i) Acquire any instrument with a remaining maturity of greater than 397 calendar days;
(ii) Maintain a dollar-weighted average portfolio maturity (“WAM”) that exceeds 60 calendar days; or
(iii) Maintain a dollar-weighted average portfolio maturity that exceeds 120 calendar days, determined without reference to the exceptions in paragraph (i) of this section regarding interest rate readjustments (“WAL”).
(2)
(i)
(ii)
(iii)
(iv)
(A) The conditional demand feature is an eligible security or first tier security, as the case may be;
(B) At the time of the acquisition of the underlying security, the money market fund's board of directors has determined that there is minimal risk that the circumstances that would result in the conditional demand feature not being exercisable will occur; and
(C) The underlying security or any guarantee of such security (or the debt securities of the issuer of the underlying security or guarantee that are comparable in priority and security with the underlying security or guarantee) has received either a short-term rating or a long-term rating, as the case may be, from the requisite NRSROs within the NRSROs' two highest short-term or long-term rating categories (within which there may be sub-categories or gradations indicating relative standing) or, if unrated, is determined to be of comparable quality by the money market fund's board of directors to a security that has received a rating from the requisite NRSROs within the NRSROs' two highest short-term or long-term rating categories, as the case may be.
(3)
(i)
(A)
(B)
(C)
(ii)
(A)
(B)
(C)
(D)
(
(
(E)
(F)
(iii)
(A)
(B)
(iv)
(A)
(B)
(v)
(4)
(i)
(ii)
(iii)
(e)
(f)
(1)
(i)
(A) A portfolio security of a money market fund ceases to be a first tier security (either because it no longer has the highest rating from the requisite NRSROs or, in the case of an unrated security, the board of directors of the money market fund determines that it is no longer of comparable quality to a first tier security); and
(B) The money market fund's investment adviser (or any person to whom the fund's board of directors has delegated portfolio management responsibilities) becomes aware that any unrated security or second tier security held by the money market fund has, since the security was acquired by the fund, been given a rating by a designated NRSRO below the designated NRSRO's second highest short-term rating category.
(ii)
(iii)
(2)
(i) The default with respect to a portfolio security (other than an immaterial default unrelated to the financial condition of the issuer);
(ii) A portfolio security ceases to be an eligible security;
(iii) A portfolio security has been determined to no longer present minimal credit risks; or
(iv) An event of insolvency occurs with respect to the issuer of a portfolio security or the provider of any demand feature or guarantee.
(3)
(4)
(i) In the case of an instrument subject to a demand feature, the demand feature has been exercised and the fund has recovered either the principal amount or the amortized cost of the instrument, plus accrued interest;
(ii) The provider of the guarantee is continuing, without protest, to make payments as due on the instrument; or
(iii) The provider of a guarantee with respect to an asset-backed security pursuant to paragraph (a)(16)(ii) of this section is continuing, without protest, to provide credit, liquidity or other support as necessary to permit the asset-backed security to make payments as due.
(g)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(A) Increases in the general level of short-term interest rates;
(B) An increase in shareholder redemptions, together with an assessment of how the fund would meet the redemptions, taking into consideration assumptions regarding the relative liquidity of the fund's portfolio securities, the prices for which portfolio securities could be sold, the fund's historical experience meeting redemption requests, and any other relevant factors;
(C) A downgrade or default of portfolio securities, and the effects these events could have on other securities held by the fund;
(D) The widening or narrowing of spreads among the indexes to which interest rates of portfolio securities are tied;
(E) Other movements in interest rates that may affect the fund's portfolio securities, such as parallel and non-parallel shifts in the yield curve; and
(F) Combinations of these and any other events the adviser deems relevant, assuming a positive correlation of risk factors (
(ii) A report on the results of such testing to be provided to the board of directors at its next regularly scheduled meeting (or sooner, if appropriate in light of the results), which report must include:
(A) The date(s) on which the testing was performed and the magnitude of each hypothetical event that would cause the money market fund to have invested less than fifteen percent of its total assets in weekly liquid assets and, in the case of a money market fund relying on the exemptions provided by paragraph (c)(2) or (3) of this section, that would cause the fund's price per share for purposes of distribution, redemption and repurchase to deviate from the stable price per share established by the board of directors; and
(B) An assessment by the fund's adviser of the fund's ability to withstand the events (and concurrent occurrences of those events) that are reasonably likely to occur within the following year, including such information as may reasonably be necessary for the board of directors to evaluate the stress testing conducted by the adviser and the results of the testing.
(h)
(1)
(2)
(3)
(4)
(5)
(i) The identities of the ten percent obligors (as that term is used in paragraph (d)(3)(ii)(D) of this section), the percentage of the qualifying assets constituted by the securities of each ten percent obligor and the percentage of the fund's total assets that are invested in securities of each ten percent obligor; and
(ii) Any determination that an asset-backed security will not have, or is unlikely to have, ten percent obligors deemed to be issuers of all or a portion of that asset-backed security for purposes of paragraph (d)(3)(ii)(D) of this section.
(6)
(7)
(8)
(9)
(10)
(i) For a period of not less than six months, beginning no later than the fifth business day of the month, a schedule of its investments, as of the last business day or subsequent calendar day of the preceding month, that includes the following information:
(A) With respect to the money market fund and each class of redeemable shares thereof:
(B) With respect to each security held by the money market fund:
(ii) A schedule, chart, graph, or other depiction, which must be updated each business day as of the end of the preceding business day, showing, as of the end of each business day during the preceding six months:
(A) The percentage of the money market fund's total assets invested in daily liquid assets;
(B) The percentage of the money market fund's total assets invested in weekly liquid assets; and
(C) The money market fund's net inflows or outflows.
(iii) A schedule, chart, graph, or other depiction showing the money market fund's net asset value per share (which each fund relying on the exemption provided by paragraph (c)(2) or (c)(3) of this section must calculate based on current market factors before applying the penny rounding method), rounded to the fourth decimal place in the case of funds with a $1.0000 share price or an equivalent level of accuracy for funds with a different share price (
(iv) A link to a Web site of the Securities and Exchange Commission where a user may obtain the most recent 12 months of publicly available information filed by the money market fund pursuant to § 270.30b1–7.
(v) For a period of not less than one year, beginning no later than the first business day following the occurrence of any event specified in Part C of Form N–CR (§ 274.222 of this chapter), the same information that the money market fund is required to report to the
(i)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(j)
(1)
(2)
(a)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(i) Fully and unconditionally guaranteed by a municipal issuer;
(ii) Payable from the general revenues of the municipal issuer or other municipal issuers (other than those revenues derived from an agreement or arrangement with a person who is not a municipal issuer that provides for or secures repayment of the security issued by the municipal issuer);
(iii) Related to a project owned and operated by a municipal issuer; or
(iv) Related to a facility leased to and under the control of an industrial or commercial enterprise that is part of a public project which, as a whole, is owned and under the control of a municipal issuer.
(8)
(i) Cash;
(ii) Direct obligations of the U.S. Government;
(iii) Securities that will mature, as determined without reference to the exceptions in paragraph (i) of this section regarding interest rate readjustments, or are subject to a demand feature that is exercisable and payable, within one business day; or
(iv) Amounts receivable and due unconditionally within one business day on pending sales of portfolio securities.
(9)
(10)
(i) The money market fund's board of directors:
(A) Has designated as an NRSRO whose credit ratings with respect to any obligor or security or particular obligors or securities will be used by the fund to determine whether a security is an eligible security; and
(B) Determines at least once each calendar year issues credit ratings that are sufficiently reliable for such use;
(ii) Is not an “affiliated person,” as defined in section 2(a)(3)(C) of the Act (15 U.S.C. 80a–2(a)(3)(C)), of the issuer of, or any insurer or provider of credit support for, the security; and
(iii) The fund discloses in its statement of additional information is a designated NRSRO, including any limitations with respect to the fund's use of such designation.
(11)
(i) A rated security with a remaining maturity of 397 calendar days or less that has received a rating from the requisite NRSROs in one of the two highest short-term rating categories (within which there may be sub-categories or gradations indicating relative standing); or
(ii) An unrated security that is of comparable quality to a security meeting the requirements for a rated security in paragraph (a)(11)(i) of this section, as determined by the money market fund's board of directors; provided, however, that: a security that at the time of issuance had a remaining maturity of more than 397 calendar days but that has a remaining maturity of 397 calendar days or less and that is an unrated security is not an eligible security if the security has received a long-term rating from any designated NRSRO that is not within the designated NRSRO's three highest long-term ratings categories (within which there may be sub-categories or gradations indicating relative standing), unless the security has received a long-term rating from the requisite NRSROs in one of the three highest rating categories.
(iii) In addition, in the case of a security that is subject to a demand feature or guarantee:
(A) The guarantee has received a rating from a designated NRSRO or the guarantee is issued by a guarantor that has received a rating from a designated NRSRO with respect to a class of debt obligations (or any debt obligation within that class) that is comparable in priority and security to the guarantee, unless:
(
(
(
(B) The issuer of the demand feature or guarantee, or another institution, has undertaken promptly to notify the holder of the security in the event the demand feature or guarantee is substituted with another demand feature or guarantee (if such substitution is permissible under the terms of the demand feature or guarantee).
(12)
(13)
(i) Is a rated security that has received a short-term rating from the requisite NRSROs in the highest short-term rating category for debt obligations (within which there may be sub-categories or gradations indicating relative standing);
(ii) Is an unrated security that is of comparable quality to a security meeting the requirements for a rated security in paragraph (a)(13)(i) of this section, as determined by the fund's board of directors;
(iii) Is a security issued by a registered investment company that is a money market fund; or
(iv) Is a government security.
(14)
(15)
(16)
(i) Means an unconditional obligation of a person other than the issuer of the security to undertake to pay, upon presentment by the holder of the guarantee (if required), the principal amount of the underlying security plus accrued interest when due or upon default, or, in the case of an unconditional demand feature, an obligation that entitles the holder to receive upon the later of exercise or the settlement of the transaction the approximate amortized cost of the underlying security or securities, plus accrued interest, if any. A guarantee includes a letter of credit, financial guaranty (bond) insurance, and an unconditional demand feature (other than an unconditional demand feature provided by the issuer of the security).
(ii) The sponsor of a special purpose entity with respect to an asset-backed security shall be deemed to have provided a guarantee with respect to the entire principal amount of the asset-backed security for purposes of this section, except paragraphs (a)(11)(iii) (definition of eligible security), (d)(2)(iii) (credit substitution), (d)(3)(iv)(A) (fractional guarantees) and (e) (guarantees not relied on) of this section, unless the money market fund's board of directors has determined that the fund is not relying on the sponsor's financial strength or its ability or willingness to provide liquidity, credit or other support to determine the quality (pursuant to paragraph (d)(2) of this section) or liquidity (pursuant to paragraph (d)(4) of this section) of the
(17)
(i) A person that, directly or indirectly, does not control, and is not controlled by or under common control with the issuer of the security subject to the guarantee (
(ii) A sponsor of a special purpose entity with respect to an asset-backed security if the money market fund's board of directors has made the findings described in paragraph (g)(6) of this section.
(18)
(19)
(20)
(i) The security has received a short-term rating from a designated NRSRO, or has been issued by an issuer that has received a short-term rating from a designated NRSRO with respect to a class of debt obligations (or any debt obligation within that class) that is comparable in priority and security with the security; or
(ii) The security is subject to a guarantee that has received a short-term rating from a designated NRSRO, or a guarantee issued by a guarantor that has received a short-term rating from a designated NRSRO with respect to a class of debt obligations (or any debt obligation within that class) that is comparable in priority and security with the guarantee; but
(iii) A security is not a rated security if it is subject to an external credit support agreement (including an arrangement by which the security has become a refunded security) that was not in effect when the security was assigned its rating, unless the security has received a short-term rating reflecting the existence of the credit support agreement as provided in paragraph (a)(20)(i) of this section, or the credit support agreement with respect to the security has received a short-term rating as provided in paragraph (a)(20)(ii) of this section.
(21)
(22)
(i) Any two designated NRSROs that have issued a rating with respect to a security or class of debt obligations of an issuer; or
(ii) If only one designated NRSRO has issued a rating with respect to such security or class of debt obligations of an issuer at the time the fund acquires the security, that designated NRSRO.
(23)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(i) Cash;
(ii) Direct obligations of the U.S. Government;
(iii) Government securities that are issued by a person controlled or supervised by and acting as an instrumentality of the government of the United States pursuant to authority granted by the Congress of the United States that:
(A) Are issued at a discount to the principal amount to be repaid at maturity without provision for the payment of interest; and
(B) Have a remaining maturity date of 60 days or less;
(iv) Securities that will mature, as determined without reference to the exceptions in paragraph (i) of this section regarding interest rate readjustments, or are subject to a demand feature that is exercisable and payable, within five business days; or
(v) Amounts receivable and due unconditionally within five business days on pending sales of portfolio securities.
(b) Holding out and use of names and titles.
(1) It shall be an untrue statement of material fact within the meaning of section 34(b) of the Act (15 U.S.C. 80a–33(b)) for a registered investment company, in any registration statement, application, report, account, record, or other document filed or transmitted pursuant to the Act, including any advertisement, pamphlet, circular, form letter, or other sales literature addressed to or intended for distribution to prospective investors that is required to be filed with the Commission by section 24(b) of the Act (15 U.S.C. 80a–24(b)), to hold itself out to investors as a money market fund or the equivalent of a money market fund, unless such registered investment company complies with this section.
(2) It shall constitute the use of a materially deceptive or misleading name or title within the meaning of section 35(d) of the Act (15 U.S.C. 80a–34(d)) for a registered investment company to adopt the term “money market” as part of its name or title or the name or title of any redeemable securities of which it is the issuer, or to adopt a name that suggests that it is a money market fund or the equivalent of a money market fund, unless such registered investment company complies with this section.
(3) For purposes of paragraph (b)(2) of this section, a name that suggests that a registered investment company is a money market fund or the equivalent thereof includes one that uses such terms as “cash,” “liquid,” “money,” “ready assets” or similar terms.
(c)
(1)
(2)
(i)
(A)
(B)
(ii)
(iii)
(iv)
(d)
(1)
(i) Acquire any instrument with a remaining maturity of greater than 397 calendar days;
(ii) Maintain a dollar-weighted average portfolio maturity (“WAM”) that exceeds 60 calendar days; or
(iii) Maintain a dollar-weighted average portfolio maturity that exceeds 120 calendar days, determined without reference to the exceptions in paragraph (i) of this section regarding interest rate readjustments (“WAL”).
(2)
(i)
(ii)
(iii)
(iv)
(A) The conditional demand feature is an eligible security or first tier security, as the case may be;
(B) At the time of the acquisition of the underlying security, the money market fund's board of directors has determined that there is minimal risk that the circumstances that would result
(C) The underlying security or any guarantee of such security (or the debt securities of the issuer of the underlying security or guarantee that are comparable in priority and security with the underlying security or guarantee) has received either a short-term rating or a long-term rating, as the case may be, from the requisite NRSROs within the NRSROs' two highest short-term or long-term rating categories (within which there may be sub-categories or gradations indicating relative standing) or, if unrated, is determined to be of comparable quality by the money market fund's board of directors to a security that has received a rating from the requisite NRSROs within the NRSROs' two highest short-term or long-term rating categories, as the case may be.
(3)
(i)
(A)
(B)
(C)
(ii)
(A)
(B)
(C)
(D)
(
(
(E)
(F)
(iii)
(A)
(B)
(iv)
(A)
(B)
(v)
(4)
(i)
(ii)
(iii)
(e)
(f)
(1)
(i)
(A) A portfolio security of a money market fund ceases to be a first tier security (either because it no longer has the highest rating from the requisite NRSROs or, in the case of an unrated security, the board of directors of the money market fund determines that it is no longer of comparable quality to a first tier security); and
(B) The money market fund's investment adviser (or any person to whom the fund's board of directors has delegated portfolio management responsibilities) becomes aware that any unrated security or second tier security held by the money market fund has, since the security was acquired by the fund, been given a rating by a designated NRSRO below the designated NRSRO's second highest short-term rating category.
(ii)
(iii)
(2)
(i) The default with respect to a portfolio security (other than an immaterial default unrelated to the financial condition of the issuer);
(ii) A portfolio security ceases to be an eligible security;
(iii) A portfolio security has been determined to no longer present minimal credit risks; or
(iv) An event of insolvency occurs with respect to the issuer of a portfolio security or the provider of any demand feature or guarantee.
(3)
(4)
(i) In the case of an instrument subject to a demand feature, the demand feature has been exercised and the fund has recovered either the principal amount or the amortized cost of the instrument, plus accrued interest;
(ii) The provider of the guarantee is continuing, without protest, to make payments as due on the instrument; or
(iii) The provider of a guarantee with respect to an asset-backed security pursuant to paragraph (a)(16)(ii) of this section is continuing, without protest, to provide credit, liquidity or other support as necessary to permit the asset-backed security to make payments as due.
(g)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(i) The periodic testing, at such intervals as the board of directors determines appropriate and reasonable in light of current market conditions, of the money market fund's ability to maintain the stable price per share established by the board of directors for the purpose of distribution, redemption, and repurchase, and to have invested at least fifteen percent of its assets in weekly liquid assets, based upon specified hypothetical events that include, but are not limited to:
(A) Increases in the general level of short-term interest rates;
(B) An increase in shareholder redemptions, together with an assessment of how the fund would meet the redemptions, taking into consideration assumptions regarding the relative liquidity of the fund's portfolio securities, the prices for which portfolio securities could be sold, the fund's historical experience meeting redemption requests, and any other relevant factors;
(C) A downgrade or default of portfolio securities, and the effects these events could have on other securities held by the fund;
(D) The widening or narrowing of spreads among the indexes to which interest rates of portfolio securities are tied;
(E) Other movements in interest rates that may affect the fund's portfolio securities, such as parallel and non-parallel shifts in the yield curve; and
(F) Combinations of these and any other events the adviser deems relevant, assuming a positive correlation of risk factors (
(ii) A report on the results of such testing to be provided to the board of directors at its next regularly scheduled meeting (or sooner, if appropriate in light of the results), which report must include:
(A) The date(s) on which the testing was performed and the magnitude of each hypothetical event that would cause the fund's price per share for purposes of distribution, redemption and repurchase to deviate from the stable price per share established by the board of directors, or cause the fund to have invested less than fifteen percent of its assets in weekly liquid assets; and
(B) An assessment by the fund's adviser of the fund's ability to withstand the events (and concurrent occurrences of those events) that are reasonably
(h)
(1)
(2)
(3)
(4)
(5)
(i) The identities of the ten percent obligors (as that term is used in paragraph (d)(3)(ii)(D) of this section), the percentage of the qualifying assets constituted by the securities of each ten percent obligor and the percentage of the fund's total assets that are invested in securities of each ten percent obligor; and
(ii) Any determination that an asset-backed security will not have, or is unlikely to have, ten percent obligors deemed to be issuers of all or a portion of that asset-backed security for purposes of paragraph (d)(3)(ii)(D) of this section.
(6)
(7)
(8)
(9)
(10)
(i) For a period of not less than six months, beginning no later than the fifth business day of the month, a schedule of its investments, as of the last business day or subsequent calendar day of the preceding month, that includes the following information:
(A) With respect to the money market fund and each class of redeemable shares thereof:
(B) With respect to each security held by the money market fund:
(ii) A schedule, chart, graph, or other depiction, which must be updated each business day as of the end of the preceding business day, showing, as of the end of each business day during the preceding six months:
(A) The percentage of the money market fund's total assets invested in daily liquid assets;
(B) The percentage of the money market fund's total assets invested in weekly liquid assets; and
(C) The money market fund's net inflows or outflows.
(iii) A schedule, chart, graph, or other depiction showing the money market fund's net asset value per share (which the fund must calculate based on current market factors before applying the penny-rounding method), rounded to the fourth decimal place in the case
(iv) A link to a Web site of the Securities and Exchange Commission where a user may obtain the most recent 12 months of publicly available information filed by the money market fund pursuant to § 270.30b1–7.
(v) For a period of not less than one year, beginning no later than the first business day following the occurrence of any event specified in Parts C, E, F, or G of Form N–CR (§ 274.222 of this chapter), the same information that the money market fund is required to report to the Commission on Part C, Part E (Items E.1 and E.2), Part F (Items F.1 and F.2), or Part G of Form N–CR concerning such event.
(11)
(i)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(j)
(1)
(2)
The revisions and additions read as follows.
(a) * * *
(1) The fund, at the end of a business day, has invested less than fifteen percent of its total assets in weekly liquid assets or, in the case of a fund relying on the exemptions provided by
(d)
(a) * * *
(1) The fund, at the end of a business day, has invested less than fifteen percent of its total assets in weekly liquid assets, or the fund's price per share as computed for the purpose of distribution, redemption and repurchase, rounded to the nearest one percent, has deviated from the stable price established by the board of directors or the fund's board of directors, including a majority of directors who are not interested persons of the fund, determines that such a deviation is likely to occur;
(d)
Every registered open-end management investment company, or series thereof, that is regulated as a money market fund under § 270.2a–7 must file with the Commission a monthly report of portfolio holdings on Form N–MFP (§ 274.201 of this chapter), current as of the last business day or any subsequent calendar day of the preceding month, no later than the fifth business day of each month.
Every registered open-end management investment company, or series thereof, that is regulated as a money market fund under § 270.2a–7, that experiences any of the events specified on Form N–CR (17 CFR 274.222 of this chapter), must file with the Commission a current report on Form N–CR within the period specified in that form.
15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z–2, 77z–3, 77sss, 78c, 78
15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78
The additions and revisions read as follows:
The text of Form N–1A does not, and this amendment will not, appear in the Code of Federal Regulations.
(b) * * *
(ii)(A) If the Fund is a Money Market Fund that is not subject to the exemption provisions of § 270.2a–7(c)(2) or § 270.2a–7(c)(3), include the following bulleted statement:
• You could lose money by investing in the Fund.
• You should not invest in the Fund if you require your investment to maintain a stable value.
• The value of shares of the Fund will increase and decrease as a result of changes in the value of the securities in which the Fund invests. The value of the securities in which the Fund invests may in turn be affected by many factors, including interest rate changes and defaults or changes in the credit quality of a security's issuer.
• An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
• The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
(B) If the Fund is a Money Market Fund that is subject to the exemption provisions of § 270.2a–7(c)(2) or § 270.2a–7(c)(3), include the following bulleted statement:
• You could lose money by investing in the Fund.
• The Fund seeks to preserve the value of your investment at $1.00 per share, but cannot guarantee such stability.
• An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
• The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
(g)
1. The term “financial support” includes, for example, any capital contribution, purchase of a security from the Fund in reliance on § 270.17a–9, purchase of any defaulted or devalued security at par, purchase of Fund shares, execution of letter of credit or letter of indemnity, capital support agreement (whether or not the Fund ultimately received support), or performance guarantee, or any other similar action to increase the value of the Fund's portfolio or otherwise support the Fund during times of stress.
2. If during the last 10 years, the Fund has participated in one or more mergers with another investment company (a “merging investment company”), provide the information required by Item 16(g) with respect to any merging investment company as well as with respect to the Fund; for purposes of this instruction, the term “merger” means a merger, consolidation, or purchase or sale of substantially all of the assets between the Fund and a merging investment company.
(b) “Redemption Fee” includes a fee charged for any redemption of the Fund's shares, but does not include a deferred sales charge (load) imposed upon redemption, and, if the Fund is a Money Market Fund, does not include a liquidity fee imposed upon the sale of Fund shares in accordance with rule 2a–7(c)(2).
(b) * * *
(ii)(A) If the Fund is a Money Market Fund (including any Money Market Fund that is subject to the exemption provisions of rule 2a–7(c)(2)(iii), but that has chosen not to rely on the rule 2a–7(c)(2)(iii) exemption provisions), include the following bulleted statement:
• You could lose money by investing in the Fund.
• The Fund seeks to preserve the value of your investment at $1.00 per share, but cannot guarantee such stability.
• The Fund may impose a fee upon sale of your shares when the Fund is under considerable stress.
• The Fund may temporarily suspend your ability to sell shares of the Fund when the Fund is under considerable stress.
• An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
• The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
(B) If the Fund is a Money Market Fund that is subject to the exemption provisions of rule 2a–7(c)(2)(iii) and that has chosen to rely on the rule 2a–7(c)(2)(iii) exemption provisions, include the following bulleted statement:
• You could lose money by investing in the Fund.
• The Fund seeks to preserve the value of your investment at $1.00 per share, but cannot guarantee such stability.
• An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
• The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
(g)
(1) During the last 10 years, any occasion on which the Fund has invested less than fifteen percent of its total assets in weekly liquid assets (as provided in rule 2a–7(c)(2)), and with respect to each such occasion, whether the Fund's board of directors determined to impose a liquidity fee pursuant to rule 2a–7(c)(2)(i) and/or temporarily suspend the Fund's redemptions pursuant to rule 2a–7(c)(2)(ii).
(2) During the last 10 years, any occasion on which an affiliated person, promoter, or principal underwriter of the Fund, or an affiliated person of such a person, provided any form of financial support to the Fund, including a description of the nature of support, person providing support, brief description of the relationship between the person providing support and the Fund, brief description of the reason for support, date support provided, amount of support, security supported (if applicable), value (calculated using available market quotations or an appropriate substitute that reflects current market conditions) of security supported on date support was initiated (if applicable), term of support, and a brief description of any contractual restrictions relating to support.
1. The term “financial support” includes, for example, any capital contribution, purchase of a security from the Fund in reliance on § 270.17a–9, purchase of any defaulted or devalued security at par, purchase of Fund shares, execution of letter of credit or letter of indemnity, capital support agreement (whether or not the Fund ultimately received support), or performance guarantee, or any other similar action to increase the value of the Fund's portfolio or otherwise support the Fund during times of stress.
2. If during the last 10 years, the Fund has participated in one or more mergers with another investment company (a “merging investment company”), provide the information required by Item 16(g)(2) with respect to any merging investment company as well as with respect to the Fund; for purposes of this instruction, the term “merger” means a merger, consolidation, or purchase or sale of substantially all of the assets between the Fund and a merging investment company.
The text of Form N–MFP does not, and this amendment will not, appear in the Code of Federal Regulations.
Form N–MFP is to be used by registered open-end management investment companies, or series thereof, that are regulated as money market funds pursuant to rule 2a–7 under the Investment Company Act of 1940 (“Act”) (17 CFR 270.2a–7) (“money market funds”), to file reports with the Commission pursuant to rule 30b1–7 under the Act (17 CFR 270.30b1–7). The Commission may use the information provided on Form N–MFP in its regulatory, disclosure review, inspection, and policymaking roles.
Form N–MFP is the public reporting form that is to be used for monthly reports of money market funds required by section 30(b) of the Act and rule 30b1–7 under the Act (17 CFR 270.30b1–7). A money market fund must report information about the fund and its portfolio holdings as of the last business day or any subsequent calendar day of the preceding month. The Form N–MFP must be filed with the Commission no later than the fifth business day of each month, but may be filed any time beginning on the first business day of the month. Each money market fund, or series of a money market fund, is required to file a separate form. If the money market fund does not have any classes, the fund must provide the information required by Part B for the series.
A money market fund may file an amendment to a previously filed Form N–MFP at any time, including an amendment to correct a mistake or error in a previously filed form. A fund that files an amendment to a previously filed form must provide information in response to all items of Form N–MFP, regardless of why the amendment is filed.
The General Rules and Regulations under the Act contain certain general requirements that are applicable to reporting on any form under the Act. These general requirements should be carefully read and observed in the preparation and filing of reports on this form, except that any provision in the form or in these instructions shall be controlling.
A money market fund must file Form N–MFP in accordance with rule 232.13 of Regulation S–T. Form N–MFP must be filed electronically using the Commission's EDGAR system.
A registrant is not required to respond to the collection of information contained in Form N–MFP unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. 3507.
References to sections and rules in this Form N–MFP are to the Investment Company Act of 1940 [15 U.S.C. 80a] (the “Investment Company Act”), unless otherwise indicated. Terms used in this Form N–MFP have the same meaning as in the Investment Company Act or related rules, unless otherwise indicated.
As used in this Form N–MFP, the terms set out below have the following meanings:
“Cash” means demand deposits in depository institutions and cash holdings in custodial accounts.
“Class” means a class of shares issued by a Multiple Class Fund that represents interests in the same portfolio of securities under rule 18f–3 [17 CFR 270.18f–3] or under an order exempting the Multiple Class Fund from sections 18(f), 18(g), and 18(i) [15 U.S.C. 80a–18(f), 18(g), and 18(i)].
“Fund” means the Registrant or a separate Series of the Registrant. When an item of Form N–MFP specifically applies to a Registrant or a Series, those terms will be used.
“LEI” means, with respect to any company, the “legal entity identifier” assigned by or on behalf of an internationally recognized standards setting body and required for reporting purposes by the U.S. Department of the Treasury's Office of Financial Research or a financial regulator. In the case of a financial institution, if a “legal entity identifier” has not been assigned, then LEI means the RSSD ID assigned by the National Information Center of the Board of Governors of the Federal Reserve System, if any.
“Master-Feeder Fund” means a two-tiered arrangement in which one or more Funds (or registered or unregistered pooled investment
“Money Market Fund” means a Fund that holds itself out as a money market fund and meets the requirements of rule 2a–7 [17 CFR 270.2a–7].
“Securities Act” means the Securities Act of 1933 [15 U.S.C. 77a–aa].
“Series” means shares offered by a Registrant that represent undivided interests in a portfolio of investments and that are preferred over all other series of shares for assets specifically allocated to that series in accordance with rule 18f–2(a) [17 CFR 270.18f–2(a)].
“Value” has the meaning defined in section 2(a)(41) of the Act (15 U.S.C. 80a–2(a)(41)).
For each Class of the Series (regardless of the number of shares outstanding in the Class), disclose the following:
U.S. Treasury Debt; U.S. Government Agency Debt; Non U.S. Sovereign Debt; Non U.S. Sub-Sovereign Debt; Variable Rate Demand Note; Other Municipal Debt; Financial Company Commercial Paper; Asset-Backed Commercial Paper; Other Asset-Backed Security; Non-Financial Company Commercial Paper; Collateralized Commercial Paper; Certificate of Deposit (including Time Deposits and Euro Time Deposits); Structured Investment Vehicle Note; Equity; Corporate Bond; Exchange Traded Fund; Trust Receipt (other than for U.S. Treasuries); Derivative; Other Instrument. If Other Instrument, include a brief description.
If multiple securities of an issuer are subject to the repurchase agreement, the securities may be aggregated, in which case disclose: (a) the total principal amount and value and (b) the range of maturity dates and interest rates.
For any security sold during the reporting period, disclose the following:
Pursuant to the requirements of the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
This form shall be used by registered investment companies that are regulated as money market funds under § 270.2a–7 of this chapter to file current reports pursuant to § 270.30b1–8 of this chapter within the time periods specified in the form.
The text of Form N–CR will not appear in the Code of Federal Regulations.
Form N–CR is to be used by registered open-end management investment companies, or series thereof, that are regulated as money market funds pursuant to rule 2a–7 under the Investment Company Act of 1940 (“Investment Company Act”) (17 CFR 270.2a–7) (“money market funds”), to file current reports with the Commission pursuant to rule 30b1–8 under the Investment Company Act (17 CFR 270.30b1–8). The Commission may use the information provided on Form
Form N–CR is the public reporting form that is to be used for current reports of money market funds required by section 30(b) of the Act and rule 30b1–8 under the Act. A money market fund must file a report on Form N–CR upon the occurrence of any one or more of the events specified in Parts B–D of this form. Unless otherwise specified, a report is to be filed within one business day after occurrence of the event, and will be made public immediately upon filing. If the event occurs on a Saturday, Sunday, or holiday on which the Commission is not open for business, then the report is to be filed on the first business day thereafter.
The General Rules and Regulations under the Act contain certain general requirements that are applicable to reporting on any form under the Act. These general requirements should be carefully read and observed in the preparation and filing of reports on this form, except that any provision in the form or in these instructions shall be controlling.
Upon the occurrence of any one or more of the events specified in Parts B–D of Form N–CR, a money market fund must file a report on Form N–CR that includes information in response to each of the items in Part A of the form, as well as each of the items in the applicable Parts B–D of the form.
A money market fund must file Form N–CR in accordance with rule 232.13 of Regulation S–T. Form N–CR must be filed electronically using the Commission's EDGAR system.
A registrant is not required to respond to the collection of information contained in Form N–CR unless the form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. 3507.
References to sections and rules in this Form N–CR are to the Investment Company Act (15 U.S.C. 80a), unless otherwise indicated. Terms used in this Form N–CR have the same meaning as in the Investment Company Act or rule 2a–7 under the Investment Company Act, unless otherwise indicated. In addition, as used in this Form N–CR, the term “Fund” means the registrant or a separate series of the registrant.
If the issuer of one or more of the Fund's portfolio securities, or the issuer of a Demand Feature or Guarantee to which one of the Fund's portfolio securities is subject, and on which the Fund is relying to determine the quality, maturity, or liquidity of a portfolio security, experiences a default or Event of Insolvency (other than an immaterial default unrelated to the financial condition of the issuer), and the portfolio security or securities (or the securities subject to the Demand Feature or Guarantee) accounted for at least
If an affiliated person, promoter, or principal underwriter of the Fund, or an affiliated person of such a person, provides any form of financial support to the Fund (including, for example, any capital contribution, purchase of a security from the Fund in reliance on § 270.17a–9, purchase of any defaulted or devalued security at par, purchase of Fund shares, execution of letter of credit or letter of indemnity, capital support agreement (whether or not the Fund ultimately received support), or performance guarantee, or any other similar action to increase the value of the Fund's portfolio or otherwise support the Fund during times of stress), disclose the following information:
If a Fund is subject to the exemption provisions of rule 2a–7(c)(2) or rule 2a–7(c)(3), and its current net asset value per share (rounded to the fourth decimal place in the case of a fund with a $1.00 share price, or an equivalent level of accuracy for funds with a different share price) deviates downward from its intended stable price per share by more than
Pursuant to the requirements of the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
This form shall be used by registered investment companies that are regulated as money market funds under § 270.2a–7 of this chapter to file current reports pursuant to § 270.30b1–8 of this chapter within the time periods specified in the form.
Form N–CR is to be used by registered open-end management investment companies, or series thereof, that are regulated as money market funds pursuant to rule 2a–7 under the Investment Company Act of 1940 (“Investment Company Act”) (17 CFR 270.2a–7) (“money market funds”), to file current reports with the Commission pursuant to rule 30b1–8 under the Investment Company Act (17 CFR 270.30b1–8). The Commission may use the information provided on Form N–CR in its regulatory, disclosure review, inspection, and policymaking roles.
Form N–CR is the public reporting form that is to be used for current reports of money market funds required by section 30(b) of the Act and rule 30b1–8 under the Act. A money market fund must file a report on Form N–CR upon the occurrence of any one or more of the events specified in Parts B–G of this form. Unless otherwise specified, a report is to be filed within one business day after occurrence of the event, and will be made public immediately upon filing. If the event occurs on a Saturday, Sunday, or holiday on which the Commission is not open for business, then the report is to be filed on the first business day thereafter.
The General Rules and Regulations under the Act contain certain general requirements that are applicable to reporting on any form under the Act. These general requirements should be carefully read and observed in the preparation and filing of reports on this form, except that any provision in the form or in these instructions shall be controlling.
Upon the occurrence of any one or more of the events specified in Parts B–G of Form N–CR, a money market fund must file a report on Form N–CR that includes information in response to each of the items in Part A of the form, as well as each of the items in the applicable Parts B–G of the form.
A money market fund must file Form N–CR in accordance with rule 232.13 of Regulation S–T. Form N–CR must be filed electronically using the Commission's EDGAR system.
A registrant is not required to respond to the collection of information contained in Form N–CR unless the form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. 3507.
References to sections and rules in this Form N–CR are to the Investment Company Act (15 U.S.C 80a), unless otherwise indicated. Terms used in this Form N–CR have the same meaning as in the Investment Company Act or rule 2a–7 under the Investment Company Act, unless otherwise indicated. In addition, as used in this Form N–CR, the term “Fund” means the registrant or a separate series of the registrant.
If the issuer of one or more of the Fund's portfolio securities, or the issuer of a Demand Feature or Guarantee to which one of the Fund's portfolio securities is subject, and on which the Fund is relying to determine the quality, maturity, or liquidity of a portfolio security, experiences a default or Event of Insolvency (other than an immaterial default unrelated to the financial condition of the issuer), and the portfolio security or securities (or the securities subject to the Demand Feature or Guarantee) accounted for at least
If an affiliated person, promoter, or principal underwriter of the Fund, or an affiliated person of such a person, provides any form of financial support to the Fund (including, for example, any capital contribution, purchase of a security from the Fund in reliance on § 270.17a–9, purchase of any defaulted or devalued security at par, purchase of Fund shares, execution of letter of credit or letter of indemnity, capital support agreement (whether or not the Fund ultimately received support), or performance guarantee, or any other similar action to increase the value of the Fund's portfolio or otherwise support the Fund during times of stress), disclose the following information:
If a Fund's current net asset value per share (rounded to the fourth decimal place in the case of a fund with a $1.00 share price, or an equivalent level of accuracy for funds with a different share price) deviates downward from its intended stable price per share by more than
If, at the end of a business day, a Fund (except any Fund that is subject to the exemption provisions of rule 2a–7(c)(2)(iii) and that has chosen to rely on the rule 2a–7(c)(2)(iii) exemption provisions) has invested less than fifteen percent of its Total Assets in weekly liquid assets (as provided in rule 2a–7(c)(2)), disclose the following information:
If a Fund (except any Fund that is subject to the exemption provisions of rule 2a–7(c)(2)(iii) and that has chosen to rely on the rule 2a–7(c)(2)(iii) exemption provisions) that has invested less than fifteen percent of its Total Assets in weekly liquid assets (as provided in rule 2a–7(c)(2)) suspends the Fund's redemptions pursuant to rule 2a–7(c)(2)(ii), disclose the following information:
If a Fund (except any Fund that is subject to the exemption provisions of rule 2a–7(c)(2)(iii) and that has chosen to rely on the rule 2a–7(c)(2)(iii) exemption provisions) that has imposed a liquidity fee and/or suspended the Fund's redemptions pursuant to rule 2a–7(c)(2) determines to remove such fee and/or resume fund redemptions, disclose the following, as applicable:
Pursuant to the requirements of the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
The Investment Advisers Act of 1940, 15 U.S.C. 80b–1,
The additions and revisions read as follows:
The text of Form PF does not, and this amendment will not, appear in the Code of Federal Regulations.
By the Commission.
Centers for Medicare & Medicaid Services (CMS), HHS.
Proposed rule.
This proposed rule sets forth financial integrity and oversight standards with respect to Affordable Insurance Exchanges; Qualified Health Plan (QHP) issuers in Federally-facilitated Exchanges (FFEs); and States with regard to the operation of risk adjustment and reinsurance programs. It also proposes additional standards with respect to agents and brokers. These standards, which include financial integrity provisions and protections against fraud and abuse, are consistent with Title I of the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010, referred to collectively as the Affordable Care Act.
To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on July 19, 2013.
In commenting, please refer to file code CMS–9957–P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one of the ways listed):
1.
2.
Please allow sufficient time for mailed comments to be received before the close of the comment period.
3.
4.
(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)
If you intend to deliver your comments to the Baltimore address, call telephone number (410) 786–7195 in advance to schedule your arrival with one of our staff members. Comments erroneously mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.
For information on viewing public comments, see the beginning of the
Leigha Basini at (301) 492–4307, or Noah Isserman at (301) 492–4401 for general information. Ariel Novick at (301) 492–4309, for matters related to cost-sharing reductions and advance payments of the premium tax credit.
Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1–800–743–3951.
This
Because of the many organizations and terms to which we refer by acronym in this proposed rule, we are listing these acronyms and their corresponding terms in alphabetical order below:
Starting on January 1, 2014, qualified individuals and qualified employers will be able to be covered by private health insurance through competitive marketplaces called Affordable Insurance Exchanges, or “Exchanges” (also called Health Insurance Marketplaces). This proposed rule sets forth oversight and financial integrity standards with respect to Exchanges, QHP issuers in Federally-facilitated Exchanges (FFEs), and States with regard to the operation of risk adjustment and reinsurance programs. It also proposes additional standards for special enrollment periods, survey vendors that may conduct enrollee satisfaction surveys on behalf of QHP issuers in Exchanges, issuer participation in an FFE, and States' operation of a SHOP. Finally, it proposes additional standards for agents and brokers, geographic rating areas, and guaranteed availability and renewability. Nothing in these proposed regulations would limit the authority of the Office of the Inspector General of the U.S. Department of Health and Human Services (OIG) as prescribed by the Inspector General Act of 1978 or any other law.
Although many of the proposed provisions in this proposed rule would become effective by 2014, we do not believe that affected parties will have difficulty complying with the provisions by their effective dates, because most of the proposed standards are based on existing standards currently in effect in the private market, were previously proposed through the Blueprint process, discussed in agency-issued sub-regulatory guidance, or were discussed in the preambles to the Exchange Establishment Rule,
The Patient Protection and Affordable Care Act (Pub. L. 111–148) was enacted on March 23, 2010. The Health Care and Education Reconciliation Act of 2010 (Pub. L. 111–152), which amended and revised several provisions of the Patient Protection and Affordable Care Act, was enacted on March 30, 2010. In this proposed rule, we refer to the two statutes collectively as the “Affordable Care Act.” Subtitles A and C of Title I of the Affordable Care Act reorganized, amended, and added to the provisions of part A of Title XXVII of the Public Health Service Act (PHS Act) relating to health insurance issuers in the group and individual markets and to group health plans that are non-Federal governmental plans. As relevant here, these PHS Act provisions include section 2701 (fair health insurance premiums), section 2702 (guaranteed availability of coverage), and section 2703 (guaranteed renewability of coverage).
Starting on October 1, 2013 for coverage starting as soon as January 1, 2014, qualified individuals and qualified employers will be able to purchase QHPs—private health insurance that has been certified as meeting certain standards—through competitive marketplaces called Exchanges or Health Insurance
In this proposed rule, we encourage State flexibility within the boundaries of the law. Sections 1311(b) and 1321(b) of the Affordable Care Act provide that each State has the opportunity to establish an Exchange. Section 1311(b)(1) gives each State the opportunity to establish an Exchange that both facilitates the purchase of QHPs and provides for the establishment of a Small Business Health Options Program (SHOP) that will help qualified employers enroll their employees in QHPs. Section 1311(b)(2) contemplates the separate operation of the individual market Exchange and the SHOP under different governance and administrative structures, because it permits the individual market Exchange and SHOP to be merged only if States have adequate resources to assist both populations (individual and small employers) as a merged entity.
Section 1311(c)(4) of the Affordable Care Act directs the Secretary to establish an enrollee satisfaction survey system that would evaluate the level of enrollee satisfaction of members in each QHP offered through an Exchange with more than 500 enrollees in the previous year.
Section 1321(a) of the Affordable Care Act provides general authority for the Secretary to establish standards and regulations to implement the statutory requirements related to Exchanges, QHPs, and other components of Title I of the Affordable Care Act.
Section 1321(c)(1) requires the Secretary of Health and Human Services (referred to throughout this rule as the Secretary) to establish and operate an FFE within States that either: do not elect to establish an Exchange; or, as determined by the Secretary, will not have any required Exchange operational by January 1, 2014.
Section 1321(c)(2) of the Affordable Care Act authorizes the Secretary to enforce the Exchange standards using civil money penalties (CMPs) on the same basis as detailed in section 2723(b) of the PHS Act.
Section 1311(d)(5)(A) of the Affordable Care Act provides that States, when establishing Exchanges, must ensure that such Exchanges are self-sustaining beginning in 2015, including allowing Exchanges to charge assessments or user fees to participating issuers to generate funding to support their operations. Section 1311(d)(5)(B) contains a prohibition on the wasteful use of funds. When operating an FFE under section 1321(c)(1) of the Affordable Care Act, HHS has the authority under sections 1321(c)(1) and 1311(d)(5)(A) to collect and spend such user fees. In addition, 31 U.S.C. 9701 permits a Federal agency to establish a charge for a service provided by the agency. Office of Management and Budget (OMB) Circular A–25 Revised establishes Federal policy regarding user fees and specifies that a user charge will be assessed against each identifiable recipient for special benefits derived from Federal activities beyond those received by the general public.
Section 1311(e)(1)(B) of the Affordable Care Act specifies that an Exchange may certify a health plan as a QHP if the Exchange determines that making available such a health plan through the Exchange is in the interests of qualified individuals and qualified employers in the State or States in which the Exchange operates.
Section 1312(c) of the Affordable Care Act directs a health insurance issuer to consider all enrollees in all health plans (other than grandfathered health plans) offered by such issuer to be members of a single risk pool for each of its individual and small group markets. Section 1312(c) of the Affordable Care Act gives States the option to merge the individual and small group markets within the State into a single risk pool.
Section 1312(e) of the Affordable Care Act directs the Secretary to establish procedures under which a State may permit agents and brokers to enroll qualified individuals and qualified employers in QHPs through an Exchange, and to assist individuals in applying for advance payments of the premium tax credit and cost-sharing reductions.
Section 1313 of the Affordable Care Act, combined with section 1321 of the Affordable Care Act, provides the Secretary with the authority to oversee the financial integrity, compliance with HHS standards, and efficient and non-discriminatory administration of State Exchange activities. Section 1313(a)(6)(A) of the Affordable Care Act specifies that payments made by, through, or in connection with an Exchange are subject to the False Claims Act (31 U.S.C. 3729, et seq.) if those payments include any Federal funds.
Section 1341 of the Affordable Care Act establishes a transitional reinsurance program which begins in 2014 and is designed to provide issuers with greater payment stability as insurance market reforms are implemented and Exchanges facilitate increased enrollment. Section 1342 of the Affordable Care Act establishes a temporary risk corridors program which permits the Federal government and QHPs to share in gains or losses resulting from inaccurate rate setting from 2014 through 2016. Section 1343 of the Affordable Care Act establishes a permanent risk adjustment program which is intended to provide increased payments to health insurance issuers that attract higher-risk populations, such as those with chronic conditions, and eliminate incentives for issuers to avoid higher-risk enrollees.
Section 1401 of the Affordable Care Act amended the Internal Revenue Code (26 U.S.C.) to add section 36B, allowing a refundable premium tax credit to help individuals and families afford health insurance coverage. Under sections 1401, 1411, and 1412 of the Affordable Care Act and 45 CFR part 155, subpart D, an Exchange will make a determination of advance payments of the premium tax credit for individuals who enroll in QHP coverage through an Exchange and seek financial assistance. Section 1402 of the Affordable Care Act provides for the reduction of cost sharing for certain individuals enrolled in a QHP through an Exchange, and section 1412 of the Affordable Care Act provides for the advance payment of these reductions to issuers.
Section 1411(g) of the Affordable Care Act specifies that information provided by an applicant or received from a Federal agency may be used only for the purpose of, and to the extent necessary in ensuring the efficient operation of the Exchange, including for the purpose of verifying the eligibility of an individual to enroll through an Exchange, to claim a premium tax credit or cost-sharing reduction, or for verifying the amount of the tax credit or reduction.
Section 1411(h) of the Affordable Care Act sets forth civil penalties that any person will be subject to if a person provides inaccurate information as part of the application or improperly uses or discloses information.
Unless otherwise specified, the provisions in this proposed rule related to the establishment of minimum functions of an Exchange are based on the general authority of Secretary under section 1321(a)(1) of the Affordable Care Act. Nothing in these proposed regulations would limit the authority of the OIG as prescribed by the Inspector General Act of 1978 or any other law.
HHS has consulted with stakeholders on a number of polices related to the operation of Exchanges, including the SHOP, and premium stabilization programs. HHS has held a number listening sessions with consumers, providers, employers, health plans, and State representatives to gather public input. HHS consulted with stakeholders through regular meetings with the National Association of Insurance Commissioners (NAIC), regular contact with States through the Exchange grant process, and meetings with tribal leaders and representatives, health insurance issuers, trade groups, consumer advocates, employers, and other interested parties. We considered all of the public input as we developed the policies in this proposed rule.
The regulations outlined in this proposed rule would be codified in 45 CFR parts 144, 147, 153, 155, and 156. Part 153 outlines select oversight provisions related to the premium stabilization programs, such as maintenance of records, and sanctions for failing to establish a dedicated distributed data environment. Part 155 outlines the standards relative to the establishment, operation, and minimum functionality of Exchanges, including oversight provisions related to State Exchanges, such as those pertaining to financial integrity and maintenance of records. It also includes standards for States' establishment of a SHOP and agents and brokers. Part 156 outlines the standards for health insurance issuers with respect to participation in an Exchange, including minimum certification standards for QHPs and select oversight provisions related to QHP issuers in FFEs, such as those pertaining to maintenance of records, compliance reviews, and sanctions. It also includes provisions related to quality, the handling of consumer cases by issuers, and issuer standards related to the SHOP.
We note that this rule includes standards for the SHOP to coordinate with the functions of the individual market Exchange for determining eligibility for insurance affordability programs in § 155.705(c). This provision was previously proposed in recent rulemaking and published in the
After review of comments, and in light of the proposal included in this rule permitting a State to operate only a SHOP including the changes to part 155 of this rule, we are reproposing § 155.705(c) in this rulemaking.
In § 144.102(c), we propose a technical correction to clarify whether coverage sold through associations is group or individual coverage under the PHS Act. The Market Reform Rule
In § 144.103, we propose to amend the definition of “policy year” with respect to non-grandfathered coverage in the individual market or in a market in which the State has merged the individual and small group risk pools, pursuant to section 1312(c)(3) of the Affordable Care Act and implementing regulations at 45 CFR 156.80(c). Under this proposal, “policy year” means a calendar year for which health insurance coverage provides coverage for health benefits. This is consistent with the proposed technical clarification to § 147.104 discussed below.
We also propose to amend the definitions of “small employer” and “large employer” in § 144.103, consistent with PHS Act section 2791(e), as amended by the Affordable Care Act. Section 2791(e)(2) generally defines a large employer as an employer with an average of at least 101 employees. Section 2791(e)(4) generally defines a small employer as an employer with an average at least one but not more than 100 employees. Pursuant to section 1304(b)(3) of the Affordable Care Act, each State has the option to limit small employers to having no more than 50 employees until 2016.
Although the Affordable Care Act amended the definitions of “small employer” and “large employer” for purposes of the PHS Act, ERISA and the Code continue to define a small employer as one that has 50 or fewer employees.
Section 2701 of the PHS Act, as added by the Affordable Care Act, and implementing regulations at 45 CFR 147.102, direct a health insurance issuer offering non-grandfathered health insurance coverage in the individual and small group markets, beginning with plan or policy years starting in 2014, to limit any variation in premium rates with respect to a particular plan or coverage to family size, age, tobacco use, and geographic rating area. Under § 147.102(c), generally, issuers in the individual and small group markets must calculate premiums on a per-member basis by adding the rate of each covered family member or employees and their dependents to determine the total family or group premium, respectively.
HHS has received several inquiries since the issuance of the Market Reform Rule asking whether geographic rating in the small group market is based on employee or employer address. HHS has also received several inquiries asking which rating areas should be used for individual market coverage if family members live in multiple locations.
PHS Act section 2701(a)(4) and § 147.102(c) require any rating variation for age and tobacco use to be applied on a per-member basis, but do not impose the same requirement on rating for geography. Accordingly, consistent with guidance released on April 26, 2013 describing our intended clarification,
Additionally, to clarify the connection between the premium rating requirements of PHS Act section 2701 and the single risk pool requirement of section 1312(c) of the Affordable Care Act, we propose in § 147.102(a) to add a cross-reference to the single risk pool standard codified in 45 CFR 156.80. Because of this connection, HHS considers both provisions to be subject to the general enforcement authority under PHS Act section 2723.
Section 2702 of the PHS Act, as amended by the Affordable Care Act, generally directs a health insurance issuer that offers health insurance coverage in the individual or “group market” in a State to accept every individual or employer in the State that applies for such coverage. Section 2703 of the PHS Act, as amended by the Affordable Care Act, generally requires an issuer in the individual or “group” market to renew or continue in force coverage at the option of the plan sponsor or individual, as applicable. Both of these statutes and their implementing regulations, codified at 45 CFR 147.104 and 147.106, do not distinguish between the different segments of the group market, meaning the large group and small group markets. We explained in the preamble of the Market Reform Rule (78 FR 13419), in the context of the market withdrawal exception to guaranteed renewability, that because the statutory language refers only to the “group market,” the regulations implement the statute without segmenting the group market.
After further review and consideration of the statutory provisions, we are proposing to clarify that the guaranteed availability and renewability requirements apply within the applicable market segment (the individual, small group, or large group market). This clarification is consistent with the information we provided in a document titled, “Frequently Asked Questions on Health Insurance Marketplaces,” dated May 14, 2013.
Also, in § 147.104(b)(2), we propose a clarification that, as of January 1, 2015, all non-grandfathered coverage in the individual market or in a market in which the State has merged the individual and small group risk pools, pursuant to section 1312(c)(3) of the Affordable Care Act and implementing regulations at 45 CFR 156.80(c), must be offered on a calendar year basis. This simply clarifies the intent of the Market Reform Rule. It is essential that all non-grandfathered coverage in the individual and merged markets be on a calendar year basis as of January 1, 2015 to line up with coverage in the Exchanges and also to be consistent with the requirements of the single risk pool in § 156.80. For purposes of new enrollment effective on any date other than January 1, the first policy year following such enrollment may comprise a prorated policy year, ending on December 31.
In this part, we propose certain provisions related to program integrity for State-operated risk adjustment and reinsurance programs. Specifically, we propose an accounting requirement for State-operated reinsurance and risk adjustment programs, and requirements relating to summary reports and independent external audits for these programs. We also propose a provision restricting the use of reinsurance funds for administrative expenses, which we discussed in the preamble to the HHS Notice of Benefit and Payment Parameters for 2014
We intend to engage in further consultations with stakeholders, and to propose additional standards related to the oversight of the premium stabilization programs in future regulations and guidance, including standards governing data validation for risk adjustment when HHS operates that program on behalf of a State.
In this section, we propose an amendment to the definition of a “contributing entity.” The current definition states that “
Section 1341 of the Affordable Care Act provides for the establishment of a transitional reinsurance program in each State to help stabilize premiums for coverage in the individual market from 2014 through 2016. The reinsurance program is designed to alleviate the need to build into premiums the unknown costs of enrolling individuals with significant unmet medical needs. In subparts C and E of 45 CFR part 153, finalized on March 23, 2012 in the Premium Stabilization Rule (77 FR 17220), we established standards for the administration of the reinsurance program. Below, we propose certain provisions related to the oversight of State-operated reinsurance programs.
We propose to amend 45 CFR 153.240(c), a maintenance of records requirement applicable when a State establishes the reinsurance program, to be consistent with proposed § 153.310(c)(4), a maintenance of records requirement for State-operated risk adjustment programs, which is discussed below. We propose to amend § 153.240(c) such that if a State establishes a reinsurance program, the State would be directed to maintain documents and records relating to the reinsurance program, whether paper, electronic, or in other media, for each benefit year for at least 10 years, and make them available upon request from HHS, the OIG, the Comptroller General, or their designees, to any such entity. The documents and records must be sufficient to enable an evaluation of the State-operated reinsurance program's compliance with Federal standards. States would also be directed to ensure that their contractors, subcontractors, and agents similarly maintain and make relevant documents and records available upon request from HHS, the OIG, the Comptroller General, or their designees. We note that a State may satisfy this standard by archiving these documents and records and ensuring that they are accessible if needed in the event of an investigation, audit, or other review. We seek comment on this proposal.
HHS expects that States will operate the reinsurance program under section 1341 of the Affordable Care Act in an effective and efficient manner, and in accordance with the provisions of subpart C of 45 CFR part 153. We are therefore proposing, pursuant to our authority under sections 1321(a)(1) and 1341 of the Affordable Care Act, certain general oversight requirements for State-operated reinsurance programs. In § 153.260(a), we propose that a State establishing the reinsurance program would be directed to ensure that its applicable reinsurance entity keeps, for each benefit year, an accounting of the following: (1) All reinsurance funds received from HHS for reinsurance payments and for administrative expenses; (2) all claims for reinsurance payments received from issuers of reinsurance-eligible plans; (3) all reinsurance payments made to issuers of reinsurance-eligible plans; and (4) all administrative expenses incurred for the State's reinsurance program. This accounting must be kept in accordance with generally accepted accounting principles (GAAP), consistently applied. This accounting would enable HHS to ensure that the appropriate amount of reinsurance funds collected by the Federal government is spent for reinsurance payments and administrative expenses. We seek comment on this proposal.
In § 153.260(b), we propose that a State that establishes the reinsurance program would be directed to submit to HHS and make public a summary report on its reinsurance program operations for each benefit year, in the manner and timeframe specified by HHS. This report must include a summary of the accounting for the benefit year as set forth in proposed § 153.260(a). We note that, in the interest of transparency, HHS intends to publish periodic reports on its operation of the reinsurance program on States' behalf. We anticipate that these reports will not correspond entirely in format and substance to those required of States that operate the reinsurance program due to the fact that HHS is already subject to a number of auditing and program integrity requirements, including requirements relating to periodic reviews of improper payments of Federal funds under the Improper Payments Elimination and Recovery Act of 2010.
In § 153.260(c), we propose that a State that establishes the reinsurance program engage an independent qualified auditing entity to perform a
In paragraph (c)(1), we propose that the State provide to HHS the results of the independent external audit for each benefit year, and in paragraph (c)(3), we propose that the State identify to HHS any material weakness or significant deficiency identified in the audit (as these terms are defined in GAAS issued by the American Institute of Certified Public Accountants, and Government Auditing Standards issued by the Government Accountability Office (GAO)
To achieve the intended purposes of the reinsurance program, reinsurance contributions collected must be spent on reinsurance payments, payments to the U.S. Treasury, and on reasonable expenses to administer the reinsurance program. As stated in the 2014 Payment Notice, the total reinsurance contributions to be collected for Federal administrative expenses for operating reinsurance for the 2014 benefit year is $20.3 million, resulting in a national per capita contribution rate of $0.11 annually for HHS administrative expenses. The funds for administrative expenses will be collected by HHS from all contributing entities, and will be apportioned as follows: $0.055 of the total administrative expenses collected per capita will be allocated to administrative expenses incurred in the collection of contributions from contributing entities; and $0.055 of the total administrative expenses collected per capita will be allocated to expenses incurred for activities supporting the administration of payments to issuers of reinsurance-eligible plans.
The total amounts allocated towards administrative expenses for reinsurance payments will be allocated in proportion to the State-by-State total requests for reinsurance payments made under the national reinsurance payment parameters. Thus, if a State that operates reinsurance receives total requests for reinsurance payments under the national reinsurance payment parameters that represent 5 percent of the total requests received for all States, then the State would receive a disbursement of 5 percent of the reinsurance contributions allocated to expenses incurred to support administration of payments to reinsurance-eligible plans to support its administration of reinsurance payments in that State. Pursuant to proposed § 153.260(a), a State operating reinsurance would be directed to keep an accurate accounting of the reinsurance funds received from HHS for administrative expenses and all the administrative expenses incurred for the State-operated reinsurance program. If a State incurs fewer expenses in operating reinsurance for a benefit year than are allocated to it under the national reinsurance contribution rate, the State would be directed to carry over those funds for use in operating reinsurance in subsequent benefit years.
Section 1311(d)(5)(B) of the Affordable Care Act prohibits an Exchange from utilizing any funds intended for the administrative and operational expenses of the Exchange for staff retreats, promotional giveaways, excessive executive compensation, or promotion of Federal or State legislative and regulatory modifications. In § 153.265, we propose to extend these prohibitions to State-operated reinsurance programs so that a State establishing the reinsurance program would be directed to ensure that its applicable reinsurance entity does not use any funds for the support of operations of the reinsurance program, including any reinsurance contributions collected under the national contribution rate for administrative expenses, for any of the prohibited purposes stated in section 1311(d)(5)(B) of the Affordable Care Act. We seek comment on this proposal.
The risk adjustment program is a permanent program created by section 1343 of the Affordable Care Act that transfers funds from lower-risk, non-grandfathered plans to higher-risk, non-grandfathered plans in the individual and small group markets, inside and outside of the Exchanges. In subparts D and G of 45 CFR part 153, finalized March 23, 2012 (77 FR 17220), we established standards for the administration of the risk adjustment program. A State approved (or conditionally approved) by the Secretary to operate an Exchange may establish a risk adjustment program. Alternatively, a State may have HHS operate a risk adjustment program on its behalf. Pursuant to our authority under sections 1321(a)(1) and 1343 of the Affordable Care Act, we propose below certain provisions related to the oversight of State-operated risk adjustment programs.
In § 153.310(c)(4), we propose that a State operating a risk adjustment program would be directed to maintain documents and records relating to the risk adjustment program, whether paper, electronic, or in other media, for each benefit year for at least 10 years, and make them available upon request from HHS, the OIG, the Comptroller General, or their designees, to any such entity. The documents and records must be sufficient to enable the evaluation of a State-operated risk adjustment program's compliance with Federal standards. States would also be directed to ensure that their contractors, subcontractors, and agents maintain and make those documents and records available upon request from HHS, the OIG, the Comptroller General, or their designees. We note that a State may satisfy this standard by archiving these documents and records and ensuring that they are accessible if needed in the event of an investigation, audit, or other review. This provision is consistent with the requirements set forth in proposed § 153.240(c), which contains
In § 153.310(d)(3), we propose that, in addition to the requirements set forth in 45 CFR 153.310(d)(1) and (d)(2), to obtain recertification from HHS to operate risk adjustment for a third benefit year, a State would be directed to, in the first benefit year for which it operates risk adjustment, provide to HHS an interim report, in a manner specified by HHS, that includes a detailed summary of its risk adjustment activities in the first 10 months of the benefit year. We propose that this report would be due no later than December 31st of the first benefit year for which a State operates risk adjustment. The interim report is intended to provide HHS with the information needed to assess the State's compliance with the applicable Federal standards related to risk adjustment. We note that because the process for receiving certification to operate risk adjustment begins more than one year before the beginning of the applicable benefit year, the first benefit year for which an interim report based on the first year's operations could be used for certification purposes is the third benefit year. We intend to provide more information on the risk adjustment interim report in future guidance, and we seek comment on the content and format of this report.
We propose to amend 45 CFR 153.310(f) and re-designate it as § 153.310(d)(4). In § 153.310(d)(4), we propose that in order to obtain recertification from HHS to operate risk adjustment for each benefit year after the third benefit year for which it is certified, each State operating a risk adjustment program would be directed to submit to HHS and make public a detailed summary of risk adjustment program operations for the most recent benefit year for which risk adjustment operations have been completed, in the manner and timeframe specified by HHS. We propose in § 153.310(d)(4)(i) that this summary report include the results of a programmatic and financial audit for the benefit year of the State-operated risk adjustment program conducted by an independent qualified auditing entity in accordance with GAAS. As discussed above, this entity, which may be a government entity, must be licensed and in good standing in one or more States, and must be free from bias or the appearance of bias. In § 153.310(d)(4)(ii), we propose that the summary report would identify to HHS any material weakness or significant deficiency (as these terms are defined in GAAS issued by the American Institute of Certified Public Accountants, and Government Auditing Standards issued by the GAO
We seek comment on these proposals, including on the content and format of the summary reports.
To enable HHS to recertify States to operate risk adjustment pursuant to 45 CFR 153.310(d), HHS proposes in § 153.365 that a State operating a risk adjustment program keep an accounting of all receipts and expenditures related to risk adjustment payments and charges and the administration of risk adjustment-related functions and activities for each benefit year. This accounting would be kept in accordance with GAAP, consistently applied. This requirement parallels proposed § 153.260(a), which applies to the reinsurance program when operated by a State.
In the Payment Notice (78 FR 15430–34), we noted our intent to modify the risk adjustment payment transfer formula in order to accommodate community rated States that utilize family tiering rating factors. In non-community rated States, family policy premiums must be developed by summing the applicable rates of each individual covered under the policy, as required under 45 CFR 147.102(c)(1). In the case of families with more than three children in non-community rated States, only the applicable rates of the three oldest covered children under age 21 are counted towards the family policy premium rate (for example, for a family with four children under age 21, only the applicable individual rates of the three oldest children would count towards the family policy premium). These family rating requirements do not apply to community rated States that utilize family tiering rating factors. In community rated States, family tiering rating factors do not have to yield premiums that are equal to the sum of each policy member's applicable rate, nor do they have to be set in a way that only counts the rates of the oldest three children under age 21 within a family policy. For example, a community rated State could establish a family tiering rating factor of 1.0 for an adult policy, 1.8 for a policy covering one adult and one or more children, 2.0 for a policy covering two adults, and 2.8 for a policy covering two adults and one or more children.
In order to account for the differences in family rating practices between family tiering States and non-family tiering States, we are proposing two changes to the risk adjustment payment transfer formula that HHS will use when operating risk adjustment on behalf of a State. These changes would only apply to States that are using family tiering rating structures. In the 2014 Payment Notice, we stated that billable members exclude children who do not count towards family rates (that is, children who do not count toward family policy premiums are excluded) (78 FR 15432, 15434). We propose to clarify that in the case of family tiering States, billable members would be based on the number of children that implicitly count towards the premium under a State's family rating factors. For example, assume a State has the following four family tiers: One adult; one adult plus one or more children; two adults; and two adults plus one or more children. Under this tiering structure, only one child would be counted as a billable member in the payment transfer formula, because additional children covered under a family policy would not affect the policy's premium.
Additionally, we are proposing a modification to the allowable rating factor (ARF) formula that would be used for family tiering States. In the Payment Notice (78 FR 15433), the ARF is calculated as the member month weighted average of the age factor applied to each billable enrollee. In non-family tiering States, the ARF is intended to measure the extent to which plans are increasing or decreasing their premiums based on allowable age rating factors. In the case of family tiering States, premium revenue will not vary by age-specific rating factors. Rather, policy level premiums will vary only based on the family tiering factors. In order to capture the impact of the family tiering factors on plans' premium revenue we are proposing that the ARF formula for family tiering States be
Specifically, for family tiering States, the ARF would be calculated at the level of the subscriber, as follows:
We note that aside from the changes to the billable member months definition and the ARF formula discussed above, payment transfers in family tiering States will be calculated using the formulas provided in the Payment Notice (78 FR at 15431–34). Additionally, the changes to the billable member month definition and the ARF formula would not apply to community rated States that do not implement family tiering rating factors.
In some health coverage arrangements, an insured group health plan may provide benefits through more than one policy to the same covered lives, where each policy standing alone does not constitute major medical coverage, but the total benefits do.
Therefore, to clarify the application of the rules (solely for the purpose of reinsurance contributions), we propose to amend paragraph (a)(1)(i) of 45 CFR 153.400(a) and add a new paragraph (a)(3) that would address liability for reinsurance contributions in cases where an insured group health plan provides health insurance coverage through more than one policy to the same covered lives, where, as described above, none of the policies provides major medical coverage individually, but their combined benefits meet the definition of major medical coverage. This paragraph (a)(3) would be an exception to the rule under paragraph (a)(1)(i), which provides that an issuer of health insurance coverage is not required to make reinsurance contributions for coverage to the extent the coverage is not major medical coverage.
Under the proposed paragraph (a)(3), notwithstanding paragraph (a)(1)(i), a health insurance issuer providing coverage under a group health plan would make reinsurance contributions for lives under its health insurance coverage even if the insurance coverage does not constitute major medical coverage, if (i) The group health plan provides health insurance coverage for the same covered lives through more than one insurance policy that in combination constitute major medical coverage but individually do not; (ii) the lives are not covered by self-insured coverage of the group health plan (except for self-insured coverage limited to excepted benefits); and (iii) the health insurance coverage under the policy offered by the health insurance issuer represents a percentage of the total health insurance coverage offered in combination by the group health plan greater than the percentage offered under any of the other policies. Clause (i) describes the arrangement described in the paragraphs above. Clause (ii) makes clear that this exception would apply where group health coverage was divided only among insurance policies, and no portion of the coverage is self-insured.
Because an issuer of group health insurance coverage that does not, by itself, constitute major medical coverage, may not be aware of the existence of, or premium for, other health insurance coverage obtained by a plan sponsor covering the same lives under a group health plan, we are considering directing such an issuer to seek a representation from the plan sponsor regarding the relative percentage of coverage offered by the issuer. We seek comment on whether and in what circumstances an issuer should be entitled to rely upon such representations and what other means we should consider for ensuring that the relevant issuer knows of its obligation to make the reinsurance contributions, including with respect to any role that the employer should have in ensuring that issuers have information necessary to determine which issuer is responsible for reinsurance contributions.
We seek comment on these proposals, as well as alternative approaches that should be considered for determining responsibility for reinsurance contributions in such circumstances. For example, the liability rules could impose responsibility for the reinsurance contributions on the issuer of the coverage that provides the hospitalization coverage or the rules could allocate liability among the issuers in proportion to the benefits offered under the respective policies.
We are also considering proposing a definition for “major medical coverage” that would provide additional clarity around the responsibility to make payments. While HHS believes that responsibility for issuers and group
Finally, we have received inquiries as to how reinsurance contribution obligations would be addressed in the case of a group health plan under which some benefit options for employees are insured by an issuer, and some options offer benefits without the involvement of an issuer in insuring the benefits (because either the group health plan or some non-issuer entity assumes the risk for that coverage option). We are proposing that in such a case, if a coverage option is insured by an issuer, the issuer would be responsible for the reinsurance contribution associated with that coverage option. If an employee coverage option under such a group health plan is not insured (because either the group health plan or other non-issuer assumes the risk), then the group health plan would be responsible for the reinsurance contribution associated with that coverage option. We seek comment on this proposed approach.
Pursuant to our obligation to safeguard Federal funds, we propose to amend § 153.405 by adding paragraph (h), in which we propose that a contributing entity would be directed to maintain documents and records, whether paper, electronic, or in other media, sufficient to substantiate the enrollment count submitted pursuant to that section for at least 10 years, and make that evidence available upon request from HHS, the OIG, the Comptroller General, or their designees, to any such entity, for verification of reinsurance contribution amounts. We also propose to amend § 153.410 by adding paragraph (c), in which we propose that an issuer of a reinsurance-eligible plan in a State where HHS operates reinsurance would be directed to maintain documents and records, whether paper, electronic, or in other media, sufficient to substantiate the requests for reinsurance payments made pursuant to that section for at least 10 years, and make that evidence available upon request from HHS, the OIG, the Comptroller General, or their designees, (or, in a State where the State is operating reinsurance, the State or its designee), to any such entity, for verification of reinsurance payment requests. We note that these standards may be satisfied if the contributing entity or issuer of a reinsurance-eligible plan archives the documents and records and ensures that they are accessible if needed in the event of an investigation, audit, or other review. These proposed provisions are consistent with the requirements for record retention under the False Claims Act and those set forth in proposed § 153.620(b), which apply to issuers of risk adjustment covered plans. We seek comment on these proposals.
Section 1342(a) of the Affordable Care Act provides that “a qualified health plan offered in the individual or small group market” is to participate in the risk corridors program. In the Exchange Establishment Rule, we stated that a stand-alone dental plan is “a type of qualified health plan.” However, we did not intend for all requirements applicable to a QHP to apply to stand-alone dental plans. For example, under 45 CFR 155.1065(a)(3), certain QHP standards are not applicable to a stand-alone dental plan if they cannot be met, given the limited benefit package offered by the plan. We believe that it would not be appropriate to subject stand-alone dental plans to the risk corridors program because such plans are considered excepted benefits plan under section 2791(c) of the PHS Act, meaning that these plans are not subject to the Federal prohibition on underwriting premiums or the requirement to base pricing using the single risk pool or fair health insurance premiums limitations. Thus, although States have the option to prohibit underwriting for excepted benefits plans, and issuers of stand-alone dental plans in an FFE may voluntarily choose to underwrite these plans, we believe that, in general, an issuer of a stand-alone dental plan will not be subject to the same rate-setting uncertainty in 2014 as the issuer of a major medical plan, and will not need the premium risk-sharing protections of risk corridors.
We note that stand-alone dental plans are similarly excluded from participation in the two other premium stabilization programs—reinsurance and risk adjustment. We also note that, consistent with the exclusion of excepted benefits plans from the medical loss ratio (MLR) requirements, stand-alone dental claims would not be pooled along with an issuer's other claims for the purposes of determining “allowable costs” in the risk corridors calculation, as defined at 45 CFR 153.500. We seek comment on this approach.
We propose to amend § 153.620(b) to add a standard that would direct an issuer that offers risk adjustment covered plans to maintain documents and records, whether paper, electronic, or in other media, sufficient to enable the evaluation of the issuer's compliance with applicable risk adjustment standards, and to make that evidence available upon request from HHS, OIG, the Comptroller General, or their designees (or in a State where the State is operating risk adjustment, the State or its designee), to any such entity. This standard, which is consistent with other records maintenance standards in this proposed rule, would direct an issuer of a risk adjustment covered plan to retain additional records—not only those pertaining to data validation—to substantiate its compliance with risk adjustment standards, whether risk adjustment is operated by HHS or a State. We note that we anticipate that the bulk of the record maintenance obligations will relate to data validation, but that certain records, for instance those relating to premium rating or small group status, will not. We seek comment on this proposal.
In § 153.740(a), we propose that HHS may pursue an enforcement action for CMPs against an issuer in a State where HHS operates the reinsurance or risk adjustment program, if an issuer fails to: (a) establish a secure, dedicated distributed data environment pursuant to 45 CFR 153.700(a); (b) provide HHS with access to enrollee-level plan enrollment information, enrollee claims data, or enrollee encounter data through its dedicated distributed data environment pursuant to 45 CFR 153.710(a); (c) otherwise comply with the requirements of 45 CFR 153.700 through 153.730; (d) adhere to the reinsurance data submission
As described in the Premium Stabilization Rule and the 2014 Payment Notice, HHS will employ a distributed data collection approach for risk adjustment. Under this approach, issuers in States where HHS operates risk adjustment will be required to establish dedicated, secure data environments, and provide HHS with access to “masked”
In cases where an issuer does not set up a dedicated distributed data environment or submits inadequate risk adjustment data, HHS would not have the required risk adjustment data from the issuer to calculate risk scores or payment transfers. This data is necessary to properly calculate risk adjustment payments and charges for the entire applicable market for the State. If HHS cannot perform this calculation for a particular issuer, risk adjustment payment transfers would be affected for all other issuers in the State market because payments transfers are determined within a market within a State such that they will net to zero. Therefore, we believe that we must establish an administrative capability to calculate payments and charges for all plans, to avoid penalizing those plans that submit timely, complete risk adjustment data.
Pursuant to section 1343(b) of the Affordable Care Act, we have the authority to develop and apply criteria and methods for carrying out risk adjustment activities, such as applying a default charge to issuers in the individual or small group market that fail to provide complete data. Under the HHS-operated risk adjustment methodology, we require a balanced payment transfer approach in which issuers with a higher risk enrollee population will receive a payment, while issuers with a lower risk enrollee population will be assessed a charge in order to stabilize premiums; these transfers will be calculated simultaneously and will net to zero in each market in each State. Under the balanced payment transfer approach, we believe we must calculate risk adjustment transfers for issuers that fail to provide data in a timely fashion into the risk adjustment payment transfer formula so that compliant issuers are not penalized. If issuers that would otherwise be subject to risk adjustment charges do not comply with these standards, payments to compliant issuers would be smaller and charges owed by compliant issuers would be larger.
Therefore, in § 153.740(b), we propose that if an issuer of a risk adjustment covered plan fails to establish a dedicated distributed data environment or fails to provide HHS with access to risk adjustment data in such environment by April 30th of the year following the applicable benefit year in accordance with § 153.610(a), § 153.700, § 153,710, or § 153.730, such that HHS cannot apply its Federally certified risk adjustment methodology to calculate the
We are considering two different methods for calculating the default risk adjustment charge. One option would be to use the highest per-member-per-month charge among risk adjustment covered plans in a risk pool in the market in the plan's geographic rating area. A second option would be to use a per-member-per-month default charge that is two standard deviations above the mean charge in the market in the plan's geographic rating area. With respect to this second option, we believe that a two standard deviation calculation will adequately encourage compliance with the applicable data requirements while remaining tied to the market realities of the applicable geographic rating area.
In order to calculate a plan's risk adjustment payment transfer amount, we must consider the enrollment data of the plan. As such, if a risk adjustment covered plan fails to provide HHS with enrollment data, we propose that the default charge would be based on the average enrollment in the State market. If enrollment data is provided, we propose that the default charge would be based on average annual enrollment for the plan in a risk pool in the State market. We seek comment on these methods, other appropriate methods for calculating a default risk adjustment charge, and other sources of data HHS could use to determine enrollment data for non-compliant issuers, such as MLR or NAIC filings, or information supplied by a State Department of Insurance (DOI). We also seek comment on whether to allocate a non-compliant issuer's default charge to issuers in the market as part of payments and charges in the concurrent benefit year, during a subsequent benefit year, or sometime between annual payments and charges processes.
Section 1311(b) of the Affordable Care Act provides States with the opportunity to establish and operate an Exchange that both facilitates the purchase of QHPs and provides for the establishment of a SHOP. Previously, we have interpreted this provision to mean that a State must elect to carry out both these functions in order to establish an “Exchange” in accordance with the Affordable Care Act.
We propose to amend 45 CFR 155.20 to reflect this new flexibility for States by modifying the definition for “Exchange.”
We propose that “Exchange” would mean a governmental agency or non-profit entity that meets the applicable standards of Part 155 and makes QHPs available to qualified individuals and/or qualified employers. Unless otherwise identified, under the proposed definition this term would include an Exchange serving the individual market for qualified individuals and a SHOP serving the small group market for qualified employers, regardless of whether the Exchange is established and operated by a State (including a regional Exchange or subsidiary Exchange) or by HHS.
We also clarify that we intend the phrase “meets the applicable standards of this part” in the proposed amendment to the definition to refer to any applicable standard of Part 155, including but not limited to the proposed amendments to §§ 155.100, 155.105, and 155.200 discussed below, and the special rules applicable to regional Exchanges pursuant to § 155.140 (together with the proposed amendments to that section). Pursuant to the proposed amendment to the definition, there could be several types of Exchanges operating in a State, all of which would meet the regulatory definition, so long as the applicable standards of Part 155 were met. We further clarify that there must be an individual market Exchange
We are also adding a new definition for “issuer customer service representative.”
For the same reasons that we propose adding § 155.415 below, we propose to define an “issuer customer service representative” to mean an employee, contractor, or agent of a QHP issuer that provides assistance to applicants and enrollees, but is not licensed as an agent, broker, or producer under State law.
We are also making a clarification regarding the definition of “qualified health plan.”
With regard to the definition of “qualified health plan” in the preamble to the Exchange Establishment Rule, we stated that health plans that are “substantially the same” as a QHP are
We are now proposing to specify that, for a plan offered outside the Exchange to be considered the same plan as one that is certified as a QHP and offered through the Exchange, among other things, the benefits package, provider network, service areas, and cost-sharing structure of the two offerings must be identical. Under this proposal, a plan that is certified as a QHP and that meets the requirements for sale in the applicable market outside of the Exchange is a QHP for the entire applicable market within a State. We note that nothing in this proposal would relieve an issuer of a plan that has been certified as a QHP by the Exchange from the requirement to charge the same premium for the QHP sold to consumers outside of the Exchange (pursuant to sections 1301(a)(C)(iii) of the Affordable Care Act and 45 CFR 156.255(b) and 45 CFR 147.104).
We also propose to clarify that a plan sold to consumers outside of the Exchange would only be subject to the risk corridors program if it is the same as a QHP
We believe that the proposed policy set forth in this section is consistent with the intent of the statute and existing regulations with respect to the offering and certification of QHPs, and helps to maintain the integrity of the risk corridors program, which we believe is intended primarily to stabilize premiums of plans offered through the Exchanges.
We request comment on all aspects of this approach, particularly on issues that may be raised by this approach for State requirements for product or policy form filings, including filings for coverage riders (whether mandatory or optional), State-required benefits, and State-required service areas (including tiered networks within service areas). We seek comment on whether the criteria laid out above—benefits, provider network, service areas, and cost-sharing structure—are the proper criteria for determining whether offerings are the same plan, and whether additional criteria such as allowances for de minimis variations that do not change plan actuarial value should be included, or whether no criteria are necessary because it is clear from State oversight processes when a plan is the same plan or a different plan. We also seek comment on how this proposed approach would affect what is considered a new plan offering, and the potential impact of this proposal on plan renewals. Finally, we seek comment on the operational feasibility of the proposed requirements, particularly with regard to issuers in the small group market.
Consistent with our proposed amendments to the definition of “Exchange” in § 155.20, we propose to amend § 155.100 to permit a State to operate only a State-based SHOP while the individual market Exchange is operated as an FFE. This proposed amendment would permit a State to elect to establish and operate only the SHOP and to focus on effective implementation of that program. A State that is electing to establish only a SHOP must establish an Exchange entity—consistent with section 1311(d)(1) of the Affordable Care Act and §§ 155.100(b) and 155.110—to perform only the SHOP functions.
We considered whether to propose allowing a State to establish and operate only the individual market Exchange while HHS operates the SHOP, but decided not to do so for the reasons described below. Accordingly, under the proposed amendments, a State could not elect to establish and operate just the individual market Exchange. We believe that building and operating the SHOP is an excellent way for a State to move towards operating both a SHOP and an individual market Exchange. Further, while a State operating a SHOP has a variety of options available to ensure a robust choice of QHPs and issuers, for example, through its direct regulation of the individual and small group insurance markets, these options may not be available to HHS because they would require HHS to go beyond its traditional market role under the PHS Act. The only tool HHS can rely upon for incentivizing issuer participation in the SHOP is the QHP certification process, and this tool is a limited one if the individual market Exchange is operated by the State.
We propose in § 155.100(a)(3) that a State that has timely applied for certification of an Exchange for 2014, and that has received conditional approval for its application, would be able to modify its Blueprint pursuant to 45 CFR 155.105(e) to exclude the operation of the individual market Exchange functions for 2014.
We further propose to amend § 155.105 so that the Exchange approval criteria set forth therein would be consistent with the Exchange operational models now proposed in §§ 155.20, 155.100, and 155.200, and to permit HHS to operate only a FFE that will make QHPs available to qualified individuals when a State has elected to operate only an Exchange providing for the establishment of a SHOP pursuant to proposed § 155.100(a)(2). In paragraphs (b)(1) and (b)(2) we clarify that a State establishing and operating only a SHOP would have to perform the minimum functions described in subpart H and all applicable references to other subparts contained therein, and need not comply with other provisions that by their express terms apply only to an individual market Exchange.
We propose to amend paragraph (f) to clarify that where a State has elected to establish and operate only a SHOP, the FFE must meet the requirements set forth in §§ 155.120(c), 155.130, and subparts C, D, E, and K of this part; however, it need not implement the standards for the establishment of a SHOP described in subpart H. We seek comment on this proposal.
We are also proposing an amendment to § 155.105(f) to clarify that the regulatory provisions that will apply in an FFE include the nondiscrimination requirements of § 155.120(c). Section 155.120(c), as written, applies to all Exchanges, and its previous omission from the list of provisions referenced in § 155.105(f) was inadvertent.
We propose to amend § 155.140 to clarify how a subsidiary or regional Exchange may operate in light of the proposed amendments to permit a State to establish and operate an Exchange only providing for the establishment of a SHOP. Under this proposal, a State establishing and operating only a SHOP could still establish subsidiary SHOP Exchanges. Multiple States that wish to establish and operate only SHOPs could still form a regional Exchange only providing for the establishment of a SHOP across the region covered by the participating states.
Previously, we had created the standards for regional and subsidiary Exchanges such that the geographic area served by such Exchanges must be the same for the individual market Exchange and the SHOP.
In paragraph (c)(2)(ii)(A), we propose that in the case of a regional Exchange established pursuant to proposed § 155.100(a)(2) to provide only for the establishment and operation of a SHOP, the regional SHOP would be required to encompass a geographic area that matches the combined geographic areas of the individual market Exchanges established by HHS to serve the States establishing the regional SHOP.
In paragraph (c)(ii)(B), we propose that in the case of a subsidiary Exchange established pursuant to § 155.100(a)(2) to provide only for the establishment and operation of a SHOP, the combined geographic area of all subsidiary SHOPs established by the State would be required to encompass the geographic area of the individual market Exchange established by HHS to serve the State.
In addition, under 45 CFR 153.310(a), a State that elects to operate an Exchange is eligible to establish a risk adjustment program using a methodology that has obtained federal certification. We are considering whether a State that elects to operate a SHOP but not an individual market Exchange under the proposed approach described above should be eligible to establish a risk adjustment program, and in particular whether such a State should be eligible to establish a risk adjustment program only for the small group market or should be required to establish the program for both markets. We seek comment on this issue.
Consistent with the proposed amendments described above to §§ 155.20, 155.100, 155.105, and 155.140, which permit a State to operate only an Exchange providing for the establishment of a SHOP, in § 155.200 we propose that a State operating only an Exchange which provides for the establishment of a SHOP need perform only the minimum functions described in subpart H and all applicable provisions of other subparts referenced therein. Under such circumstances, the Exchange operated by HHS need not perform the minimum functions related to the establishment of a SHOP.
Section 1312(e) of the Affordable Care Act authorizes the Secretary to establish procedures that permit agents and brokers to enroll qualified individuals and qualified employers in QHPs through an Exchange, and to assist individuals in applying for advance payments of the premium tax credit and cost-sharing reductions, to the extent allowed by States.
In 45 CFR 155.220(c), 155.220(d), and 155.220(e), we established general Exchange standards that agents and brokers must meet to assist individuals in enrolling in QHPs and applying for advance payments of the premium tax credit and cost-sharing reductions, including registration, training, compliance with the privacy and security standards adopted by the Exchange, compliance with applicable State law, and execution of an agreement with the Exchange. Section 155.220(c)(3) established additional standards for agents and brokers that use Internet Web sites to assist qualified individuals in enrolling in a QHP.
In CMS's guidance titled “Role of Agents, Brokers, and Web-brokers in Health Insurance Marketplaces,”
Regardless of what pathway they use, all agents and brokers must register with CMS before they may assist qualified individuals in enrolling in individual market coverage through an FFE. Once an agent or broker has completed the registration process, which includes undergoing basic CMS identity proofing, completing an FFE training course, and signing an agreement with CMS, he or she will receive an active FFE user identification number, which will be the agent's or broker's unique identifier in an FFE. This would allow CMS to monitor and oversee the activities of
Section 155.220(c)(3) establishes standards that apply if an agent or broker uses its publicly-facing Internet Web site to assist individuals in selecting or enrolling in a QHP through the Exchange. Agents or brokers who do so are referred to as “Web-brokers” for the purposes of this proposed rule. We propose amending § 155.220(c)(3)(i), which currently requires that a Web-broker meet all standards for disclosure and display of QHP information contained in §§ 155.205(b)(1) and 155.205(c). In particular, § 155.205(b)(1) requires the display of standardized comparative information on each available QHP, including its: (a) Premium and cost-sharing information; (b) summary of benefits and coverage; (c) metal level (bronze, silver, gold, or platinum); (d) enrollee satisfaction survey results; (e) quality ratings; (f) medical loss ratio, (g) transparency of coverage measures, and (h) provider directory.
After taking into consideration concerns from issuers, we propose to limit the Web-broker's obligation to disclose and display the QHP information to all the information provided to the Web-broker by the Exchange or directly by the issuer. We recognize that an Exchange may not be able to provide all Web-brokers with certain data elements necessary to meet the § 155.205(b)(1) requirements, such as premium and rate information, depending upon confidentiality requirements, the extent to which Web-brokers are appointed by individual QHP issuers, and State laws regarding agent and broker appointments. We also recognize that some of the required data, such as quality rating and enrollee satisfaction survey results, may not be available in the first year of Exchange operations, in which case Web-brokers would also not need to display this information. We seek comment on whether this provision should be limited to FFEs.
We note that we do not intend this amendment to alter Web-brokers' obligations to meet all existing standards for disclosure and display of QHP information contained in § 155.205(c), regardless of the availability of QHP issuer information from issuers or the Exchange. Additionally, the Web-broker should display all information provided by the Exchange or an issuer in a manner that is as consistent with the requirements in § 155.205(b)(1) as possible. We solicit comments on how to monitor this provision to ensure that Web-brokers display QHP information received by an Exchange or QHP issuers in a manner consistent with the QHP information displayed on an Exchange Web site.
Even if a Web-broker is unable to display certain QHP information identified in § 155.205(b)(1) because it is not provided by the Exchange or a QHP issuer, it must still display a list of all available QHPs for the consumers to view, as required by § 155.220(c)(3)(ii). We also propose that, to address situations where the Web-broker is unable to display certain QHP information identified in § 155.205(b)(1), the Web-broker must display a link to the Exchange Web site so the consumer may obtain the additional information.
Instead of modifying only § 155.220(c)(3)(i), we considered removing § 155.220(c)(3)(ii), which requires Web-brokers to provide consumers with the ability to view all QHPs offered through the Exchange. We decided not to propose this approach so that the consumer would be aware of all available QHP options, even if some of the specific plan details may not be available on the Web-broker's Internet Web site. We invite comment on this proposal.
We also propose to amend § 155.220(c)(3) by adding a new paragraph (c)(3)(vii), which would require Web-brokers' Internet Web sites in an FFE to prominently display language notifying consumers that: (a) the Web-broker's Internet Web site is not an FFE Web site; (b) the Web-broker's Web site might not display all QHP data available on the Exchange Web site; (c) the Web-broker has entered into an agreement with HHS pursuant to § 155.220(d); and (d) the Web-broker agrees to comply with standards specified in § 155.220(c) and (d). We believe that this additional standard is in the best interest of the consumers in an FFE, as it will help consumers distinguish between an FFE Web site and the Internet Web sites of Web-brokers, and it will inform consumers that agents and brokers must comply with FFE standards and requirements before they can assist and enroll consumers. We welcome comments on this proposal. HHS expects to make available an application programming interface that would permit Web-brokers to use their public-facing Internet Web sites to assist consumers in enrolling through individual market QHPs offered through an FFE (“FFE API”). An FFE API would allow a person seeking to enroll in a QHP to initiate his or her shopping experience on a Web-broker's Internet Web site, connect securely to an FFE Web site to complete the eligibility application and determination process, and return securely to the Web-broker's Internet Web site compare and select QHPs.
We understand that some Web-brokers may enter into arrangements with other agents and brokers under which those agents and brokers would be able to enroll qualified individuals in an FFE through the Web-broker's Internet Web site. We are concerned about these arrangements that would allow other agents and brokers to use the Web-broker's connection to HHS, because they would not require the agent or broker to be a party to the Web-broker's agreement with HHS, or to become an employee or subcontractor of the Web-broker. We are considering prohibiting such arrangements outright, in part because such entities are not a party to the Web-broker's agreement with HHS. However, we also want to make sure that agents and brokers have many possible avenues to participate in the FFE. If we do not prohibit such arrangements, we believe that a Web-broker should not be able to enter into these arrangements unless the Web-broker ensures that the agent or broker using its connection to HHS agrees to comply with the same FFE standards and requirements applicable to Web-brokers under § 155.220(c) and (d). We therefore propose to add a new § 155.220(c)(4) that would require any Web-broker who makes an Internet Web site available to other agents and brokers for this purpose to require as a condition of agreement or contract that the agent or broker accessing and using the Internet Web site complies with § 155.220(c) and (d). We also propose that the Web-broker would be required to provide to HHS a list of agents and brokers who are under such arrangements, and that the Web-broker be required to ensure that the agent or broker accessing or using the Internet Web site would be required to comply with the policies that the Web-broker would be required to develop under § 155.220(d)(4), as proposed below. Because we would require the agent or broker accessing or using the Web-broker's connection to comply with § 155.220(d), that agent or broker would also have to enter into a Web-broker agreement with HHS. If the agent or broker accessing or using the Internet Web site fails to comply with either provision, both parties to the arrangement would be found to be noncompliant with the regulatory
Section 155.220(d)(3) currently directs all agents or brokers assisting qualified individuals with enrollment in QHPs to comply with the Exchange privacy and security requirements. We propose to establish a new standard in § 155.220(d)(4) requiring agents and brokers assisting or enrolling consumers in the individual market of an FFE to establish policies and procedures implementing the privacy and security standards pursuant to § 155.220(d)(3); to train their employees, representatives, contractors, and agents with regard to those policies and procedures on a periodic basis; and to ensure that their employees, representatives, contractors, and agents comply with those policies and procedures. Because agents and brokers will have access to PII provided by consumers we want to ensure that the agents and brokers have appropriate procedures, training and monitoring safeguards in place to protect PII. We invite comments on the appropriate frequency of retraining requirements.
We propose adding a new § 155.220(f), which would require agents and brokers who wish to terminate their agreement with an FFE to send to HHS a 30-day advance written notice of the intent to terminate. This notice would also include the intended date of termination. If the notice does not specify a date of termination, or the date is not acceptable to HHS, HHS may set a date that will be no less than 30 days from the date of the agent or broker's notice of termination. We believe that this additional standard would be in the best interest of FFE consumers, as the 30-day pre-termination period would allow agents and brokers to complete any application or enrollment activity initiated prior to the notice. As of the date of termination, an agent or broker would not be able to conduct business in an FFE, although the agent's or broker's related duty to protect and maintain the privacy and security of PII it has created, collected, accessed, or acquired during its period of relationship with an FFE would survive the termination. We are considering whether to require such agents and brokers to also directly notify their clients of the termination plan during the pre-termination period. We welcome comment on this proposal.
We also propose to establish new standards for agents and brokers in the FFEs, so that agents and brokers that register with an FFE have a clear understanding of the rights and standards governing their participation in an FFE. In new section § 155.220(g), we propose the standards under which HHS may terminate an agent's or broker's agreement with an FFE for cause.
In § 155.220(g)(1), we propose that HHS may pursue termination with notice of an agent's or broker's agreement with an FFE executed pursuant to § 155.220(d) if, in HHS's determination, a specific finding of noncompliance or pattern of noncompliance is sufficiently severe. Under this proposal, termination of the agreement with notice would mean that after a 30-day opportunity to cure, HHS would take necessary steps to prohibit an agent or broker from assisting or enrolling individuals in an individual market QHP offered through an FFE, or a Web-broker's ability to securely exchange information with HHS.
In § 155.220(g)(2), we propose that an agent or broker would be considered noncompliant if HHS finds that the agent or broker violated: (a) Any standard specified under § 155.220; (b) any term or condition of its agreement with the FFE, including but not limited to the FFE privacy and security standards; (c) any applicable State law; or (d) any other applicable Federal law.
We propose that if HHS finds noncompliance or patterns of noncompliance to be sufficiently severe, such a finding would form the basis for a termination for cause. We believe that HHS must maintain the ability to terminate an agent's or broker's agreement for cause to protect the interest of consumers in cases of severe violations and patterns of violations, particularly violations with respect to privacy and security protections. Specific findings of noncompliance that HHS might determine to be sufficiently severe to warrant termination for cause would include, but not be limited to, violations of the Exchange privacy and security standards. Patterns of noncompliance that HHS might determine to be sufficiently severe to warrant termination for cause would include, for example, repeated violations of any of the standards set forth in § 155.220 for which the agent or broker was previously found to be noncompliant. We seek comment on this proposal and on other circumstances that should result in an HHS termination for cause.
Prior to pursuing the termination of an agent's or broker's agreement for cause, we are considering implementing informal procedures, which may be published in future sub-regulatory guidance. The informal procedures would allow agents and brokers, at HHS discretion, to resolve certain noncompliance issues within a time period determined reasonable by HHS. Through this informal process, HHS would notify an agent or broker of the reason for the potential termination, the potential consequences of continued noncompliance, and any applicable administrative procedures. However, HHS would retain the right to bypass these informal procedures.
Upon identification of a sufficiently severe violation under the proposed § 155.220(g)(2), HHS would formally notify the agent or broker of the specific finding of noncompliance or pattern of noncompliance, as proposed in § 155.220(g)(3). The agent or broker would then have a period of 30 days from the date of the notice to correct the noncompliance to HHS's satisfaction, through good-faith efforts. If after 30 days, the noncompliance is not appropriately addressed, HHS may terminate the agreement for cause. In § 155.220(g)(4), we propose that termination for cause would result in the loss of the ability to assist individuals enroll in QHPs and transact data with HHS, including transactions through the FFE API. We believe this approach would provide an opportunity for agents and brokers to remedy any noncompliance issue in advance of a potential termination for cause.
We request comment on the informal resolution approach we are considering implementing through future sub-regulatory guidance, specifically on whether we should consider any alternative proposals. We also solicit comment on the appropriate time length for a cure period, and on whether we should include a provision permitting HHS to terminate an agent's or broker's agreement immediately and permanently for cause if findings of noncompliance are sufficiently egregious. We are also considering an option that would allow HHS to immediately but temporarily suspend an agent or broker by prohibiting the agent or broker from assisting individuals to enroll in a QHP offered through the FFE and/or ability to securely exchange information with HHS, including through the FFE API, without advance notice. We are considering this option because there
We further propose a new section § 155.220(h) to establish a one-level process through which an agent or broker may request reconsideration of HHS's decision to terminate the agreement for cause. In § 155.220(h)(2), we propose that an agent or broker must submit a request for reconsideration to an appropriate HHS designee (“reconsideration entity”) within 30 calendar days of the date of the notice in order to obtain a reconsideration. In § 155.220(h)(3), we propose that the reconsideration entity would provide the agent or broker with a written reconsideration decision within 30 calendar days of the date it receives the request for reconsideration. This decision would constitute HHS's final determination.
We believe this approach would afford agents and brokers an opportunity to furnish any facts and information that might not have been considered as part of HHS's decision to terminate the agreement for cause, and to provide due process. We intend to provide future guidance on the manner and form in which agents and brokers should present requests for reconsideration, HHS's designation of an appropriate reconsideration entity, and additional procedures related to agent and broker revocation and reconsideration. We invite comments on this reconsideration proposal.
We expect that States will continue to license and monitor agents and brokers, and will continue to oversee and regulate all agents and brokers, both inside and outside of the Exchange. We expect that all State laws related to agents and brokers, including State laws related to appointments, contractual relationships with issuers, and licensing and marketing requirements, will continue to apply. Therefore, to avoid duplication of oversight activities related to agents and brokers enrolling or assisting consumers through an FFE, HHS will focus its oversight activities primarily on ensuring that agents and brokers in an FFE meet the standards outlined in § 155.220. In particular, HHS plans to focus its oversight efforts on protecting the privacy and security of PII, to the extent this is not already covered under existing State or Federal law.
Prior to releasing additional guidance on agent and broker activities in the FFE, we intend to collaborate with State DOIs to further develop standard operating procedures for an FFE that will be critical to HHS oversight of agents and brokers working with an FFE. We encourage comment on the information required to carry out these activities, and on any existing definitions, timeframes, or procedures described in our proposed amendments to § 155.220.
Section 155.270 of 45 CFR directs Exchanges that perform electronic transactions with a covered entity to use standards, implementation specifications, operating rules, and code sets adopted by the Secretary in 45 CFR parts 160 and 162. When 45 CFR 155.270 was finalized in its current form, HHS believed that the HIPAA standard transactions, as defined in 45 CFR Parts 160 and 162, were the most appropriate standards for transmitting information electronically between Exchanges and issuers. Since then, the Accredited Standards Committee X12, also known as “ASC X12,”
In § 155.280, consistent with section 1411(g) and (h) of the Affordable Care Act, we propose that HHS will monitor any individual or entity who would be subject to the privacy and security requirements as established and implemented by an Exchange under § 155.260.
We propose in § 155.280(a) that HHS will oversee and monitor the FFEs and non-Exchange entities associated with FFEs for compliance with the privacy and security standards established and implemented by the FFEs pursuant to § 155.260 for compliance with those standards. HHS will monitor State Exchanges for compliance with the privacy and security standards established and implemented by the State Exchanges pursuant to § 155.260. In addition, we propose that State Exchanges will oversee and monitor non-Exchange entities associated with the State Exchange for compliance with the standards implemented by the State Exchange pursuant to § 155.260.
In § 155.280(b), we propose the oversight activities that HHS may conduct in order to ensure adherence to the privacy and security requirements in § 155.260. These may include, but are not limited to, audits, investigations, inspections and any reasonable activities necessary for appropriate oversight of compliance with the Exchange privacy and security standards as permitted under sections 1313(a)(2) and (a)(3) of the Affordable Care Act.
In § 155.280(c)(1)(i) and (ii), we propose definitions for the terms “incident” and “breach” as they apply to privacy and security. We considered but declined to use the definitions for these terms provided under the HIPAA regulations because the protected health information (PHI) that triggers the HIPAA requirements is considered a subset of PII,
In § 155.280(c)(2) we propose that in the event of an incident or breach, the entity where the incident or breach occurs would be responsible for reporting and managing it according to the entity's documented incident handling or breach notification procedures. We believe that incident handling and breach notification procedures should be among the written policies and procedures required for Exchanges under § 155.260(d). Non-Exchange entities associated with the Exchanges would be required to have policies and procedures in place for reporting breaches and incidents as a condition of the contracts or agreements that are required under § 155.260(b). Under § 155.260(a)(3)(viii), Exchanges would also be required to establish accountability standards that would include the development and implementation of policies and procedures including incident handling and breach notification procedures.
In § 155.280(c)(3) we propose that FFEs, non-Exchange entities associated with FFEs, and State Exchanges must report all privacy and security incidents and breaches to HHS within one hour of discovering the incident or breach. We also propose that a non-Exchange entity associated with a State Exchange must report all privacy and security incidents and breaches to the State Exchange with which they are associated. We welcome comment on these proposals.
In our consultations with states and in the operational development of Exchanges, we have identified with States the need to establish a standardized process for handling applications that are submitted without information that is necessary for determining eligibility. It is our understanding that States have an existing process for handling incomplete applications for other programs, such as Medicaid, and may want to establish a consistent process for handling incomplete applications submitted to the Exchange. Accordingly, the language of this proposed regulation is designed to provide flexibility to States so they may align this process with Medicaid and CHIP. Further, we intend to work with States to implement these procedures and in 2014 to accommodate States with processes established for handling incomplete applications that does not match the process described in these regulations.
We are adding § 155.310(k), to provide that if an application filer does not provide sufficient information on an application for the Exchange to conduct an eligibility determination for enrollment in a QHP through the Exchange, or for insurance affordability programs (if the application includes a request for an eligibility determination for insurance affordability programs), the Exchange will provide notice through the eligibility determination notice described in 45 CFR 155.310(g). The notice would indicate that information necessary to complete an eligibility determination is missing, specifying the missing information, and include instructions on how to provide the missing information. We propose that the Exchange will provide the applicant with a period of no less than 15 days and no more than 90 days from the date this notice is sent to the applicant to provide the necessary information. Further, we propose that during this period, the Exchange will not proceed with the applicant's eligibility determination or provide advance payments of the premium tax credit or cost-sharing reductions, unless an application filer has provided sufficient information to determine his or her eligibility for enrollment in a QHP through the Exchange, in which case the Exchange must make such a determination for enrollment in a QHP. We propose that the Exchange may make an eligibility determination for enrollment in a QHP through the Exchange if an applicant has provided sufficient information to make an eligibility determination for enrollment in a QHP through the Exchange. For example, if there is sufficient information to determine eligibility for enrollment in a QHP, but an applicant who requested an eligibility determination for insurance affordability programs has not provided information regarding employer-sponsored coverage, which is needed to determine eligibility for advance payments of the premium tax credit and cost-sharing reductions, the Exchange will determine the applicant's eligibility for enrollment in a QHP through the Exchange but may not provide advance payments of the premium tax credit or cost-sharing reductions.
We believe this process is consistent with current Medicaid and CHIP policies regarding the process for handling incomplete applications. We propose a flexible timeframe of no less than 15 days and no more than 90 days. While we believe it does not benefit an applicant to have a long timeframe because no advance payments of the premium tax credits and cost-sharing reductions will be provided during the period, we understand that State Medicaid and CHIP agencies use periods similar to this length, and we also believe that it is important to allow flexibility for the Exchange to align with the time period for inconsistencies, which is a period of 90 days as specified in 45 CFR 155.315(f)(2)(ii). We note that the online and telephonic applications are structured to minimize situations in which an applicant can fail to provide necessary information. Accordingly, we anticipate that this paragraph will be implicated most frequently with respect to paper applications. We seek comment
As finalized in the Exchange Establishment Rule, § 155.320(b) specifies standards related to the verification of eligibility for minimum essential coverage other than through an eligible employer-sponsored plan. We propose to redesignate paragraph (b)(1) as (b)(1)(i) and (b)(2) as (b)(1)(ii) to consolidate the standards for Exchange responsibilities in connection with verification of eligibility for minimum essential coverage other than through an eligible employer-sponsored plan. In paragraph (b)(1)(i), we also propose to add the phrase “for verification purposes” to the end of existing text. This would clarify that HHS would provide a response to the Exchange to verify the information transmitted from the Exchange to HHS about an applicant's eligibility for or enrollment in minimum essential coverage other than through an eligible employer sponsored plan, Medicaid, CHIP, or the Basic Health Program. The Exchange would submit specific identifying information to HHS and HHS would verify applicant information with information from the Federal and State agencies or programs that provide eligibility and enrollment information regarding minimum essential coverage. Such agencies or programs may include but are not limited to Veterans Health Administration, TRICARE, and Medicare. HHS will work with the appropriate Federal and State agencies to complete the appropriate computer matching agreements, data use agreements, and information exchange agreements which will comply with all appropriate Federal privacy and security laws and regulations. The information obtained from Federal and State agencies will be used and redisclosed by HHS as part of the eligibility determination and information verification process set forth in subpart D of part 155.
In connection with the proposal to redesignate paragraph (b)(2) to paragraph (b)(1)(ii), we are not proposing any change to the text of the provision as previously finalized. Consistent with the authorizations for the disclosure of certain information under 42 CFR 435.945(c) and 457.300(c), this regulation provides for an Exchange to verify whether an applicant has already been determined eligible for coverage through Medicaid, CHIP, or the Basic Health Program, using information obtained from the agencies administering such programs.
Finally, we propose to add paragraph (b)(2) to provide that consistent with 45 CFR 164.512(k)(6)(i) and 45 CFR 155.270, a health plan that is a government program providing public benefits, is expressly authorized to disclose PHI, as that term is defined at 45 CFR 160.103, that relates to eligibility for or enrollment in the health plan to HHS for verification of applicant eligibility for minimum essential coverage as part of the eligibility determination process for advance payments of the premium tax credit or cost-sharing reductions. We intend for this provision to enable any health plan that is a government program within the scope of 45 CFR 164.512(k)(6)(i) to disclose the protected health information necessary for HHS to be able to verify of minimum essential coverage as required to conduct eligibility determinations for insurance affordability programs. We seek comment on this proposal.
We propose to amend § 155.340 by adding paragraph (h), which sets forth additional requirements applicable when a State Exchange is facilitating the collection and payment of premiums to QHP issuers. We propose that if the Exchange discovers that it did not reduce an enrollee's premium by the amount of the advance payment of the premium tax credit in accordance with 45 CFR 155.340(g), the Exchange would be required to refund to the enrollee any excess premium paid by or for the enrollee. The Exchange would also notify the enrollee of the improper application of the advance payment of the premium tax credit no later than 30 calendar days after the Exchange discovers it. We note that an Exchange may provide the refund to the enrollee by reducing the enrollee's portion of the premium in the following month, as long as the reduction is provided no later than 30 calendar days after the Exchange discovers the improper application of the advance payment of the premium tax credit. If the Exchange elects to provide the refund by reducing the enrollee's portion of the premium for following month and the refund exceeds the enrollee's portion of the premium for the following month, then the Exchange would need to refund to the enrollee the excess, no later than 30 calendar days after the Exchange discovers the improper application of the advance payment of the premium tax credit. These provisions are similar to the policy we propose in § 156.460, when a QHP issuer is collecting premiums directly from enrollees and fails to apply the advance payment of the premium tax credit to the enrollee's portion of the premiums. The parallel requirements are designed to ensure that all enrollees, regardless of whether a QHP issuer or the Exchange is collecting premiums, are afforded the same level of protection.
We are considering requiring the Exchange to provide to HHS for each quarter, in a manner and timeframe specified by HHS, a report detailing the occurrence of any improper application of the advance payment of the premium tax credit. We believe that it is important that an Exchange timely address improper applications of the advance payments of the premium tax credit in order to mitigate potential harm to enrollees. However, we recognize that, given operational constraints, it may be difficult at this point for Exchanges to develop systems that can produce these types of quarterly reports for the 2014 benefit year. Therefore, we are considering requiring Exchanges to provide such reports to HHS beginning in the 2015 benefit year. We seek comment on whether HHS should establish a minimum error rate or threshold before an Exchange is required to inform HHS of such improper applications of the advance payment of the premium tax credit in a quarterly report, as well as what an appropriate error rate or threshold should be. For example, we are considering requiring issuers to report the number of enrollees for whom the Exchange improperly applied the advance payment of the premium tax credit compared to the total number of enrollees in the Exchange receiving Federal premium subsidies. We also seek comment on whether such reports should be provided to HHS less frequently than quarterly.
Section 1413 of the Affordable Care Act directs the Secretary to establish, subject to minimum requirements, a streamlined enrollment process for enrollment in QHPs and all insurance affordability programs. Many issuers
In accordance with section 1311(c)(6)(C) of the Affordable Care Act, the Secretary must establish special enrollment periods for all Exchanges, including special enrollment periods specified in section 9801 of the Internal Revenue Code of 1986 and under circumstances similar to such periods under Part D of title XVIII of the Social Security Act. Under this authority, we propose to amend § 155.420(d) to clarify that a special enrollment period will be available when a Exchange determines that a consumer has been incorrectly or inappropriately enrolled in coverage due to misconduct on the part of the non-Exchange entity. We propose to add a new paragraph § 155.420(d)(10) to create this new special enrollment period for qualified individuals. We propose to limit this special enrollment opportunity to the individual market Exchange and not extend it to the SHOP.
We propose that the Exchange would extend a special enrollment period to a qualified individual when, in the determination of the Exchange, misconduct on the part of a non-Exchange entity has caused the qualified individual to be enrolled incorrectly or inappropriately in coverage such that they are not enrolled in QHP coverage as desired, are not enrolled in their selected QHP, or have been determined eligible for but are not receiving advance payments of the premium tax credit or cost-sharing reductions.
Non-Exchange entities will be performing enrollment activities, including providing assistance with enrollment activities, and in some cases will be enrolling consumers directly in QHPs. Consumers would be harmed if they fail to enroll in a health plan or are enrolled in a QHP they did not select as a result of misconduct on the part of a non-Exchange entity. Consumers would also be harmed if they are eligible for, but not receiving advance payments of the premium tax credit or cost-sharing reductions as a result of misconduct on the part of a non-Exchange entity. The proposed provision would ensure that all qualified individuals and enrollees have similar protections against these harms.
For purposes of this proposed provision, we would interpret a non-Exchange entity providing enrollment assistance or conducting enrollment activities to include, but not be limited to, those individuals and entities that are authorized by the Exchange to assist with enrollment in QHPs (such as a Navigator, as described in § 155.210; non-Navigator consumer assistance personnel, as authorized by § 155.205(d) and (e); a certified application counselor, as described in proposed § 155.225; an agent or broker assisting consumers in an Exchange under § 155.220; issuer customer service representatives assisting consumers in an Exchange under proposed § 155.415; or a QHP conducting direct enrollment under proposed § 156.1230).
We further propose in § 155.420(d)(10) that misconduct on the part of a non-Exchange entity providing enrollment assistance or conducting enrollment activities could include, but would not be limited to, the failure of a non-Exchange entity to comply with applicable requirements set forth in Exchange regulations or other applicable Federal or State laws.
For purposes of the proposed provision, the Exchange could base the determination triggering the special enrollment period on findings of HHS or a State; the Exchange's evaluation of consumer complaints, including the complaint of the affected individual; audits; information provided by the consumer, issuer, or non-Exchange entity; or other mechanisms. All requests for special enrollment periods, including those that may be initiated by the Exchange through its own audits or other mechanisms, should be evaluated by the Exchange as part of the eligibility determination process established pursuant to 45 CFR 155.310. We expect to develop further guidance and standard operating procedures for making the determinations that would trigger this special enrollment period. If a qualified individual is harmed due to an error or inaction on the part of a non-Exchange entity, the qualified individual may also seek to demonstrate the existence of exceptional circumstances to the Exchange under existing regulations at § 155.420(d)(9). If the Exchange determines that the error or inaction on the part of the non-Exchange entity caused the qualified individual to be harmed (including, but not limited to failure to be enrolled in a health plan, enrolled in the incorrect health plan or failure to receive advance payments of the premium tax credit or cost-sharing reduction), the Exchange may provide for a special enrollment opportunity to correct the error.
We solicit comments on these proposals.
We propose to amend § 155.700 by adding a definition for “SHOP application filer.”
We propose that “SHOP application filer” would mean an applicant, an authorized representative, an agent or broker of the employer, or an employer filing for its employees where not prohibited by other law. By broadening who can file an employee application beyond just an employee, we propose to permit the entities that have traditionally assisted employees in filing applications to provide such assistance.
In § 155.705, we propose adding paragraph (b)(6)(i) so that a SHOP would require QHP issuers to make changes to rates at a uniform time that is no more frequently than quarterly. This proposed paragraph would conform to the proposed issuer standard at § 156.80 regarding the frequency of indexed rate updates. In paragraph (b)(6)(ii), we propose providing issuers participating in the FF–SHOP with the maximum amount of flexibility permitted under § 156.80 as proposed in this rule and new (b)(6)(i), standardizing the effective dates for rate updates in the FF–SHOP, and providing that FF–SHOP issuers would have to submit rates to HHS 60 days in advance of the effective date. Consistent with technical guidance provided to issuers through the Health Insurance Oversight System on April 8, 2013, issuers would be able to submit updated quarterly rates for the FF–SHOP no sooner than for the third
We are also re-proposing a new pargraph (c). We previously proposed this paragraph in a recent rulemaking
In paragraph (d), we propose to provide additional flexibility to States with respect to the operation of the SHOP Navigator program when the State has elected to establish and operate only the SHOP. In most cases, there need not be separate Navigator programs for the SHOP and individual market Exchange. However, when the SHOP is operated by the State, and the individual market Exchange is operated by the Federal government, there would be two Navigator programs: a Federal Navigator program for the individual market Exchange, and a State Navigator program for the SHOP. We propose to clarify that when a State establishes and operates a SHOP independently of a Federally-facilitated individual market Exchange, as proposed in this rulemaking, the SHOP would have the flexibility to focus its Navigator program on outreach and education to small employers. If the State takes this option, SHOP Navigators would be able to fulfill their statutory and regulatory obligations under section 1311(i) of the Affordable Care Act and 45 CFR 155.210 to facilitate enrollment in QHPs, and to refer consumers with complaints, questions, and grievances to applicable offices of health insurance consumer assistance or ombudsmen, by referring small businesses to agents and brokers for these types of assistance, so long as State law permits agents and brokers to carry out these functions. The option of carrying out these two Navigator functions via referrals to agents and brokers would not be available in any other circumstances. Additionally, this provision would not prevent a State operating a separate SHOP from requiring SHOP Navigators to perform the full range of Navigator services with equal focus and without making referrals to agents and brokers, if it so desires.
In § 155.730, we propose amending the application filing standard to relieve SHOPs of having to of accept paper applications and accept applications by telephone. Such relief may reduce the cost of operating a SHOP while permitting SHOPs to provide applications in the manner that will best serve their enrollees. Nothing in this proposed standard would prohibit SHOPs from accepting paper applications or applications by telephone. Additionally, in this section we clarify that an employer or an employee application may be filed by a “SHOP application filer,” that is, an applicant, an authorized representative of the applicant, an agent or broker, and, if not prohibited by other law, an employer filing on behalf of employees. By broadening who can file an employee application beyond just an employee, we propose to permit the entities that have traditionally assisted employees in filing applications to provide such assistance.
In § 155.735, we propose that each SHOP would be required to develop uniform standards for the termination of coverage in a QHP. Standardizing the timing, form, and manner of a group's termination in the SHOP would ensure that an employer offering coverage through multiple health insurance issuers (that is, in a SHOP offering employee choice) will be subject to uniform, predictable termination policies. Some SHOPs have considered developing termination standards using their authority to establish a uniform enrollment timeline and process pursuant to § 155.720(b). We propose this section to clarify the authority for SHOPs to establish termination standards and to set such standards for the FF–SHOP. Because SHOPs will not be required to offer employee choice and premium aggregation until plan years beginning on or after January 1, 2015, we created a transition policy such that these standards would be required starting in 2015. However, we are proposing these standards now, for two reasons. First, State Exchanges may desire to implement employee choice and premium aggregation in 2014 and, if so, would be required to apply these standards. Second, we are proposing these standards in response to comments received from issuers on the Exchange Final Rule and 2014 Payment Notice requesting detailed guidance well in advance of implementation to so that they are better able to build conforming systems.
Proposed paragraph (b) addresses employer requests for termination of employer group coverage. In paragraph (b)(1), we propose that each SHOP would be required to set policies regarding advance notice of such terminations and when coverage will end following the SHOP's receipt of notice that an employer wishes to terminate coverage.
In paragraph (b)(2), we propose that employer-requested terminations of employer group coverage through an FF–SHOP would be effective only on the last day of a month. We also propose that notice of termination would have to be received from the employer on or before the 15th of a given month for it to be effective on the last day of that month. If notification of termination is provided after the 15th of the month, we propose the group's coverage be terminated on the last day of the following month.
Proposed paragraph (c) addresses terminations of employer group coverage for non-payment of premiums. In paragraph (c)(1), we propose that each SHOP would be required to establish standards for termination due to non-payment, including defining grace periods, due dates for premium payments made to a SHOP pursuant to § 155.705(b)(4), employer and employee notices, and reinstatement policies. Standardized grace periods, due dates for payment and reinstatement policies, and notices would ensure that an employer offering coverage through multiple health insurance issuers is subject to clear and consistent rules.
In paragraph (c)(2), we propose the policies for terminations for non-payment of premiums in the FF–SHOP. As proposed, payment for a group's coverage for a given month would be due to the FF–SHOP by the first day of the coverage month. Additionally, we propose that the employer would have a 31-day grace period from the first day of the coverage month for making this payment. Having reviewed the State-
In paragraph (c)(2)(iii), we propose that an employer would have 30 days from the date of its termination from coverage under the FF–SHOP to request the reinstatement of its group in the previous coverage. Additionally, we propose that the employer would pay in full all outstanding premiums and the premium for the next month's coverage before reinstatement could occur.
Proposed paragraph (d) addresses terminations of employee or dependent coverage. In paragraph (d)(1), we propose that each SHOP would be required to establish consistent policies across QHP issuers regarding the process and effective dates for termination of employee and dependent coverage in the SHOP. Furthermore, this provision would clarify the specific circumstances under which the SHOP would be permitted to terminate an employee's coverage.
In paragraph (d)(2), we propose that in the FF–SHOP, terminations for the reasons enumerated in paragraph (d)(1) would be effective on the last day of the month in which the FF–SHOP receives notice of the event. We further propose that the FF–SHOP must have received notice prior to the proposed date of the termination. Notwithstanding the standards promulgated in 45 CFR 147.120, under this proposed standard a person who loses coverage as a dependent when she turns 26 years old would have to be covered on the parent's plan through the end of the month.
In paragraph (e), we direct that all SHOPs comply with the general administrative requirements of § 155.430(c). This compliance would ensure that the SHOP keeps sufficient records of terminations and that reasonable accommodations would be made for enrollees with disabilities.
In paragraph (f), we propose that the standards set in this section would apply to all SHOPs for coverage beginning on or after January 1, 2015. Additionally, because these provisions propose to harmonize issuer termination policies where employee choice exists, we propose that SHOPs offering employee choice and premium aggregation prior to January 1, 2015 would need to comply with these standards by the time they are operational. We do not expect this provision to place additional burden on such States, as we expect them to have already developed such policies consistent with this proposal pursuant to § 155.720(b).
Sections 1311, 1313, and 1321 of the Affordable Care Act provide the Secretary with oversight of financial integrity and program integrity in the State Exchanges. More specifically, the statutory authority for HHS oversight of the programmatic integrity of an Exchange is found in section 1313(a)(1) of the Affordable Care Act, which requires an Exchange to keep an accurate accounting of all activities as stated above, and section 1313(a)(2) of the Affordable Care Act which gives the Secretary the authority to investigate the affairs of an Exchange and examine the properties and records of an Exchange in relation to activities undertaken by an Exchange. In addition, section 1313(a)(5) of the Affordable Care Act directs the Secretary to provide for the efficient and non-discriminatory administration of Exchange activities and to implement any measure or procedure that the Secretary determines is appropriate to reduce fraud and abuse. The key principles underlying the Secretary's State Exchange oversight program design include: effectiveness, efficiency, integrity, coordination, transparency and accountability in State Exchange operations. The State Exchange oversight program builds on existing State oversight efforts, where possible, by coordinating with State authorities to address compliance issues and concerns. State Exchange compliance with the Affordable Care Act and the regulatory requirements being proposed in this proposed rule (if finalized) would include submitting financial and operational reports and maintaining records in a standardized fashion.
These proposed standards will enable HHS to carry out its responsibility of ensuring that Federal funds are used appropriately in the administration of State Exchange activities. Therefore, we are proposing that the State Exchange must submit to HHS financial reports and must oversee its activities to ensure that it is complying with Federal requirements, such as those governing eligibility determinations for advance payments of the premium tax credit and cost-sharing reductions.
These sections, § 155.1200 and § 155.1210, would ensure that the State Exchange has financial and operational safeguards in place to avoid making inaccurate eligibility determinations, including those related to advance payment of the premium tax credit, cost-sharing reductions, and enrollments. These sections are not intended to be a part of any prospective measurement program that may be required under the Improper Payments Elimination and Recovery Act at 31 U.S.C. 3321.
We are not proposing that these standards should be applicable to the FFE, because CMS, which will operate the FFE, is already subject to similar standards in its role as a government agency. For example, OMB Circular A–123 dated December 21, 2004, provides instruction on internal controls (financial and operational) for Federal agencies.
Section 1313(a)(1) of the Affordable Care Act requires an Exchange to keep an accurate accounting of all activities, receipts, and expenditures, and annually submit to the Secretary a report concerning such accounting. In § 155.1200(a), we propose that the State Exchange maintain an accounting of all its receipts and expenditures, in accordance with GAAP. In addition, we propose that the State Exchange develop and implement a process for monitoring all Exchange-related activities for effectiveness, efficiency, integrity, transparency and accountability. We believe that these activities would help to ensure State Exchange compliance with Federal requirements as set forth in Part 155 and ensure the appropriate administration of Federal funds, including advance payment of the premium tax credit and cost-sharing reductions. In § 155.1200(b), we propose that the State Exchange submit several types of reports to HHS. The State Exchange would submit at least annually a report to allow for transparency of State Exchanges activities. The report must include a financial statement presented in accordance with GAAP. This report is due to HHS by April 1st of each year. Additionally, the State Exchange must submit reports in a form and manner to be specified by HHS regarding eligibility and enrollment. These reports will focus on eligibility determination errors, non-discrimination safeguards, accessibility of information, and fraud and abuse incidences. The State Exchange must also submit performance monitoring data that includes financial sustainability, operational efficiency, and, consumer satisfaction. We solicit comments on our approach, including comments on the content, format, and timing of such reports.
Section 1313(a)(3) of the Affordable Care Act requires that an Exchange be
In § 155.1200(d), we propose that independent audits address specific processes and activities of State Exchanges including financial and programmatic activities and those related to the verification and determination of applicants' eligibility for enrollment in the State Exchanges and the subsequent enrollments. We propose that the external audit address whether the Exchange is complying with § 155.1200(a)(1) by keeping an accurate accounting of Exchange receipts and expenditures in accordance with generally accepted accounting principles (GAAP). We note that accurate eligibility determinations by the State Exchanges are important to the implementation of the Affordable Care Act. Failure to apply Federal standards appropriately could result in improper Federal payments in the form of advance payments of the premium tax credit and cost sharing reductions. Therefore, we also propose that the external audits and annual reports required under paragraphs (b) and (c) of this section address State Exchange processes and procedures to comply with the standards for Exchanges under 45 CFR Part 155 related to advance payments of the premium tax credit and cost-sharing reductions. These standards include the requirements under subpart D regarding eligibility determinations, including the requirements regarding the confidentiality, disclosure, maintenance, and use of information as set forth in 45 CFR 155.302(d)(3); subpart E regarding individual market enrollment in QHPs; and subpart K regarding QHP certification. We propose that such audits and annual reports assess whether a State Exchange has processes and procedures in place to prevent improper eligibility determinations and enrollment transactions. Assessing whether State Exchanges are complying with Federal requirements in these areas will assist in ensuring that eligible individuals are appropriately enrolled and receiving appropriate advance payments of the premium tax credit and cost-sharing reductions. Determining whether there are appropriate internal controls and standard operating procedures in place to identify and correct weaknesses in these particular areas will mitigate the creation of improper payments, thereby safeguarding Federal funds.
We seek comment on the proposed annual audits, and other activities that State Exchanges should specifically be required to audit annually or on an interim basis.
Under section 1313(a)(2) of the Affordable Care Act, the Secretary, in coordination with the Inspector General of HHS, may investigate, examine properties and records, and require periodic reports from the State Exchange. Under section 1313(a)(3) of the Affordable Care Act, the State Exchange is subject to annual audits by the Secretary. We anticipate conducting a limited number of targeted audits each year, informed by information from the external audit, annual report, prospective measurement programs of improper payments, consumer complaints, or other data sources. To prepare for such audits, the State Exchange would be required to maintain records pursuant to this section. Preparation for such audits would also require the State Exchange to ensure its contractors, subcontractors, and agents maintain these records.
In § 155.1210, we propose the requirements for records maintenance for the State Exchange. We propose that the State Exchange and its contractors, subcontractors, and agents maintain records for 10 years, including documents and records (whether paper, electronic or other media) and other evidence of accounting procedures and practices of the State Exchange. These records must be sufficient and appropriate to respond to any periodic auditing, inspection or investigation of the State Exchange's financial records or to enable HHS or its designee to appropriately evaluate the State Exchange's compliance with Federal requirements. In addition, we propose that the State Exchange must make all records of this section available to HHS, the OIG, the Comptroller General, or their designees, upon request. We have proposed this 10-year retention period to be consistent with the statute of limitations for the False Claims Act at 31 U.S.C. 3731. We request comment on auditing procedures and the length of document retention requirements.
We propose to amend 45 CFR 156.20 by adding the definitions for “Delegated entity,” “Downstream entity,” “Enrollee satisfaction survey vendor,” and “Registered user of the enrollee satisfaction survey data warehouse,” in alphabetical order to read as follows:
We propose to define a delegated entity as any party, including an agent or a broker that enters into an agreement with a QHP issuer to provide administrative services or health care services to qualified individuals, qualified employers, or qualified employees and their dependents.
We propose to define a downstream entity as any party, including an agent or a broker, that enters into an agreement with a delegated entity or with another downstream entity for purposes of providing administrative or health care services related to the agreement between the delegated entity and the QHP issuer. The term “downstream entity” is intended to reach the entity that directly provides administrative services or health care services to qualified individuals, qualified employers, or qualified employees and their dependents.
We propose to define an “enrollee satisfaction survey vendor” as an organization that has relevant survey administration experience (for example, Consumer Assessment of Healthcare
An “Exchange” has the meaning given to the term in § 155.20 of this subchapter.
We propose to define a “registered user of the enrollee satisfaction survey data warehouse” as enrollee satisfaction survey vendors, QHP issuers, and Exchanges authorized to access CMS's secure data warehouse to submit survey data and to preview survey results prior to public reporting.
We are proposing to add a new paragraph (d)(3) in § 156.80 to clarify when issuers may modify rates under the single risk pool provision. These proposed market-wide rate modification limitations would align with the limitations on rate setting schedules in the Exchange and SHOP, which is necessary to reduce the risk of adverse selection between plans offered outside the Exchange and QHPs offered through the Exchange. Furthermore, the frequency of rate modifications affects the rate review process because each time an issuer adjusts its index rate, the new rates of all of its plans must be subjected to rate review.
Accordingly, in paragraph (d)(3)(i), we propose that issuers in individual markets or markets in which the individual and small group risk pools were merged by the State would be permitted to make changes to their market-wide adjusted index rate and plan-specific pricing on an annual basis, as discussed in the preamble to the Market Reform Rule (78 FR 13422). In a State in which the individual and small group risk pools were merged by the State, an issuer would be able to adjust its index rate and plan-specific pricing no more frequently than annually, since the stricter standard of the individual market must be applied to the entire merged market for consistency throughout the single risk pool.
In paragraph (d)(3)(ii), we propose that issuers in the small group market generally would be permitted to make such changes on a quarterly basis, beginning with rates effective for the third quarter of 2014. This proposal is consistent with technical guidance provided to issuers through the Health Insurance Oversight System on April 8, 2013.
We propose to amend § 156.285 to ensure that all QHP issuers offering coverage in a SHOP comply with the termination of coverage requirements proposed at § 155.735 as a condition of certification for plan years beginning on or after January 1, 2015, when § 155.735 will apply to all SHOPs. Some SHOPs may decide to implement employee choice and premium aggregation before January 1, 2015, and § 155.735 would apply in such SHOPs as an operational requirement.
Proposed § 156.330 describes the notice required to be submitted by QHP issuers offering QHPs through FFEs, including the FF–SHOPs, when such issuers undergo a change of ownership, as recognized by the State in which the issuer offers the QHP, during the term of its QHP agreement. We propose that the issuer be required to notify HHS, in a manner to be specified by HHS, and provide the legal name, the Taxpayer Identification Number (TIN) of the new owner, and the effective date of the change at least 30 days prior to the date of change. We also propose that the new owner must agree to adhere to all applicable statutes and regulations. These provisions would provide HHS with adequate notice so that it could monitor or audit the new owner to ensure that the new owner meets all QHP certification standards and clarify that the new owner would agree to adhere to all applicable statutes and regulations. We considered proposing a standard similar to that in the Medicare Parts C and D programs, in which HHS, the current issuer, and the prospective new issuer would enter into a novation agreement prior to the change of ownership. We further considered requiring the prospective new issuer to submit financial and solvency information to HHS in advance of the change of ownership. However, based on research of existing State law, we believe that such standards could largely duplicate existing State requirements. We welcome comments about the 30-day notice requirement, about the information being requested when a change of ownership occurs, and about whether to specifically require a novation.
Section 1321(a)(1)(B) of the Affordable Care Act establishes that the Secretary must issue regulations setting forth standards for the offering of QHPs through the Exchanges. Based on this general authority, we propose in § 156.340 standards for delegated and downstream entities, similar to existing standards for such entities that contract with Medicare Advantage organizations, described at 42 CFR 422.504(i)(3)–(4). In § 156.340(a), we propose the general requirement that, notwithstanding any relationship(s) that a QHP issuer may have with delegated or downstream entities, the QHP issuer maintains responsibility for its compliance and the compliance of any of its delegated or downstream entities, with all applicable standards, including those we propose at § 156.340(a)(1) through (4). In paragraphs (a)(1) through (a)(4), we propose that the QHP issuer be required to comply with Federal standards,
Because a QHP issuer generally cannot enforce an agreement to which it is not a party, we believe that the most legally effective way to ensure that a QHP issuer retains the necessary control and oversight over its delegated or downstream entities would be to require that all agreements governing the relationships among a QHP issuer and its delegated and downstream entities (that is, those between the QHP issuer and its delegated entity; those between the delegated entity and any downstream entity; and those between downstream entities) contain provisions specifically describing each of the delegated and downstream entity's obligations to fulfill the QHP issuer's responsibilities proposed in paragraph (a) of this section. Such a requirement would be similar to the existing requirement for agreements governing the relationship among entities that contract with Medicare Advantage organizations, described at 42 CFR 422.504(i)(3)–(4). Therefore, in § 156.340(b)(1)–(2), we propose that all agreements among the QHP issuer's delegated and downstream entities be required to specify delegated activities and reporting responsibilities, and either provide for revocation of the delegated activities and reporting standards, or specify other remedies in instances where HHS or the QHP issuer determines that such parties have not performed satisfactorily.
Furthermore, we propose in § 156.340(b)(3) that all agreements among the QHP issuer's delegated and downstream entities be required to specify that the delegated or downstream entity must comply with all applicable laws and regulations relating to the standards specified under paragraph (a) of this section. In § 156.340(b)(4) of this proposed rule, we propose that the QHP issuer's agreement with any delegated or downstream entity must specify that the delegated and downstream entity must permit access by the Secretary and the OIG or their designees in connection with their right to evaluate through audit, inspection, or other means, to the delegated or downstream entity's books, contracts, computers, or other electronic systems, including medical records and documentation, relating to the QHP issuer's obligations in accordance with Federal standards under paragraph (a) of this section until 10 years from the final date of the agreement period. Such a requirement would be similar to the existing requirement for agreements governing the relationship among entities that contract with Medicare Advantage organizations, described at 42 CFR 422.504(i)(2)–(4).
Finally, we propose in § 156.340(b)(5) that all existing agreements contain specifications described in paragraph (b) of this section by no later than January 1, 2015. We believe the effective date recognizes the time that QHP issuers may need to amend existing agreements with delegated and downstream entities to comply with the requirements under paragraph (b). For agreements that are newly entered into as of October 1, 2013, we propose an effective date for the specifications described in paragraph (b) of this section to be no later than the effective date of the agreement.
In this subpart, pursuant to section 1321(a)(1)(B) of the Affordable Care Act, we propose standards for oversight of QHP issuers with respect to cost-sharing reductions and advance payments of the premium tax credit. We believe that it is important to establish robust oversight relating to cost-sharing reductions and advance payments of the premium tax credit in order to ensure that Federal funds are used efficiently and in full compliance with the provisions of the Affordable Care Act, and that consumers receive the financial assistance afforded them under the statute. The standards proposed in this subpart are consistent with the information we provided in the “Frequently Asked Questions on Health Insurance Marketplaces” dated May 14, 2013.
In particular, we propose requirements and timeframes for refunds to eligible enrollees and providers when a QHP issuer incorrectly applies the cost-sharing reductions or advance payments of the premium tax credit, or incorrectly assigns an individual to a plan variation (or standard plan without cost-sharing reductions), resulting in the enrollee or the provider paying a portion of the cost sharing or premium amount that should otherwise have been reduced. The proposed provisions are intended to ensure that enrollees and providers are promptly refunded any excess cost sharing they should not have paid.
Section 156.400 of this subpart defines a “most generous,” and a “more generous,” plan variation. We propose to supplement those definitions by clarifying that the definitions of a “least generous,” and a “less generous,” plan variation have the opposite meanings of the existing definitions of a “most generous,” or a “more generous” plan variation. Specifically, we propose that, as between two plan variations (or a plan variation and a standard plan without cost-sharing reductions), the plan variation or standard plan without cost-sharing reductions designed for the category of individuals first listed in 45 CFR 155.305(g)(3) would be deemed the less generous one. The term less generous is used in this proposed rule to address circumstances in which a QHP issuer would reassign an enrollee from a more generous plan variation to a less generous plan variation (or standard plan without cost-sharing reductions), as discussed in greater detail below. We also propose a technical modification to change “QHP or plan variation” to “standard plan or plan variation” to clarify that a plan variation is not distinct from a QHP.
To address misapplication of cost-sharing reductions due to an enrollee, in § 156.410, we propose to add new paragraphs (c) and (d) to specify the actions a QHP issuer would take if it does not provide the appropriate cost-sharing reductions to an individual, or if it does not assign an individual to the appropriate plan variation (or standard plan without cost-sharing reductions) in accordance with § 156.410(a)–(b) or § 156.425(a)–(b) of this subpart. The QHP issuer is responsible under these provisions for ensuring that individuals are assigned to the appropriate plan variation (or standard plan without cost-sharing reductions) and ensuring that the cost-sharing reduction is applied when the cost sharing is collected. We believe that enrollees and providers should be held harmless if the QHP issuer misapplies the cost-sharing reduction, such that the QHP issuer should not recoup excess funds paid for the individual or to the provider.
Accordingly, in paragraph (c)(1), we propose that if a QHP issuer fails to ensure that an individual assigned to a QHP plan variation receives the cost-sharing reductions required under the applicable plan variation, taking into account the requirement regarding cost sharing previously paid under other plan variations of the same QHP under § 156.425(b), the QHP would notify the enrollee of the improper application of the cost-sharing reductions and refund any excess cost sharing paid by or for the enrollee during such period no later than 30 calendar days after discovery of the improper application of the cost-sharing reductions. This refund would be paid to the person or entity that paid the excess cost sharing, whether the enrollee or the provider.
In paragraph (c)(2), we propose that if a QHP issuer provides an enrollee assigned to a plan variation more cost-sharing reductions than required under the applicable plan variation, taking into account § 156.425(b) concerning continuity of deductibles and out-of-pocket amounts, if applicable, then the QHP issuer will not be eligible for reimbursement of any excess cost-sharing reductions provided to the enrollee, and may not seek reimbursement from the enrollee or the provider for any of the excess cost-sharing reductions. As noted above, because the QHP issuer is responsible for ensuring the cost-sharing reduction is provided appropriately, we do not believe that the QHP issuer should be able to recoup overpayments of cost-sharing reductions that resulted from the QHP issuer's own errors.
In paragraph (d), we propose that if a QHP issuer does not comply with § 156.410(b) by improperly assigning an enrollee to a plan variation (or standard plan without cost-sharing reductions), or the QHP issuer does not change the enrollee's assignment due to a change in eligibility in accordance with § 156.425(a), in each case, based on the eligibility and enrollment information or notification provided by the Exchange, then the QHP issuer would, no later than 30 calendar days after discovery of the improper assignment, reassign the enrollee to the applicable plan variation (or standard plan without cost-sharing reductions) and notify the enrollee of the improper assignment.
If a QHP issuer reassigns an enrollee from a more generous to a less generous plan variation of a QHP (or a standard plan without cost-sharing reductions), for example from a silver plan variation with an 87 percent AV to a silver plan variation with an 73 percent AV, to correct an improper assignment on the part of the issuer pursuant to proposed paragraph (d)(1), the QHP issuer will not be eligible for, and may not seek from the enrollee or provider, reimbursement for any of the excess cost-sharing reductions provided to or for the enrollee following the effective date of eligibility required by the Exchange. Because the QHP issuer is responsible for assigning and reassigning the enrollee to a plan variation of a QHP (or standard plan without cost-sharing reductions) and because of the reliance interests of the enrollee, we believe that the QHP issuer should not be able to recover excess cost-sharing reductions if it erroneously assigns an individual to a more generous plan variation. This aligns the policy proposed in this section with respect to the misapplication of the cost-sharing reductions.
Conversely, proposed paragraph (d)(2) provides that, if a QHP issuer reassigns an enrollee from a less generous plan variation (or a standard plan without cost-sharing reductions) to a more generous plan variation of a QHP (for example from a silver plan variation with an 87 percent AV to a silver plan variation with an 94 percent AV) to correct an improper assignment on the part of the issuer, the QHP issuer would recalculate the individual's liability for cost sharing paid between the effective date of eligibility required by the Exchange and the date on which the issuer effectuated the change. The QHP issuer would refund any excess cost sharing paid by or for the enrollee during such period, no later than 30 calendar days after discovery of the incorrect assignment. This refund would be paid to the person or entity that paid the excess cost sharing, whether the enrollee or the provider. For example, if a QHP issuer improperly assigned an individual to a silver plan variation with an 87 percent AV for the plan year starting January 1, 2014, but on March 1, 2014, discovers that the individual should have been assigned to a silver plan variation with a 94 percent AV, then the QHP issuer would be required to reassign the individual to the silver plan variation with a 94 percent AV by March 31, 2014. The issuer would also refund any excess cost sharing paid by or for the enrollee between January 1, 2014 and the date the reassignment is effectuated, that is, March 31, 2014.
We seek comment on the proposed approach, including the 30 calendar day timeframe for QHP issuers to reassign an individual to the correct plan variation and refund any excess cost sharing paid by or for the enrollee. We also seek comment on whether the timeframe should depend on the point in the month the issuer discovers the improper assignment, considering the amount of time issuers may require to effectuate the reassignment, as well as the impact on enrollees due to a delay in reassignment. We note that the date of the reassignment will not affect the initial effective date of eligibility, and that the enrollee would still be refunded any excess cost sharing paid by or for the enrollee between the effective date of eligibility and the date of the reassignment.
We are also considering requiring that, for each quarter, a QHP issuer provide to HHS and the Exchange, in a manner and timeframe specified by HHS, a report detailing the occurrence of any improper applications of cost-sharing reductions in violation of the standards finalized and proposed in § 156.410(a) and (c) and § 156.425(b), as well as instances when it did not refund any excess cost sharing paid by or for an enrollee in accordance with proposed § 156.410(c)(1) and § 156.410(d)(2), or was reimbursed for excess cost sharing provided in violation of proposed § 156.410(d)(1). This quarterly report would alert HHS and the Exchange to patterns of such errors or omissions, and could identify areas where issuer performance can be improved. However, we recognize that, given operational constraints, it may be difficult at this point for QHP issuers to develop systems that can produce these types of quarterly reports for the 2014 benefit year. Therefore, we are considering requiring issuers to produce these reports beginning in the 2015 benefit year. We seek comment on the proposed approach, including whether such reports should be provided less frequently. We also seek comment on whether HHS should establish a minimum error rate or threshold before a QHP issuer is required to inform HHS of such improper applications of cost-sharing reductions in the quarterly report, as well as what an appropriate error rate or threshold should be.
We also propose to add new paragraph (c) to § 156.460, related to the
Additionally, we are also considering that for each quarter beginning in 2015, a QHP issuer would be required to provide a report to HHS and the Exchange, in a manner and timeframe specified by HHS, detailing the occurrence of instances of improper applications of the requirements of § 156.460. This would be similar to the quarterly reporting requirements with respect to the misapplication of cost-sharing reduction discussed in the previous section of this subpart, and we note that we would anticipate utilizing a single process for issuers to submit such quarterly reports. We seek comment on the proposed approach, including the timeframe for issuers to refund any excess premiums to enrollees, the timeframes for providing the quarterly report to HHS and the Exchange, whether HHS should also establish a minimum rate or threshold before a QHP issuer is required to notify HHS of any such instances, and what an appropriate rate or threshold would be.
In § 156.480, we propose general provisions related to the oversight of QHP issuers in relation to cost-sharing reductions and advance payments of the premium tax credit. Cost-sharing reduction reimbursements and advance payments of the premium tax credit are Federal funds, which will pass from HHS directly to QHP issuers. Therefore, we believe that it is necessary for HHS to oversee QHP issuer compliance in these areas, regardless of whether the QHP is offered through a State Exchange or an FFE. We seek comment on this approach, including with respect to how HHS may coordinate with State Exchanges and State authorities to address non-compliance with Federal requirements regarding cost-sharing reductions or advance payments of the premium tax credit. We note that in States where there is a State Exchange, the State has enforcement authority over QHP issuers that are not in compliance with the standards set forth in subpart E of this Part. If the State does not enforce such standards against the QHP issuers in the individual market participating on the State Exchange, HHS will enforce QHP issuer compliance with these requirements, including the imposition of CMPs as provided for under Section 1321(c) of the Affordable Care Act. In instances where HHS enforces QHP issuer compliance with respect to cost-sharing reductions and advanced payments of the premium tax credit, we envision CMPs would be imposed using the same standards and processes as proposed for QHP issuers in an FFE in subpart I of this Part.
To effectively oversee the provision of cost-sharing reductions and advance payments of the premium tax credit by issuers of QHPs on State Exchanges, we propose to apply certain standards proposed in part 156, subpart H for QHP issuers participating in FFEs to QHP issuers participating in the individual market on a State Exchanges. In paragraph (a), we propose to extend the standards set forth in proposed § 156.705 concerning maintenance of records to a QHP issuer in the individual market on a State Exchange in relation to cost-sharing reductions and advance payments of the premium tax credit. We also propose that QHP issuers ensure that any delegated entities and downstream entities adhere to these requirements, in parallel with the standards for QHP issuers on an FFE proposed in § 156.340. We believe applying these provisions to QHP issuers participating in State Exchanges is necessary to allow HHS, pursuant to its oversight authority, to access records and investigate compliance with the requirements of this subpart. We note that a QHP issuer and its delegated entities and downstream entities may satisfy this standard by maintaining the relevant records for a period of 10 years and ensuring that they are accessible if needed in the event of an investigation or audit.
We also propose that QHP issuers participating in State Exchanges and FFEs be subject to reporting and oversight requirements that are intended to assist in monitoring a QHP issuer's compliance with Federal standards with regard to cost-sharing reductions and advance payments of the premium tax credit, in order to safeguard Federal funds distributed through these programs, and to correct improper payments to the QHPs.
In paragraph (b), we propose that an issuer that offers a QHP in the individual market through a State Exchange or an FFE report to HHS annually, in a timeframe and manner required by HHS, summary statistics with respect to administration of cost-sharing reductions and advance payments of the premium tax credit. This proposed provision would permit HHS to obtain summary information regarding cost-sharing reductions and advance payments of the premium tax credit across a broad range of issuers to identify systemic issues and errors, without requiring annual audits. We contemplate that this information will include (1) The total amount of cost-sharing paid under each plan variation, including the amount paid by the individual and amount reduced by the cost-sharing reductions program, (2) an annual error rate reflecting the misapplication of the cost-sharing reductions and advance payments of the premium tax credit by plan variation, and (3) the total number of enrollees who received a refund as well as the total and average refunds made to enrollees and providers by plan variation resulting from underpayments. Additionally, in paragraph (c), as is required under other Federal programs such as Medicare Advantage, we propose that HHS or its designee may audit an issuer that offers a QHP in the individual market through a State Exchange or an FFE to assess compliance with the requirements of this subpart. An audit may be triggered by sources such as the annual reports proposed in § 156.480(b) of this Part, consumer complaints, and information received from State regulatory agencies. We note that we intend to coordinate any audits of QHP issuers in an FFE with the compliance reviews proposed in § 156.715 of subpart H. We seek comment on these proposed reporting requirements, including the operational readiness of issuers to report these data, our proposed approach to audits, and how such oversight activities may be
a. Maintenance of Records for the Federally-facilitated Exchanges (§ 156.705)
Section 1313(a)(2) of the Affordable Care Act authorizes HHS to examine records and solicit reports regarding activities undertaken by the Exchanges. So that HHS can prepare for and successfully complete compliance reviews and audits to account for expenditures and protect against fraud and abuse, we propose that QHP issuers must retain certain records. The record retention standards we propose in this section are similar to those already established for the Medicare Advantage Program, and described at 42 CFR 422.504(d).
We propose in § 156.705(a) that issuers offering QHPs in an FFE maintain all documents and records (whether paper, electronic, or other media) and other evidence of accounting procedures and practices, which are critical for HHS to conduct activities necessary to safeguard the financial and programmatic integrity of the FFEs. We propose that such activities include: (1) periodic auditing of the QHP issuer's financial records related to the QHP issuer's participation in an FFE, and to evaluate the ability of the QHP issuer to bear the risk of potential financial losses; and (2) compliance reviews and other monitoring of a QHP issuer's compliance with all Exchange standards applicable to issuers offering QHPs in the FFE listed in part 156. We considered requiring maintenance of other types of records, but we propose limiting our scope to Exchange-specific records as applicable to the FFEs. We seek comment on the type and scope of records we propose must be maintained by QHP issuers participating in the FFEs.
In § 156.705(b), we propose to clarify that the records described in proposed paragraph (a) of this section include the sources listed in proposed § 155.1210(b)(2), (b)(3), and (b)(5). Our intent is to align record maintenance standards of the FFEs and State Exchanges to the extent possible.
In § 156.705(c), we propose that issuers offering QHPs in an FFE must maintain the records described in this section, as well as records required by § 155.710 (to determine SHOP eligibility), for 10 years. This proposed standard parallels standards in part 155 as well as existing part 153 standards (45 CFR 153.240(c), 153.520(e) and 153.620(b) and proposed §§ 153.310(c)(4), 153.405(h), and 153.410(c)). It is also consistent with the statute of limitations for the False Claims Act (31 U.S.C. 3731(b)). Our proposed 10-year record retention requirement supports the Federal government's right under the False Claims Act to investigate and pursue claims based on violations involving Federal funds that have occurred within the last 10 years.
Proposed § 156.705(d) explains that the records referenced in paragraph (a) must be made available to HHS, the OIG, the Comptroller General, or their designees, upon request.
These proposed standards pertain only to Exchange-specific areas of concern (for example, matters pertaining to advance payments of premium tax credits or cost-sharing reductions) within the FFEs, as HHS would expect the State DOI to oversee the maintenance of records pertaining to other aspects of QHP issuer operations as required under State law. We welcome comments on these proposed standards.
b. Compliance Reviews of QHP Issuers in Federally-facilitated Exchanges (§ 156.715)
Section 1313(a)(5) of the Affordable Care Act requires the Secretary to establish any measure or procedure that the Secretary has authority to implement in Title I of the Affordable Care Act or any other act to protect against fraud and abuse. Additionally, in accordance with section 1321 of the Affordable Care Act, the Secretary has the authority to issue regulations on the establishment and operation of an Exchange, the offering of QHPs through the Exchange, the establishment of reinsurance and risk adjustment programs, and other requirements as the Secretary determines appropriate.
Based on this authority, we propose in § 156.715(a) that issuers offering QHPs in an FFE be subject to compliance reviews by HHS to ensure ongoing compliance with Exchange standards applicable to issuers offering QHPs in the FFE. We envision our oversight of QHP issuers in FFEs to be primarily focused on Exchange standards applicable only to issuers offering QHPs in the FFE because oversight of market-wide standards will generally be performed by States as part of their regulatory oversight. We intend to rely on data related to these standards to inform our selection of the QHP issuers for compliance reviews. We anticipate that the majority of QHP issuers selected for compliance review will be identified using a risk-based approach and include an analysis of the data collected by an FFE during certification and the plan year. Given the primary role States play in regulating health insurance, these compliance reviews will be less rigorous than in Medicare Advantage. In paragraph (b), we describe the proposed scope of documents that HHS may inspect as part of the compliance review. We propose that HHS may review the records of the QHP issuer pertaining to its activities within an FFE, which include but are not limited to the QHP issuer's books and contracts, policy manuals and other QHP plan benefit information provided to the QHP issuer's enrollees, and the QHP issuer's policies and procedures related to the QHP issuer's activities in an FFE. We further propose that the scope of information subject to the compliance review include any other information reasonably necessary, as determined by HHS, for HHS to: (a) evaluate the QHP's issuer's compliance with Exchange standards applicable to issuers offering QHPs in the FFE and their performance in the FFE; (b) verify that the QHP issuer has performed the duties attested to as part of the QHP certification process; and (c) assess the likelihood of fraud and abuse. An example of an area that may be reviewed, evaluated, or inspected is compliance with proper application and documentation of advance payments of the premium tax credit and cost-sharing reductions. We invite comment regarding other areas that should be included or considered for inclusion in the compliance reviews.
We note that under section 1311(e)(1)(B) of the Affordable Care Act, which is codified in 45 CFR 155.1000(c), the Exchange may make the health plan available on the Exchange if doing so is in the interest of the qualified individuals and qualified employers. Accordingly, under § 156.715(c), we propose that HHS's findings from compliance reviews may be used in conjunction with other findings related to the QHP issuer's compliance with certification standards to confirm that permitting the issuer's QHPs to be available in an FFE is in the interest of qualified individuals and qualified employers as provided under § 155.1000(c)(2).
In § 156.715(d), similar to requirements for Medicare Part C audits, we propose that QHP issuers in an FFE make available to HHS the issuer's premises, physical facilities, and equipment for compliance reviews. We believe that on-site reviews are standard within the health insurance industry
In § 156.715(e), we propose a time period for which HHS may conduct compliance reviews. We propose that HHS may conduct compliance reviews of a QHP issuer's operations during any plan benefit year for up to 10 years from the last day of that plan benefit year, except when a QHP is no longer available through an FFE, HHS would be able to conduct a compliance review of the last plan benefit year of that QHP only up to 10 years from the last day that the QHP's certification was effective. For example, if a QHP's current benefit plan year ended on December 31, 2014, then HHS may conduct a compliance review of that benefit plan year until December 31, 2024. If QHP was decertified on May 1, 2014, then HHS may conduct a compliance review of the QHP's last benefit plan year until May 1, 2024. In the event that the 10 year review period ends during an ongoing compliance review, the ongoing compliance review would be permitted to continue beyond the 10 year review period. We invite comments on this proposal.
In subpart I, we propose the enforcement remedies that may be used in an FFE with respect to QHP issuers participating in an FFE.
a. Available Remedies; Scope (§ 156.800)
Section 1321(c)(2) of the Affordable Care Act authorizes the Secretary to enforce Exchange standards applicable to issuers offering QHPs in the FFE using CMPs as detailed in section 2723(b) of the PHS Act “without regard to any limitation on the application of those provisions to group health plans.” Section 2723(b) of the PHS Act authorizes the Secretary to impose CMPs as a means of enforcing the individual and group market reforms contained in Title XXVII, Part A of the PHS Act when a State fails to substantially enforce these provisions.
Section 1311(d)(4) of the Affordable Care Act requires an Exchange to implement procedures for the certification, recertification, and decertification of health plans as QHPs. Accordingly, we propose that HHS may determine that a QHP offered through an FFE will be decertified and no longer offered through an FFE under specified circumstances, including where the QHP no longer meets the conditions of the general certification criteria under 45 CFR 155.1000(c). We intend to focus our enforcement efforts on Exchange standards applicable to issuers offering QHPs in the FFE given that enforcement of market-wide standards will generally be performed by States as part of their traditional regulatory roles. In the interest of avoiding duplication of efforts, we intend to generally rely on determinations by States that have the authority to enforce Federal standards related to participation in a Federally-facilitated Exchange and are in fact, substantially enforcing these standards. In § 156.800, paragraphs (a) and (b), we propose CMPs and QHP decertification, respectively, as the two formal enforcement actions that HHS may take against issuers of QHPs offered in an FFE. These are the two tools that the Affordable Care Act authorizes the Secretary to use for addressing areas of non-compliance of QHP issuers in FFEs. As with our proposed approach to monitoring QHP issuers participating in an FFE, we intend to coordinate our enforcement actions with State efforts in order to streamline the oversight of QHP issuers by HHS and States and to avoid inappropriately duplicative enforcement actions. We solicit comment on the use of these proposed compliance tools. We also invite comments on how HHS can collaborate with States on enforcement actions.
b. Bases and Process for Imposing Civil Money Penalties in Federally-facilitated Exchanges (§ 156.805)
In § 156.805(a), we propose the bases on which HHS can impose CMPs on QHP issuers in FFEs. We propose imposing CMPs where there misconduct in the FFE or substantial non-compliance with Exchange standards applicable to issuers offering QHPs in the FFE. Examples include falsifying information furnished to an individual or entity upon which HHS relies to make evaluations of the QHP issuer's ongoing compliance with Exchange standards applicable to issuers offering QHPs in the FFE, or which have the effect of hindering the operations of an FFE. We intend to apply these penalties in a manner such that the level of the enforcement action would vary based on our assessment of the scope or level of the violation, taking into account the issuer's previous record of compliance, the frequency of the violation, and any aggravating or mitigating factors. Because QHPs are one of several commercial market insurance products operating in State markets, HHS will seek not to unnecessarily duplicate or interfere with the traditional regulatory roles played by State DOIs. HHS generally intends to focus its QHP oversight to Exchange standards applicable to issuers offering QHPs (for example, correctly administering advance payments of the premium tax credits and cost-sharing reductions and offering benefits consistent with those set forth in the QHP applications approved by HHS) because oversight of market-wide standards will generally be performed by States in their traditional regulatory roles. We will also seek to work collaboratively with State Departments of Insurance on topics of mutual concern, in the interest of efficiently deploying oversight resources and avoiding unnecessarily duplicative regulatory roles. We seek comment on this proposal.
In § 156.805(b), we propose factors that HHS may take into consideration in determining the amount of CMPs to assess. HHS recognizes that 2014 will be a transitional year for issuers offering QHPs. As a general principle, while HHS proposes to establish authority to impose penalties consistent with this proposed rule, we note that we intend to work collaboratively with issuers to address problems that may arise, particularly in 2014. We propose that an issuer's previous and ongoing record of compliance; the level of the violation, including the frequency of the violation and the impact of the violation on affected individuals; as well as any aggravating or mitigating circumstances be taken into consideration. Section 2723(b)(2)(C) of the PHS Act limits the CMP amount to $100 for each day for each individual adversely affected. Therefore in § 156.805(c), we propose that the maximum amount of penalty imposed for each violation to be $100 per day for each QHP issuer, for each individual adversely affected by the non-compliance. For violations where the number of individuals adversely
We expect this amount to be necessary and adequate for encouraging issuers to correct identified occurrences of non-compliance as quickly as possible. Our intent is to encourage QHP issuers to address issues of non-compliance rather than to impose a punitive monetary assessment, especially in situations where the issuer demonstrates good faith in monitoring compliance with applicable standards, identifying any occurrences of non-compliance, and resolving of issues of non-compliance. We believe that taking into consideration the various factors proposed in paragraph (b) provides HHS flexibility to consider the totality of the circumstances in determining a reasonable amount of CMP to assess. In paragraph (d), we propose standards for notifying QHP issuers of the intent to assess a civil money penalty, which notice must include an explanation of the QHP issuer's right to a hearing under subpart J of this part, which appeals process we propose to model after the process that applies to appeals of HIPAA violations. Section 156.805(e) contains our proposed provisions on the consequences of failing to timely request a hearing, which we have modeled after 45 CFR 150.347.
We seek comment on the content and scope of these provisions.
Section 1311(d)(4) of the Affordable Care Act directs that each Exchange must implement procedures for the certification, recertification, and decertification of health plans as QHPs, consistent with guidelines developed by the Secretary. We have considered the possibility of decertification at (1) the issuer level, (2) the QHP level, and (3) both at the issuer level and at the QHP level. We considered all three options because some of the bases for de-certification include failure to comply with applicable standards at the issuer level, while others uniquely involve compliance at the QHP level. However, since certification is granted at the plan (QHP) level, we propose that decertification should also occur at the QHP level.
In § 156.810(a), we propose the bases for decertification. We considered events that are likely to undermine the integrity or operations of an FFE, harm the health of enrollees by limiting access to healthcare, and or substantially interfere with HHS' ability to ensure that QHPs offered in an FFE are in the interests of qualified individuals and qualified employers. Recognizing that QHP issuers are voluntarily electing to participate in an FFE, and that participation is not required by any statutory mandate, we expect the majority of QHP issuers to cooperate with HHS in resolving any issues of non-compliance. As such and absent any extraordinary circumstances, we expect few decertifications, especially in the first plan year. With these considerations in mind, we propose in paragraph (a)(1), that a QHP may be decertified if the issuer substantially fails to comply with Federal laws and regulations applicable to QHP issuers participating in an FFE. In paragraphs (a)(2), (3), and (4), we propose that a QHP may be decertified if the issuer substantially fails to comply with other specific Federal standards applicable to its participation in an FFE, as related to the risk adjustment program, transparency in coverage, QHP marketing and benefit design, privacy and security standards, and advance payment of the premium tax credit and cost-sharing reductions. In paragraph (a)(5), we propose that a QHP may be decertified if the issuer operates in a manner that hinders the efficient and effective administration of an FFE. In paragraph (a)(6), we propose that failure of a QHP to meet the requirements of the applicable certification criteria would be a basis for decertification. In paragraph (a)(7), we propose that a QHP may be decertified when there is credible evidence that the issuer has committed or participated in fraudulent or abusive activities affecting the Exchange, including submission of false or fraudulent data. In paragraphs (a)(8) and (9), we propose as bases for decertification, when the QHP issuer substantially fails to meet Federal standards related to enrollees' ability to access necessary medical items and services which failure could have the effect of seriously harming enrollees. In paragraph (a)(10), we propose as a basis for decertification, when the State recommends to HHS that the QHP should no longer be available in an FFE. We note that in the first year, we expect decertification under these bases to be used only in extreme cases, and only after the issuer has a sufficient opportunity to come into compliance, unless the deficiency is egregious and the harm to enrollees or to the integrity or operations of the FFE is immediate and severe.
In § 156.810(b)(1), we propose that HHS may consider a previous or ongoing regulatory or enforcement actions taken by a State against a QHP issuer as a factor in determining whether to decertify a QHP offered by that issuer. We believe this is important to ensure that mitigating factors identified by the State are thoroughly considered in the decision to decertify a QHP. We believe that, by collaborating with the State in which a QHP is being considered for decertification, we can make a more informed decision about whether decertification is an appropriate course of action by HHS. In paragraph (b)(2), we propose that HHS may decertify a QHP offered by an issuer in an FFE based on a determination or action of a State as they relate to the issuer offering QHPs in an FFE, including, but not limited to, when a State places an issuer or its parent organization into receivership or when the State has recommended to HHS that a QHP should no longer be made available in an FFE. We invite comments on whether these bases are appropriate.
In § 156.810(c) and (d), we propose two processes for decertification actions, in consideration of the different bases which may result in decertification. Where the basis for decertification does not put the QHP enrollees' ability to access necessary medical items and services at risk or substantially compromise the integrity of FFEs, we propose a standard decertification process under § 156.810(c). Under the standard process, we propose that written notice of the decertification would be sent to the QHP issuer, enrollees in the QHP being decertified, and the State DOI in the State in which the QHP is being decertified. The written notice would specify the effective date of the decertification, which would not be earlier than 30 days after the date of issuance of the notice. Additionally, we propose that the written notice would state the reason for the decertification, including the legal basis; inform the issuer of the effect of decertification and the procedure for appeal; and inform the QHP enrollees of the effect of decertification and the availability of a special enrollment period under § 155.420.
Where the basis for a decertification is one in which the QHP enrollees' ability to access necessary medical items or services is at risk or the integrity of an FFE is substantially compromised, we propose that the QHP issuer would be subject to an expedited decertification process under § 156.810(d). This would include cases in which there is credible evidence of fraud, the issuer substantially fails to provide enrollees of its QHPs access to necessary medical items or services, or other specified circumstances. We propose that the expedited decertification process would be similar to the standard process, except that the effective date of the decertification could be immediate. We recognize that, under the expedited decertification process, a QHP issuer may lose enrollees during the appeal process. However, given that the bases for expedited decertification are limited to when the enrollees' ability to access needed health items or services is at risk or the integrity of an FFE is substantially compromised, and that enrollees should be offered an opportunity to transition to another QHP in these circumstances, we believe that this expedited decertification process is appropriate. Furthermore, the QHP issuer's interests are adequately protected by the opportunity for a hearing after decertification, and the potential for QHP reinstatement depending on the outcome of the appeal process.
Both the standard and expedited decertification processes would afford the issuer of the decertified QHP the right to appeal the decertification through an administrative hearing process under § 156.810(e), only the timing of that appeal would differ. We propose that, under the standard decertification process, the appeal would be available prior to the decertification; under the expedited decertification process, the appeal generally would be available post-decertification. Under § 156.810(e), we propose that an issuer may appeal the decertification of a QHP offered by that issuer by filing a request for hearing under part 156, subpart J. If the issuer makes a request for hearing and the decertification is proceeding under the standard process, we propose that the decertification would not take effect until after the final administrative decision in the appeal, notwithstanding the effective date specified in the notice of decertification. If the decertification is proceeding under the expedited process, we propose that the decertification would still take effect on the effective date specified in the notice of decertification; however, we propose that the certification of the QHP could be reinstated immediately upon issuance of a final administrative decision that the QHP should not be decertified.
We welcome comment on all of the proposed decertification procedures, specifically, we invite comment on the two processes for decertification (standard and expedited) and the bases for each process.
Section 1321(c)(2) of the Affordable Care Act authorizes the Secretary to use CMPs as a means to enforce the Exchange standards, including in an FFE. Section 1311(d)(4)(A) of the Affordable Care Act authorizes Exchanges, including an FFE, to take action to decertify QHPs offered through the Exchange. Enforcement actions taken by a Federal agency are generally subject to the Administrative Procedure Act, 5 U.S.C. 554 and 556. Consequently, we believe that QHP issuers in an FFE that are subject to an enforcement action authorized by the Affordable Care Act and proposed subpart I of 45 CFR part 156 are entitled to the protections provided by the Administrative Procedure Act, including a hearing.
45 CFR 150.401 through 150.463 sets forth an administrative hearing process for individuals and entities against whom a CMP has been imposed in the individual and group health markets. This process is intended to provide the individual or entity an opportunity to submit evidence to be considered by the administrative law judge (ALJ). 45 CFR 150.401 through 150.463 establish the evidentiary and procedural rules governing the administrative hearing. Under these provisions, the ALJ decides whether there is a basis for assessing a CMP against the individual or entity and whether the amount assessed is reasonable. In order to appeal the CMP, an individual or entity must request a hearing within 30 days after the date of the issuance of a notice of assessment. If no hearing is requested, the assessment constitutes a final and un-appealable order.
We believe that the process set forth in 45 CFR 150.401 through 150.463 is similar to the processes most States have in place for issuers to appeal State enforcement actions. These regulations also established the administrative review process for enforcement actions against individuals and entities for HIPAA violations, which have been expanded to apply to appeals of market-wide reform enforcement actions. Because the process established in 45 CFR Part 150 is similar to existing State appeals processes, and we expect that issuers should be familiar with HIPAA enforcement processes given the long history of that statute, we believe there is significant benefit in modeling the administrative hearing process for appeals of sanctions against QHP issuers in an FFE after the process established in Part 150. Furthermore, we believe that the process as described in the relevant sections of Part 150 sufficiently protects the procedural rights of QHP issuers. Therefore, we propose in 45 CFR 156.901 through 156.963 an administrative appeals process modeled after that set forth in 45 CFR 150.401 through 150.463. We seek comment on whether this process, as proposed, should include additional protections and whether certain provisions could be eliminated to expedite the administrative review process and reduce administrative burden. We also invite comments on whether other models, such as the appeals process for CMPs under section 1128A of the Social Security Act, would be more appropriate models to use. We propose numbering these sections in a manner similar to the numbering in Part 150 for simplicity.
Section 1311(d) of the Affordable Care Act requires an FFE to implement procedures for decertification of QHPs offered through an FFE. 45 CFR 155.1080 codifies this requirement and, in paragraph (d) requires an FFE to establish a process for appealing the decertification of a QHP. We considered two approaches to the decertification appeals process. The first approach would be to expand the proposed process for CMP appeals to include appeals of decertifications of QHPs offered in an FFE. Under this approach, the issuer of a QHP that is being decertified would have the opportunity to request a hearing before an ALJ. The appeals process would be governed by explicit procedural and evidentiary rules that would afford issuers due process protections. As explained above, this approach is modeled after the HIPAA administrative hearing process for CMPs assessed against issuers in the group and individual markets, and is similar to appeals processes that currently exist at the
We propose in § 156.1010 to set requirements for resolving cases forwarded to the QHP issuer operating in an FFE by HHS. A case is communication brought by a complainant that expresses dissatisfaction with a specific person or entity subject to State or Federal laws regulating insurance, concerning the person or entity's activities related to the offering of insurance, other than a communication with respect to an adverse benefit determination as defined in 45 CFR 147.136(a)(2)(i). Cases could include concerns about the operations of a QHP issuer operating in an FFE such as: waiting times when contacting an issuer's call center, the demeanor of customer service personnel, or the failure to receive materials related to coverage under the QHP, such as the Summary of Benefits and Coverage. While we expect that most cases will be brought by or on behalf of QHP applicants and enrollees, some cases may be brought by providers or other interested parties. HHS recognizes that States currently play an important role in handling various types of cases related to health plans and issuers, and HHS envisions the States will continue to play an important role in assisting applicants, enrollees, providers and others. We anticipate that many cases will be presented in the first instance to the State DOI and will be addressed by the State in accordance with its own laws, regulations, and processes. For a case forwarded to a QHP issuer operating in an FFE by a State, the QHP issuer is expected to comply with applicable standards established by State laws and regulations. Additionally, some cases not related to FFE-specific topics will be brought to HHS rather than to the State. HHS intends to work with each State to ensure that such cases are addressed by the State in accordance with its own laws, regulations, and processes. We intend that cases received by a QHP issuer operating in an FFE directly from a complainant or the complainant's authorized representative will be handled by the issuer through its internal customer service process. For cases related to FFE-specific topics brought to HHS, we propose that such cases will be addressed and resolved by HHS and the issuer, as appropriate, pursuant to the proposed standards in § 156.1010.
In § 156.1010(a), we propose the definition of a case. In § 156.1010(b), we propose that QHP issuers operating in an FFE must investigate and resolve, as appropriate, cases brought by a complainant or the complainant's authorized representative and forwarded to the issuer by HHS. QHP issuers operating in an FFE are reminded that issues and inquiries related to an adverse benefit determination as defined in 45 CFR 147.136(a)(2)(i) are not covered by this proposed section, and are subject to the regulations governing internal claims appeals and external review in 45 CFR 147.136.
Section 156.1010(c) proposes that cases may be forwarded to a QHP issuer operating in an FFE through a casework tracking system developed by HHS, or through other means as determined by HHS. Cases may be input into a tracking system developed by HHS by a variety of individuals, including HHS staff, Navigators and other assistors, and Consumer Assistance Programs.
Section 156.1010(d) proposes that cases forwarded by HHS to a QHP issuer operating in an FFE must be resolved within 15 calendar days of receipt of the case. We propose that such cases involving the need for urgent medical care must be resolved no more than 72 hours after receipt of the case. QHP issuers operating in an FFE must make every effort to quickly resolve cases when an enrollee has an urgent need to access needed medical items and services, pursuant to proposed paragraph (e) of this section. We further propose that, for cases forwarded by HHS to a QHP issuer operating in an FFE, where applicable State laws and regulations establish timeframes for case resolutions that are stricter than the standards under this paragraph, QHP issuers are required to comply with the stricter State laws and regulations.
In 156.1010(e) we propose that an urgent case is one in which there is an immediate need for health services because a non-urgent standard could seriously jeopardize the enrollee's or potential enrollee's life, or health or ability to attain, maintain, or regain maximum function.
In § 156.1010(f), for cases forwarded by HHS we propose that QHP issuers operating in an FFE are required to provide notice to complainants regarding the disposition of a case as soon as possible upon resolution of the case, but in no event later than seven (7) business days after the case is resolved. Notification may be by verbal or written means as determined most expeditious by the QHP issuer.
In § 156.1010(g), we propose that the QHP issuer operating in an FFE must document in a casework tracking system developed by HHS, or by other means determined by HHS, that the case has been resolved, no later than seven (7) business days after resolution of the case. The resolution record must include a clear and concise narrative explaining how the case was resolved including information about how and when the complainant was notified of the resolution.
In § 156.1010(h) we propose that cases received by a QHP issuer operating in an FFE from the State in which the issuer offers QHPs must be investigated and resolved according to applicable State laws and regulations. In addition, QHP issuers operating in an FFE must cooperate fully with a State, HHS, or any other appropriate regulatory authority that is handling a case.
HHS will use casework data within the HHS developed casework tracking system, including data entered by HHS and other users such as QHP issuers operating in FFEs, Consumer Assistance Programs, and Navigators, to identify trends, areas of concern, and compliance issues.
Section 1311(c)(4) of the Affordable Care Act directs the Secretary to develop an enrollee satisfaction survey that evaluates the level of enrollee satisfaction with each QHP that is offered through an Exchange, for QHPs that had more than 500 enrollees in the previous year. The results of the evaluation are to be publicly reported on the Exchange's Internet portal, in a manner that allows for easy comparison of enrollee satisfaction levels among comparable plans. HHS intends to begin public reporting of these survey results in 2016. 45 CFR 155.200(d) directs Exchanges to oversee the implementation of enrollee satisfaction surveys and the assessment and ratings of health care quality and outcomes, in accordance with sections 1311(c)(1), 1311(c)(3) and 1311(c)(4) of the Affordable Care Act. Further, as part of minimum certification standards, 45 CFR 156.200(b)(5) directs QHP issuers to disclose and report information on health care quality and outcomes and implement appropriate enrollee satisfaction surveys.
In order to carry out these functions, we propose processes under which HHS would approve and oversee enrollee satisfaction survey vendors that will administer enrollee satisfaction surveys on behalf of QHP issuers. In future rulemaking, we intend to direct QHP issuers to contract with HHS-approved enrollee satisfaction survey vendors to fulfill the requirements established in 45 CFR 156.200(b)(5). The enrollee satisfaction survey vendors would need to be approved by mid-2014 to allow time for QHP issuers to contract with these vendors by late 2014, well before any relevant quality reporting standards must be implemented. We have previously stated that quality reporting standards (including the enrollee satisfaction survey) would be implemented in 2016, and available for consumers to use during 2017 open enrollment.
We also intend to establish, in future rulemaking, that the enrollee satisfaction survey be modeled on the CAHPS® Health Plan survey which typically assesses patients' satisfaction with their health care, personal doctors, and health plans. To administer the CAHPS® survey to Medicare Parts C and D enrollees, Medicare Parts C and D utilize a similar process to the one we are proposing in § 156.1105 to approve enrollee satisfaction survey vendors. We anticipate that enrollee satisfaction survey vendors would also be responsible for submitting survey results directly to HHS and other entities specified by HHS, such as Exchanges. We also plan to promulgate additional quality reporting standards for QHP issuers and Exchanges. We seek comment on this proposed approach to approving and monitoring enrollee satisfaction survey vendors.
In § 156.1105(a), we propose an application and approval process for enrollee satisfaction survey vendors. We propose that only HHS-approved enrollee satisfaction survey vendors could administer the survey on behalf of QHP issuers. We believe that this proposed process will help to ensure that survey results are valid, reliable, and unbiased. This process would also allow QHP issuers to easily find approved vendors since we plan to publish a list of approved vendors. We propose that enrollee satisfaction survey vendors will be approved for one-year terms, which could mean that, to maintain their HHS approval, each vendor would submit annual applications to HHS demonstrating that the vendor meets all of the application and approval requirements. Survey vendor application forms will be developed and released at a later date. Survey vendors that are not approved by HHS are invited to re-apply. HHS will work with those vendors so that they could meet the standards specified in § 156.1105(b) for re-application. We are also considering developing a process for revoking HHS approval of vendors and a related appeals process in future rulemaking. We seek comment on these processes.
In paragraph (b), we propose the standards that an enrollee satisfaction survey vendor must meet to be approved by HHS.
We have not proposed specific minimum business criteria in paragraph (b)(11) for enrollee satisfaction survey vendors. However, we intend to align these criteria with existing criteria set for Medicare Advantage CAHPS® Survey vendors, including but not limited to relevant survey experience and organizational survey capacity. Specifically, we are considering the following criteria: (a) Having at least two years of experience conducting similar types of survey administration; (b) possessing appropriate staff credentials and expertise to conduct survey administration; and (c) minimum facility requirements, such as ability to store secure data. We seek comment on these minimum business criteria and any additional criteria that we should consider.
Finally, we propose in paragraph (c) that once HHS has approved enrollee satisfaction survey vendors, HHS would publish a list of approved entities on an HHS Web site.
We anticipate sending each applicable issuer a monthly payment and collections reports that will show, with respect to certain provisions under Title I of the Affordable Care Act, payments HHS owes to the issuer, as well as those the issuer owes HHS. For the 2014 calendar year, we anticipate this report will include advance payments of the premium tax credit and advance payments of cost-sharing reductions that HHS is paying to the issuer for each policy listed on the payment report, any
This proposed provision will help align enrollment and eligibility data transmitted by the Exchange, payments provided by and collected by HHS, and the issuer's own records of payments due. In addition to the provisions proposed in § 156.410 and § 156.460 of this Part, this proposed provision will also help ensure that the correct amounts of advance payments of the premium tax credit and advance cost-sharing reductions are paid to issuers on behalf of eligible individuals. We note the need to protect enrollees from unanticipated tax liability that could result if the advance payments of the premium tax credit they receive are greater than the amounts of premium tax credit available to them. We seek comment on this provision, and in particular on the length of time issuers should have to respond to the payment and collections report.
Section 1413 of the Affordable Care Act directs the Secretary to establish, subject to minimum requirements, a streamlined enrollment process for enrollment in QHPs and all insurance affordability programs. We anticipate that many individuals will approach issuers directly for purposes of QHP enrollment. Many issuers currently use their Web sites to enroll individuals into health coverage. Accordingly, consistent with HHS's guidance titled “Affordable Exchanges Guidance: Letter to Issuers on Federally-facilitated and State Partnership Exchanges,”
We are also proposing paragraphs (a)(1)(ii)–(a)(1)(v) whereby QHP issuers that seek to directly enroll a qualified individual in a manner considered to be through the Exchange would be required to meet certain minimum consumer protections. The proposed protections would ensure that consumers know how to access available coverage options and are able to make informed plan selections. We propose in a new paragraph § 156.1230(a)(1)(ii) that QHP issuers that seek to directly enroll qualified individuals in a manner considered to be through the Exchange must provide applicants the ability to view the QHPs offered by the issuer with data elements set forth at 45 CFR 155.205(b)(1). Under this proposal, QHP issuers would need to ensure their Web sites provide standardized comparative information on each available QHP offered by the QHP issuer, including premium and cost-sharing information; the summary of benefits and coverage established under section 2715 of the PHS Act; identification of whether the QHP is a bronze, silver, gold or platinum metal level or a catastrophic plan; the results of the enrollee satisfaction survey, as described in section 1311(c)(4) of the Affordable Care Act; quality ratings assigned in accordance with section 1311(c)(3) of the Affordable Care Act; MLR information as reported to HHS in accordance with 45 CFR part 158; transparency of coverage measures reported to the Exchange during certification; and the provider directory in accordance with § 156.230. We note that for 2014, the information referenced in 45 CFR 155.205(b)(1)(iv), (v), and (vii) will not be required because the information will not be available.
We also propose in § 156.1230(a)(1)(iii) that QHP issuers that seek to directly enroll qualified individuals in a manner considered to be through the Exchange using the issuer's Web site must clearly distinguish between QHPs for which the consumer is eligible and non-QHPs that the issuer may offer. We propose that this distinction must also clearly articulate that APTC and CSRs apply only to QHPs offered through the Exchange.
In addition, in § 156.1230(a)(1)(iv) we propose that QHP issuers that seek to directly enroll qualified individuals in a manner considered to be through the Exchange be required to notify applicants of the availability of other QHP products offered through the Exchange to consumers, regardless of whether they apply through a Web site, in-person or by phone. The QHP issuer would also be required to display the Web link to or describe how to access the Exchange Web site. We seek comment if HHS should require a universal disclaimer to be displayed by the issuer that informs applicants that other coverage options exist in the Marketplace and that not all coverage options are displayed.
In § 156.1230(a)(1)(v) we propose that a QHP issuer be required to ensure that, when an applicant initiates enrollment directly with the QHP issuer and the QHP issuer seeks to directly enroll the applicant in a manner considered to be through the Exchange, the applicant is allowed to select an APTC amount, if applicable, in accordance with § 155.310(d)(2), provided that the applicant makes the attestations required by § 155.310(d)(2)(ii).
In § 156.1230(a)(2) we propose that, if permitted by the Exchange pursuant to § 155.415 of this part, a QHP issuer seeking to directly enroll applicants in a manner considered to be through the Exchange enter into an agreement with the Exchange prior to allowing any of its customer service representatives to assist qualified individuals in the individual market with: (a) Applying for an eligibility determination or redetermination for coverage through the Exchange; (b) applying for insurance affordability programs; or (c) facilitating the selection of a QHP offered by the issuer represented by the customer service representative whereby the QHP issuer would agree to require each of its customer service representatives to at a minimum: (i) receive training on QHP options and insurance affordability programs, eligibility, and benefits rules and regulations; (ii) comply with the Exchange's privacy and security standards adopted consistent with § 155.260; and (iii) comply with applicable State law related to the sale, solicitation, and negotiation of health insurance products, including
We also propose to add paragraph (a)(3) to ensure that the premium that a QHP issuer charges to a qualified individual or enrollee is the same as was accepted by the Exchange in its certification of the QHP issuer after accounting for any APTC. We propose that if the QHP issuer identifies an error in the amount it has charged the qualified individual, the QHP issuer must retroactively correct the error no later than 30 calendar days after its discovery. We also propose that for issuers of QHPs in the FFE, HHS may review the premiums charged to qualified individuals through the compliance reviews proposed in § 156.715(a).
Finally, in paragraph (b), we state that the individual market FFE will permit the conduct set forth in this section, to the extent permitted by applicable State law.
We realize that a segment of the population that will seek health insurance coverage through an Exchange will not have bank accounts or credit cards, and we have received numerous questions and comments on this topic. These people should be able to access coverage through an Exchange on the same basis as those with a bank account or credit card and should not be unable to access coverage merely due to the inability to pay their share of the premium. Therefore, we propose to require QHP issuers at a minimum accept a variety of payment formats, including, but not limited to, paper checks, cashier's checks, money orders, and replenishable pre-paid debit cards, so that individuals without a bank account will have readily available options for making monthly premium payments. Issuers may also offer electronic funds transfer from a bank account and automatic deduction from a credit or debit card as payment options. We seek comment on this proposal and whether other payment methods should be included.
Under the Paperwork Reduction Act of 1995 (PRA), we are required to provide 60-day notice in the
• The need for the information collection and its usefulness in carrying out the proper functions of our agency.
• The accuracy of our estimate of the information collection burden.
• The quality, utility, and clarity of the information to be collected.
• Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.
The following sections of this document contain estimates of burden imposed by the associated information collection requirements (ICRs); however, not all of these estimates are subject to the ICRs under the PRA for the reasons noted. Salaries for the positions cited were mainly taken from the Bureau of Labor Statistics (BLS) Web site (
The salaries for the health policy analyst and the senior manager were taken from the Office of Personnel Management Web site. Fringe Benefits estimates were taken from the BLS March 2013 Employer Costs for Employee Compensation Report.
In § 153.260 of this proposed rule, we direct a State-operated reinsurance program to: (1) Keep an accurate accounting of reinsurance contributions, payments, and administrative expenses; (2) submit to HHS and make public a summary report on program operations; and (3) engage an independent qualified auditing entity to perform a financial and programmatic audit for each benefit year. Fewer than 10 States have informed HHS that they will operate reinsurance for the 2014 benefit year. While these reinsurance records requirements are subject to the PRA, we believe the associated burden is exempt under 5 CFR 1320.3(c)(4) and 44 U.S.C. 3502(3)(A)(i), since fewer than 10 entities would be affected. Therefore, we are not seeking approval from OMB for these information collection requirements.
In § 153.310(c)(4), § 153.310(d)(3)–(4), and § 153.365 of this proposed rule, we require a State operating risk adjustment to: (1) Retain records for a 10-year period; (2) submit an interim report in its first year of operation; (3) submit to HHS and make public a summary report on program operations for each benefit year; and (4) keep an accurate accounting for each benefit year of all receipts and expenditures related to risk adjustment payments, charges, and administrative expenses. Fewer than 10 States have informed HHS that they will operate risk adjustment for the 2014 benefit year. Since the burden associated with collections from fewer than 10 entities is exempt from the PRA under 5 CFR 1320.3(c)(4) and 44 U.S.C. 3502(3)(A)(i), we are not seeking approval from OMB for the risk adjustment information collection requirements. However, if more than nine States elect to operate risk adjustment in the future, we will seek approval from OMB for these information collections.
In § 153.405(h) and § 153.410(c), we propose record retention standards for contributing entities and reinsurance-eligible plans. In proposed § 153.405(h), we require contributing entities to maintain documents and records, whether paper, electronic, or in other media, sufficient to substantiate the enrollment count submitted pursuant to this section for a period of at least 10 years, and must make that evidence available upon request to HHS, the OIG, the Comptroller General, or their designees, to any such entity, for purposes of verification of reinsurance contribution amounts. This requirement may be satisfied if the contributing entity archives the documents and records and ensures that they are accessible if needed in the event of an investigation or audit.
We estimate that 26,200 contributing entities will be subject to this requirement, based on the Department of Labor's (DOL) estimated count of self-insured plans and the number of fully insured issuers that we estimate will make reinsurance contributions.
In proposed § 153.410(c), we require issuers of reinsurance-eligible plans to maintain documents and records, whether paper, electronic, or in other media, sufficient to substantiate the requests for reinsurance payments made pursuant to this section for a period of at least 10 years, and must make that evidence available upon request to HHS, the OIG, the Comptroller General, or their designees, (or, in the case of a State operating reinsurance, the State or its designees), to any such entity, for purposes of verification of reinsurance payment requests. We estimate that 1,900 issuers of reinsurance-eligible plans will be subject to this requirement, based on HHS's most recent estimate of the number of fully insured issuers that will submit requests for reinsurance payments. On average, we estimate that it will take each issuer of a reinsurance-eligible plan approximately 10 hours annually to maintain records. We estimate that it will take an insurance operations analyst 10 hours (at $38.49 an hour) to meet these requirements. On average, the cost estimate for each issuer is approximately $384.90 annually. Therefore, for 1,900 issuers, we estimate an aggregate burden of $731,310 and 19,000 hours as a result of this requirement.
The burden estimates for these two recordkeeping requirements are broad estimates that include not only the maintenance of data, but all records and documents that may be necessary to substantiate the enrollment count and requests for reinsurance payments made pursuant to 45 CFR 153.405 and 153.410, respectively. Because the scope of these requirements is substantially less than the scope of the recordkeeping requirement applicable to a State operating reinsurance, these estimates are lower than those that were set forth for State-operated reinsurance programs record maintenance requirement (45 CFR 153.240(c)) in the Premium Stabilization Rule published March 23, 2012 (77 FR 17220), and the associated information collection request approved under OMB Control Number 0938–1155. We note that we will account for the additional burden associated with submitting this information to HHS in a future information collection request that will go through the requisite notice and comment period and subsequent OMB review and approval process.
Section 155.220 authorizes HHS to terminate an agent's or broker's agreement with an FFE if HHS determines that the agent or broker is out of compliance with the standards outlined in 45 CFR 155.220. Section 155.220(g) sets forth the process whereby an agent or broker can request reconsideration of HHS's termination. Specifically, the agent or broker must submit the request for reconsideration within 30 calendar days of receipt of the date of the notice of termination.
The burden estimates for the reporting requirements in § 155.220 reflect our assumption that there will be 254,095 agents and brokers registered in an FFE. The NAIC indicates that there are between 600,000 and 700,000 total licensed brokers selling health insurance at any point in time in the United States. We selected the midpoint, 650,000, as our estimate of the number of licensed brokers. We estimate that 37 percent of these brokers are in States with State Exchanges. This means an estimated 63 percent, or 409,500, are in FFE States. We estimate that 85 percent, or 348,000, will be registered in an FFE. States have traditionally overseen agents and brokers in the health insurance market and we expect that States will continue in that regulatory role and be the primary regulator of agents and brokers in their respective States. Given that our oversight of agents and brokers will be narrowly tailored to FFE-specific standards, we expect terminations to be infrequent, especially in the first plan year. For purposes of this burden estimate, we assume that two agents or brokers will have their access suspended or revoked and that both agents or brokers will appeal these actions. We solicit comments on these assumptions.
As stated in § 155.220(g)(2), an agent or broker may submit a request for reconsideration of any termination decision by HHS within 30 calendar days of notification of the decision. We assume the need to terminate an agent's or broker's agreement with an FFE will occur only rarely. For purposes of this initial burden estimate we estimate that revocation notices will be sent to 2 agents or brokers each year. The hour burden associated with this action is the time and effort needed by the agent or broker to create the written request and submit it electronically to HHS. The associated costs are labor costs for gathering the necessary background information and then preparing and submitting the request.
We assume that all agents and brokers who receive a notice of termination will submit a request for reconsideration. We expect the request to address the issues presented in the original notice of termination from HHS. The hours involved in preparing and submitting this request may vary. For the purpose of this burden estimate we estimate that it will take 18 hours for an agent or broker to prepare and submit this request: 10 hours (at $28.81 an hour) for the brokerage clerk to gather and assemble necessary background materials and 8 hours (at $41.15 an hour) for the agent or broker to prepare the written request and submit it electronically. This is a total of 18 hours annually at a cost of $617.30 per agent or broker. Therefore, we estimate an aggregate burden of 36 hours at a cost of $1,234.60 for the two agents or brokers. We solicit comments on these estimates.
Section § 155.310(k) provides that if an Exchange does not have enough information to conduct an eligibility determination for advance payments of the premium tax credit or cost-sharing reductions, the Exchange must provide notice to the applicant regarding the incomplete application. We anticipate that this notice requirement is not a separate notice to an individual but text within the eligibility determination notice described in § 155.310(g) and discussed in a separate information collection request that is associated with the notice of proposed rulemaking that published on January 22. 2013 (78 FR 4594). We therefore do not include a separate burden estimate to develop this notice but the time and cost associated
Section 155.310(k)(2) provides that the Exchange must provide the applicant with a period of no less than 15 days and no more than 90 days from the date on which the notice is sent to the applicant to provide the information needed to complete the application to the Exchange.
Given the fact that the Exchange eligibility process is entirely new and involves the use of new electronic data sources in combination with a new application, it is not possible to provide estimates for the number of applicants for whom we expect to have an incomplete application. However, we anticipate that this number will decrease as applicants become more familiar with the eligibility process, as more data become available electronically, and as customer service resources evolve based on experience.
Therefore, we estimate the time and effort for one individual to comply with this provision. We expect that this will take an individual one hour to gather the relevant documentation and enter the missing information online or contact the call center to provide the necessary information. Our estimate that it will take an individual one hour to gather the relevant documentation depends on whether or not the individual already has the necessary documentation on hand, or whether the documents are presently unavailable and the individual needs to spend additional time to gather the documentation. As such, it could take significantly less time if an individual already had the documents on hand, or potentially more time if certain documents were unavailable at the time an individual needed to complete the application.
In subpart M of part 155, we describe the information collection and third-party disclosure standards related to the oversight and financial integrity of State Exchanges.
Section 155.1200(a)(1)–(3) requires the State Exchange to follow GAAP and to monitor and report to HHS all Exchange-related activities. This includes keeping an accurate accounting of all Exchange receipts and expenditures. The burden associated with this reporting requirement is the time and effort needed to develop and submit Exchange-related activities to HHS. The State Exchanges will electronically maintain the information as a result of normal business practices; therefore, the burden does not include the time and effort needed to maintain the Exchange-related activity information. State Exchanges most likely will already have accounting systems in place to store accounting information. The burden associated with this requirement includes a computer programmer taking 8 hours (at $48.61 an hour) to modify the system to maintain and monitor the information required under § 155.1200(a)(1) through (3), an analyst taking 8 hours (at $58.05 an hour) to pull the necessary data under § 155.1200(a)(1) through (3) in the State Exchange accounting system, and a senior manager taking 2 hours (at $77.00 an hour) to oversee the development and transmission of the reported data. We estimate that it will take 18 total hours at a cost of $1,007.28 for each State Exchange. We estimate the total burden to be 324 hours for a total cost of $18,131.04 for all State Exchanges.
Section 155.1200(b)(1) requires the State Exchange to submit a financial statement, in accordance with GAAP to HHS. The information under § 155.1200(b) must be submitted at least annually by April 1 to HHS and must also be publicly displayed. The burden associated with this reporting requirement is the time and effort needed to develop and submit the financial statement to HHS. The State Exchanges will electronically submit the information. Therefore, the burden is the time and effort needed to develop and publically display the financial statement. The State Exchanges will electronically maintain the information as a result of normal business practices, therefore the burden does not include the time and effort needed to develop and maintain the financial information. The burden associated with this requirement includes a computer programmer taking 40 hours (at $48.61 an hour) to design the financial statement report, an analyst taking 8 hours (at $58.05 an hour) pulling the necessary data and inputting it into the financial statement report, and a senior manager taking 2 hours (at $77.00 an hour) overseeing the development and transmission of the reported data. We estimate a burden of 50 total hours for each State Exchange at a cost of $2,562.80, for a total cost of $45,410.40 for all Exchanges.
Section 155.1200(b)(2) requires the State Exchange to submit eligibility and enrollment reports to HHS. The State Exchanges will electronically maintain the information as a result of normal business practices, therefore the burden does not include the time and effort required to develop and maintain the source information. The burden associated with this reporting requirement includes the time and effort necessary for a computer programmer taking 40 hours (at $48.61 an hour) to design the report template, an analyst taking 8 hours (at $58.05 an hour) to compile the statistics for the report for submission to HHS, a privacy officer taking 8 hours (at $64.98 an hour) and senior manager taking 2 hours (at $77.00 an hour) overseeing the development and submission of the reported data. The burden also includes the time and effort necessary to post the data on the State Exchange Web site. We estimate an initial year burden of 58 hours at a cost of $3,082.64 to each State Exchange and a total burden of 1,044 hours at a cost of $55, 487.52 for all State Exchanges.
As discussed in § 155.1200(b)(3), the State Exchange will report performance monitoring data to HHS. The performance monitoring data includes information on financial sustainability, operational efficiency, and consumer satisfaction which will be reported on an annual basis. The State Exchanges will electronically maintain the information as a result of normal business practices developed under Establishment Grants from HHS for this purpose. Therefore the burden does not include the time and effort needed to develop and maintain the performance data. The burden associated with meeting the reporting requirement includes the time and effort necessary for a computer programmer taking 40 hours (at $48.61 an hour) to design the report, for an analyst taking 12 hours (at $58.05 an hour) to pull data into the report and prepare for submission to HHS and for a senior manager taking 2 hours (at $77.00 an hour) to oversee the development and transmission of the reported data. Section 155.1200(b) requires the State Exchange to submit to HHS and to display publicly financial, eligibility and enrollment reports and performance data at least annually. For those measures reported annually, we estimate that in the initial year a burden of 54 hours for the State Exchanges at a cost of $2,795.00 each and a total burden of $50,031.00.
Section 155.1200(c)(1) through (3) direct the State Exchange to engage an independent audit/review organization to perform an external financial and programmatic audit of the State Exchange. The State Exchange must provide the results of the audit and identify any material weakness or significant deficiency and any intended corrective action. The burden associated with meeting this third party disclosure requirement includes the burden for an
As stated in § 155.1210(a), the State Exchange and its contractors and subcontractors must maintain for 10 years, books, records, documents, and other evidence of accounting procedures and practices. Section 155.1210(b) specifics the records contain information concerning management and operation of the State Exchange's financial and other record keeping systems. The records must include financial statements, including cash flow statements, and accounts receivable and matters pertaining to the costs of operation. Additionally, the records must contain any financial report filed with other Federal programs or State authorities. Finally, the records must contain data and records relating to the State Exchange's eligibility verifications and determinations, enrollment transactions, appeals, plan variation certifications, QHP contracting data, consumer outreach, and Navigator grant oversight information. State Exchanges most likely already have systems in place to store records. The burden associated with this record keeping requirement includes the time and effort necessary for a network administrator taking 16 hours (at $46.86 an hour) to modify the State systems to maintain the information required under § 155.1210(b), for a health policy analyst taking 8 hours (at $58.05 an hour) to enter the data under § 155.1210(b) into the State Exchange record retention system, and for senior management taking 2 hours (at $73.41 an hour) to oversee record collection and retention. We estimate that it will take 26 hours for the State Exchange to comply with this requirement for a total of 468 hours. We estimate one year burden for the State Exchanges at a cost of $1360.98 each and a total burden of $24,497.64.
The QHP issuer must notify HHS of the change in a manner to be specified by HHS and provide the legal name and tax identification number of the new owner of the QHP and the effective date of the change of ownership. The information must be submitted at least 30 days prior to the effective date of the change of ownership. The burden associated with the QHP issuer notifying HHS of a change of ownership includes a health policy analyst taking 1 hour to draft a notice of change of ownership and 1 one hour for a senior manager to review the notice and transmit it electronically to HHS. We estimate that it will cost a QHP issuer $128.43 to comply with this reporting requirement. At this time, we cannot estimate the number of QHP issuers that will be reporting changes of ownership. When it becomes clearer as to the potential number that may report a change of ownership, we will update our estimates to reflect the potential number.
In proposed § 156.480(a), we propose to extend the standards set forth in proposed § 156.705 concerning maintenance of records to a QHP issuer in the individual market on State Exchange with respect to cost-sharing reductions and advance payments of the premium tax credit. We believe that the burden of maintaining records related to cost-sharing reductions and advance payments of the premium tax credit for QHP issuers in an FFE is already accounted for in the burden for proposed § 156.705, described elsewhere in the Collection of Information section of this proposed rule. On average, we estimate each QHP issuer in a State Exchange will incur a cost of approximately $2,232.54 to comply with this record maintenance requirement. This reflects 46 hours of work by an insurance operations analyst (at $38.49 an hour) and 6 hours by a senior manager (at $77 an hour), for a total of 52 burden hours. Based on our most recent estimates, we assume that there will be approximately 791 QHP issuers in the individual market on State Exchanges in 2014. Therefore, we estimate an aggregate burden of 41,132 hours and a total cost of approximately $1,765,939.10 as a result of this requirement.
In § 156.480(b), we propose that, for each benefit year, an issuer that offers a QHP in the individual market through a State Exchange or an FFE report to HHS annually, in a timeframe and manner required by HHS, summary statistics with respect to cost-sharing reductions and advance payments of the premium tax credit. This proposed provision will permit HHS to obtain critical information regarding cost-sharing reductions and advance payments of the premium tax credit across a broad range of issuers to identify systemic problems and errors, without requiring intrusive annual investigations. We believe that QHP issuers will already have the information and data systems in place necessary to generate a summary report, and that there will only be a small additional burden as a result of this submission requirement. We estimate that it will take an insurance operations analyst 16 hours (at $38.49 an hour) annually and one senior manager 2 hours (at $77 an hour) to gather summary information and prepare a report for submission to HHS. Therefore, we estimate an additional burden of 21,600 hours and total costs of approximately $923,808 for 1,200 QHP issuers ($769.84, on average, for each QHP issuer) as a result of this requirement.
The burden estimates for the collections of information in Part 156, Subpart H, of the regulation reflect the assumption that an FFE will include 409 QHP issuers. The labor categories and salary estimates used to calculate the cost burden of these collections on issuers are derived from the Bureau of Labor Statistics' (BLS) May 2012 Occupational Employment Statistics data for selected occupations. These burden estimates generally reflect burden for the first year. We anticipate that the burden in subsequent years will be significantly lower because issuers will have met many of the requirements in the regulation, including developing automated processes that will reduce the total time, effort, and financial resources they need to expend in order to respond to the collections in this subpart. For this reason, these estimates should be considered an upper bound of burden for issuers.
Section 156.705 provides that issuers offering QHPs in an FFE must maintain all documents and records (whether paper, electronic or other media), and other evidence of accounting procedures and practices necessary for HHS to conduct activities necessary to safeguard the financial and programmatic integrity of the FFEs. Such activities include: (1) Periodic auditing of the QHP issuer's financial records, including data related to the QHP issuer's ability to bear the risk of potential financial losses; and (2) compliance reviews and other monitoring of a QHP issuer's compliance with all Exchange standards applicable to issuers offering QHPs in
Section 156.705(d) provides that QHP issuers must make all records described in paragraph (a) of this section available to HHS, the OIG, the Comptroller General, or their designees, upon request. In estimating the annual hour and cost burden on QHP issuers of making these records available to such authorities upon request, we assumed that such requests would normally be made in connection with a formal audit or compliance review or a similar process. Our burden estimates for this section address the hour and cost burden of making records available to HHS, the OIG, the Comptroller General, or their designees, for audit. Our estimates reflect our assumptions that about 47 QHP issuers would be subject to a formal audit in a given year and that the burden on issuers of making the records available would include the time, effort, and associated cost of compiling the information, reviewing it for completeness, submitting it to the auditor(s), and participating in telephone or in-person interviews. We anticipate using a risk-based approach to selection of the majority of QHP issuers for compliance review so that burdens to the issuer community would generally be linked to the QHP issuers' risk. We estimate it will take 90 hours at a cost of $4,221.20 for an issuer to make their records available for an audit for a total of 9,000 hours and $422,120.00 across all QHP issuers subject to this requirement, which we estimate at an upper end as 100 issuers.
Section 156.715 establishes the general standard that QHP issuers are subject to compliance reviews. Our burden estimates for § 156.715 address the estimated annual hour and cost burden on QHP issuers of complying with the records disclosure requirements associated with compliance reviews conducted by an FFE.
Section 156.715 provides standards for compliance reviews in the FFEs, stating that QHP issuers offering QHPs in the FFEs may be subject to compliance reviews. This section also describes the categories of records and information issuers must make available to an FFE in conducting such reviews.
Compliance reviews evaluate a QHP issuer's compliance with the Affordable Care Act and applicable regulations. Compliance reviews will target high-risk QHP issuers and not every issuer will be reviewed each year. The results of compliance reviews will also provide insight into trends across the compliance statuses of QHP issuers, enabling HHS to prioritize areas of oversight and technical assistance.
We assume that HHS will conduct desk reviews of 31 QHP issuers each year. For each QHP issuer desk review we estimate an average of 40 hours for administrative work to assemble the requested information, 19.5 hours to review the information for completeness, and 30 minutes to submit the information to HHS. There will also be an additional 10 hours to spend on phone interviews conducted by the reviewer and 2 hours to spend speaking through processes with the reviewer. We estimate it will take 72 hours at a cost of $2,877.40 for an issuer to make information available to HHS for a desk review for a total of 2,232 hours and $89,199.40 across all issuers that may be subject to this information collection requirement.
We assume that HHS will conduct onsite reviews of 16 QHP issuers each year. For each onsite review we estimate it will take an average of 40 hours for administrative work to assemble the requested information, 19.5 hours to review the information for completeness and 30 minutes to submit the information to HHS in preparation for an onsite review. An onsite review requires an additional 2 hours to schedule the onsite activities with the compliance reviewer, 4 hours for introductory meeting, 8 hours to tour reviewers onsite, 10 hours of interview time, 2 hours to walk through processes with the reviewer, and 4 hours for concluding meetings. This is a total of approximately 60 hours of preparation time and an additional 30 hours for onsite time for each QHP. We estimate it will take 90 hours at a cost of $3,566.84 for an issuer to make information available to HHS for an onsite review. We estimate that the burden for all respondents that may be subject to this information collection will be 1,440 hours at a cost of $57,069.44.
In cases in which HHS could potentially require clarification around submitted information, HHS may need to contact QHP issuers within 30 days of information submission. This would be the case for approximately 20 issuers. We estimate it will take an issuer 2 hours at a cost of $53.75 to respond to questions for a total of 40 hours and $1,075.00.
Subpart I of Part 156 discusses the enforcement remedies in the FFEs. Section 156.800 authorizes HHS to impose sanctions on QHP issuers in an FFE that are not in compliance with Federal standards. These sanctions may be in the form of a CMP, as set forth in § 156.805; or decertification of QHPs, as set forth in § 156.810. The burden estimates for the collections of information in this Part reflect our assumption that there will be 409 QHP issuers and 12,000–18,000 QHPs in all FFEs.
Section 156.805(a) sets forth the general process and bases for imposing a CMP on issuers offering QHPs in an FFE. As explained in the preamble to Subpart I, HHS intends to work collaboratively with QHP issuers, where possible, especially during the first plan year, when problems arising concerning compliance with applicable standards. CMPs will be imposed only for serious issues of non-compliance. We expect to provide technical assistance to issuers, as appropriate, to assist them in maintaining compliance with the applicable standards. We also plan to coordinate with States in our oversight and enforcement activities to avoid inappropriately duplicative enforcement efforts. Consequently, we anticipate that CMPs will be rare, especially in the first benefit year. For purposes of calculating the estimated burden, we assume that one issuer each year will be subject to a CMP and that the issuer will request an appeal of the enforcement action. We seek comment on these assumptions.
Section 156.810 sets forth the bases for the decertification of a QHP in an FFE and the general process for decertification. As with CMPs, HHS expects that decertification will be relatively infrequent, and reserved for only serious instances of non-compliance with applicable standards. Therefore, for purposes of this estimated burden, we assume that only one QHP in an FFE will be decertified each year. We assume that the issuer offering the decertified QHP will appeal the decertification action. We solicit comments on these assumptions.
Because we anticipate that fewer than 10 issuers would be subject to a decertification or CMP in a given year, we have not calculated a burden estimate. If the number of issuers approaches 10, we will submit a burden
Subpart J of Part 156 sets forth the administrative process for issuers subject to a CMP or decertification of a QHP offered by the issuer to appeal the enforcement action. In this process, an ALJ decides whether there is a basis for HHS to assess a CMP against the issuer and whether the amount of an assessed penalty is reasonable, or whether there is a basis for decertifying a QHP offered by the issuer, as applicable. Section 156.905 (intended to parallel 45 CFR 150.405) provides that a party has a right to a hearing before an ALJ if it files a valid request for a hearing within 30 days after the date of issuance of HHS's notice of proposed assessment decertification. An issuer's request for a hearing must include the information listed in § 156.907.
The burden associated with this request includes the time and effort needed by the issuer to create the written request and submit it electronically to the appropriate entity. The associated costs are labor costs for gathering the necessary background information and then preparing and submitting the written statement. The burden estimates for the collections of information in Part 156, Subpart J, of the regulation reflect the assumption that there will be a total of 409 QHP issuers in all FFEs.
We base our burden estimate on the assumptions that one issuer will be subject to CMPs and that one issuer will have a QHP that it offers in an FFE decertified. We assume that both issuers will choose to exercise their right to a hearing and will submit a valid request for hearing. The hours involved in preparing this request may vary; for the purpose of this burden estimate we estimate an average of 24 hours will be needed: 10 hours for the compliance officer to gather and assemble necessary background materials and prepare the written request, 12 hours for an attorney to review the background materials and written request and provide recommendations to the senior manager, and 2 hours for the senior manager to discuss the attorney's recommendations and submit the written request electronically. We estimate that it will take 24 hours at a cost of $1,649.02 for an issuer to prepare and submit a request for a hearing for a total of 48 hours and $3,298.04for both issuers. This estimate includes any statement of good cause under § 156.805(e)(3), if applicable. We solicit comments on these assumptions.
As stated in § 156.905, an issuer has the right to a hearing before an ALJ if the issuer files a request for a hearing that complies with § 156.907(a) within 30 days of the issuance of a notice of proposed assessment or decertification from HHS under § 156.805 or § 156.810. The request for a hearing must identify any factual or legal bases for the assessment or decertification with which the issuer disagrees. It must also describe with reasonable specificity the basis for the disagreement, including any affirmative facts or legal arguments on which the respondent is relying. The request must also identify the relevant notice of assessment or decertification by date and attach a copy of the notice.
An issuer's request for a hearing must include the information listed in § 156.907. The burden associated with this request includes the time and effort needed by the issuer to create the written request and submit it electronically to the appropriate entity. The only associated costs are labor costs for gathering the necessary background information and then preparing and submitting the written request.
Because we only estimate that one issuer per year would appeal a CMP and one issuer will have its QHP offered in an FFE decertified, we do not include this burden estimate in our overall calculation of burden for this proposed rule. We seek comment on this assumption.
In subpart K of part 156, we describe the information collection requirements that pertain to the resolution of consumer cases related to QHPs and QHP issuers. Section 156.1010(e) states that QHP issuers must record a clear and concise narrative documenting the resolution of a consumer case in the HHS-developed casework tracking system. The burden associated with this requirement is the time and effort necessary for a QHP issuer to gather the necessary information related to the consumer complaint, draft the narrative, and enter the narrative into the electronic HHS-developed case tracking system. For the purpose of estimating burden, we estimate 1,200 issuers. We estimate that it will take approximately 60 hours annually at a cost of $8,580.87 for the time and effort to develop and submit the narrative to HHS for a total of 72,000 hours and a cost of $10,297,044.00 for all respondents.
In subpart L of part 156, we describe the information collection and disclosure requirements that pertain to the approval of enrollee satisfaction survey vendors. The burden estimate associated with these disclosure requirements includes the time and effort required for survey vendors to develop, compile, and submit the application information and any documentation necessary to support oversight in the form and manner required by HHS. HHS is developing a model enrollee satisfaction survey vendor application that will include data elements necessary for HHS review and approval. In the near future, HHS will publish the model application and will solicit public comment. At that time, and per the requirements outlined in the PRA, we will estimate the burden on survey vendors for complying with this provision of the regulation. We solicit comment on the burden for the application and review process for these entities.
In § 156.1210, we propose that, within 15 calendar days of the date of a payment and collections report from HHS, the issuer must, in a format specified by HHS, either confirm to HHS that the payment and collections report accurately lists for the timeframe specified in the report applicable payments owed by the issuer to HHS and the payments owed to the issuer by HHS; or describe to HHS any inaccuracy it identifies in the payment and collections report. We believe that issuers will generally be able to perform this confirmation automatically, and that there will only be a small additional burden as a result of this requirement. We estimate that it will take an insurance operations analyst 1 hour (at $38.49 an hour) monthly to make the comparison and note any discrepancies to HHS (approximately $461.88 for each issuer annually). Based on our most recent estimates, we believe that 2,400 issuers will be affected by this requirement, resulting in aggregate burden of approximately $1,108,512.
Proposed § 156.1230(a)(1)(ii) would require issuers who pursue the option to use their Web site to enroll qualified individuals into QHPs directly, to provide information on available QHPs. The QHP information required to be
The burden for this requirement would be for the issuer to develop its own template and code and integrate it with the Exchange. After this initial step, the burden on the issuer would be to maintain the Internet Web site by populating the Web site with information collected per information collection requirements in this rule and future rulemaking by HHS. We do not have an estimate on the number of issuers who will choose to utilize the direct to enrollment approach subject to these third-party disclosure requirements. We estimate that it will take 610 hours at a cost of $32,104.25 for an issuer to meet these third-party disclosure requirements.
Proposed § 156.1230(a)(2) would allow qualified individuals to apply for an eligibility determination or redetermination for coverage through the Exchange and insurance affordability programs, and select QHPs with the assistance of an issuer customer service representative if the issuer customer service representative complies with the terms of an agreement between the issuer and the Exchange. The agreement would ensure that an issuer customer service representative receives training and provide additional standards governing the conduct of issuer customer service representatives.
The burden for this requirement would include the time and effort necessary to develop training materials for the customer service representative and the time and effort necessary to amend the agreement between the issuer and the Exchange if the Exchange implements this provision.
The Exchange would be required to develop training materials for issuer staff. We assume that the 18 State Exchanges will implement this standard. However, we expect Exchanges would use training materials that will either be developed by HHS for other types of assister training, including agent/broker training or use their own training materials that they have already developed for other assisters. Therefore, we anticipate that the time and costs associated with developing a training program for issuers will be minimal. We estimate it will take a training specialist 10 hours at $26.64 an hour and a training and development manager 5 hours at $64.43 an hour to develop training materials for the customer service representative, for a total time burden of 15 hours. The estimated cost burden for developing training materials for issuer customer service representatives for each Exchange is therefore $588.55 with a total cost of $10,593.90 across all respondents if 18 State Exchanges undertake these activities.
As specified in § 156.1230(a)(2), each Exchange would amend its agreement with every issuer wanting its staff to assist consumers. We assume that the 18 State Exchanges will implement this standard. We estimate it will take a health policy analyst 20 hours at $49.35 an hour and a senior manager 10 hours at $79.08 an hour to amend an agreement with the issuer, for a total time burden of 30 hours. The estimated burden for amending the agreements for each Exchange is therefore 30 hours at a cost of $1,777.87 and a total cost of $32,001.66.
If you comment on these information collection and recordkeeping requirements, please do either of the following:
1. Submit your comments electronically as specified in the
2. Submit your comments to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: CMS Desk Officer, [CMS–9957–P], Fax: (202) 395–6974; or Email:
Because of the large number of public comments we normally receive on
In accordance with the provisions of Executive Order 12866, this rule was reviewed by the OMB.
As stated earlier in this preamble, this proposed rule sets financial integrity and oversight standards with respect to Exchanges; QHP issuers in an FFE; and States in regards to the operation of risk adjustment and reinsurance. It also proposes additional standards for special enrollment periods; survey vendors that may conduct enrollee satisfaction surveys on behalf of QHP issuers in Exchanges; issuer participation in an FFE; and States' operation of the SHOP. Finally, it proposes additional standards for SHOPs, agents and brokers and customer service representatives; privacy and security; geographic rating areas; and guaranteed availability and renewability.
HHS has crafted this proposed rule to implement the protections intended by Congress in an economically efficient manner. We have examined the effects of this proposed rule as required by Executive Order 12866 (58 FR 51735, September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96–354), section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4), Executive Order 13132 on Federalism, and the Congressional Review Act (5 U.S.C. 804(2)). In accordance with OMB Circular A–4, HHS has quantified the benefits and costs where possible, and has also provided a qualitative discussion of some of the benefits and costs that may stem from this proposed rule.
Executive Order 12866 (58 FR 51735) directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects; distributive impacts; and equity). Executive Order 13563 (76 FR 3821, January 21, 2011) is supplemental to and reaffirms the principles, structures, and definitions governing regulatory review as established in Executive Order 12866.
Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as an action that is likely to result in a proposed rule—(1) Having an annual effect on the economy of $100 million
A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year), and a “significant” regulatory action is subject to review by the OMB. OMB has designated this proposed rule as a “significant regulatory action.” Even though it is not certain whether it would have economic impacts of $100 million or more in any one year, HHS has provided an assessment of the potential costs and benefits associated with this proposed regulation.
Starting in 2014, qualified individuals and qualified employers will be able to use coverage provided by QHPs—private health insurance that has been certified as meeting certain standards—through Exchanges. A transitional reinsurance program and a permanent risk adjustment program would be in place to ensure premium stability for health insurance issuers as enrollment increases and issuers enroll high-risk individuals. This proposed rule would establish general oversight requirements for State-operated reinsurance and risk adjustment programs; establish oversight of issuers inside and outside of the Exchange when HHS operates risk adjustment or reinsurance on behalf of a State; and establish oversight and monitoring of State Exchanges, FFEs, SHOPs (both State Exchanges and FFEs) and issuers of QHPs, specifically with respect to financial integrity, maintenance of records, and privacy and security of PII. This proposed rule would also restrict the use of funds for administrative expenses generated for State Exchanges and State-operated reinsurance programs; propose procedures for oversight of advance payments of the premium tax credit and cost-sharing reductions; propose procedures to ensure the accuracy of data collection, calculations, and submissions; allow a State to establish and operate only the SHOP and establish standards for SHOPs; establish requirements for customer service representatives and agents and brokers who assist consumers; establish requirements for enrollee satisfaction survey vendors; and propose additional standards for special enrollment periods.
In accordance with OMB Circular A–4, Table V.1 below depicts an accounting statement summarizing HHS's assessment of the benefits and costs associated with this regulatory action. The period covered by the RIA is 2014–2017.
HHS anticipates that the provisions of this proposed rule will ensure smooth operation of Exchanges, integrity of the reinsurance and risk adjustment programs, safeguard the use of Federal funds, prevent fraud and abuse, increase access to healthcare coverage and provide consumer protections. Affected entities such as States, QHP issuers, agents, and brokers would incur costs to maintain records, submit reports to HHS and Exchanges, comply with privacy and security standards for PII, provide records for compliance reviews, and to comply with enforcement actions. In accordance with Executive Order 12866, HHS believes that the benefits of this regulatory action justify the costs.
Starting in 2014, individuals and small businesses will be able to use health insurance coverage purchased through Exchanges. The Congressional Budget Office estimated that the number of people enrolled in coverage through Exchanges will increase from 7 million in 2014 to 26 million in 2017.
The proposed rule would specify the standards and processes for the oversight and accountability of entities responsible for operations of the Exchanges and reinsurance and risk adjustment programs. Affected entities would include States, in their roles of establishing and operating Exchanges and SHOPs and administering reinsurance and risk adjustment programs; FFEs and FF-SHOPs; issuers of QHPs; health insurance issuers offering coverage both inside and outside of the Exchange when HHS operates risk adjustment or reinsurance on behalf of the State; contractors or other subsidiaries of these organizations; and insurance agents and brokers.
This proposed rule would implement oversight, record maintenance and enforcement provisions that would ensure integrity of the reinsurance and risk adjustment programs, State Exchanges and FFE functions; prevent fraud and abuse; and establish consumer protection measures.
The proposed rule includes provisions that would create a system of oversight, financial integrity and program integrity in the Exchanges and the risk adjustment, reinsurance and risk corridors programs. The proposed oversight requirements for HHS-operated and State-operated reinsurance and risk-adjustment programs would ensure that these programs are effective and efficient, and use program funds appropriately. The proposed standards would also ensure that Federal funds are used appropriately in the administration of State Exchange activities. By monitoring financial reports and overseeing State Exchange activities, HHS would safeguard the use of Federal funds provided as cost-sharing reductions and advance payments of the premium tax credit and provide value for taxpayers' dollars.
The proposed rule would also allow a State to operate a State-based SHOP while the Exchange is operated as an FFE. This would enable the State to focus on effective implementation of the SHOP and gain experience that would help prepare it to operate both a SHOP and State Exchange in the future. Each SHOP would also be required to develop uniform standards for the termination of coverage in a QHP, starting in 2015, unless the SHOP offers employee choice before then. Standardizing the timing, form, and manner of a group's termination in the SHOP would ensure that an employer offering coverage through multiple health insurance issuers (under the SHOP `employee choice” model) will be subject to uniform, predictable termination policies.
The proposed rule would implement consumer protections that would ensure privacy and security of PII, increased access to customer assistance, information about coverage options and allow consumers to make informed coverage decisions. Permitting issuer customer service representatives to assist individuals with applying for eligibility determinations or redeterminations for coverage through the Exchange would increase assistance available to consumers, while the training and compliance standards would ensure that such assistance is fair and unbiased. The proposed rule would establish requirements for customer service representatives and agents and brokers who assist consumers, requiring them to comply with registration and training requirements. The proposed rule would also establish standards under which HHS could terminate its relationship with agents and brokers in the FFE, to help ensure that agents and brokers continue to meet Exchange standards. In addition, the requirement for QHP issuers conducting direct enrollment to provide standardized comparative information on their Web-sites would ensure that consumers can readily differentiate and compare plan choices leading to informed decisions. Consumers without bank accounts or credits cards would also have a variety of payment options.
The provisions of this rule would also ensure that enrollees are promptly refunded any excess premium paid or any excess cost sharing they should not have paid. Individuals harmed by misconduct on the part of non-Exchange entities would also be eligible for a special enrollment period. A QHP would also be required to promptly reassign an enrollee improperly assigned to a plan variation (or standard plan without cost-sharing reductions), minimizing consumer harm.
The annual application requirement for enrollee satisfaction survey vendors would allow HHS to ensure that these entities participate in relevant training and post-training certification, follow protocols related to quality assurance and the use of HHS data, and adhere to privacy and security standards when handling data. This would help to ensure that ultimately the enrollee satisfaction survey data are reliable and valid and that the information is sufficiently protected.
The proposed enforcement actions such as CMPs and decertification of a QHP, termination of agent and broker agreement for participation in the
Affected entities would incur costs to comply with the provisions of this proposed rule. Costs related to information collection requirements subject to PRA are discussed in detail in section III and include administrative costs incurred by States, issuers and agents and brokers related to record maintenance and reporting requirements; oversight and financial integrity standards; enforcement actions; enrollment process for qualified individuals; and training requirements . In this section we discuss other costs related to the proposed provisions.
States operating reinsurance programs would be required to maintain records. The costs related to this provision are generally accounted for in the RIA of the Payment Notice and are not included in this RIA. States operating reinsurance would be required to keep an accurate accounting for each benefit year, of all reinsurance funds received from HHS for reinsurance payments and for administrative expenses, as well as all claims for reinsurance payments from issuers of reinsurance-eligible plans, all payments made to those issuers, and all administrative expenses incurred. State-operated reinsurance programs will already have a system in place to track reinsurance funds received from HHS, claims from and payments to issuers, and expenses incurred to operate the reinsurance program. The cost for States operating reinsurance to maintain any records associated with the reinsurance program was previously estimated in the RIA of the Payment Notice, and we believe that the administrative costs associated with this requirement are generally accounted for in that estimate.
State-operated reinsurance programs would submit to HHS annually and make public a summary report of their program operations, which would include a summary of the accounting kept pursuant to proposed § 153.260(a). We assume that the data already collected and used to report to issuers and HHS would be the same used to prepare this annual report. Therefore, the cost associated with this requirement is the incremental time and cost to prepare an annual report to HHS and the public on program operations. We estimate it will take insurance management analysts 16 hours (at $51 per hour) and a senior manager 2 hours (at $77 per hour) to prepare the report. Therefore, we estimate it would cost each State that operates reinsurance approximately $970 to submit this report to HHS. Because two States will operate reinsurance in the 2014 benefit year, we estimate that an aggregate cost of $1,940 as a result of this requirement in the first year. We note that HHS will provide a portion of the reinsurance contributions it collects to a State operating reinsurance for the purposes of supporting State administration of reinsurance payments, which would likely cover the costs associated with this requirement.
A State operating a risk adjustment program would be directed to maintain documents and records relating to the risk adjustment program, whether paper, electronic or in other media, for each benefit year for at least 10 years, and make them available upon request from HHS, the OIG, the Comptroller General, or their designees, to any such entity. The documents and records must be sufficient to enable the evaluation of a State-operated risk adjustment program's compliance with Federal standards. States would also be directed to ensure that their contractors, subcontractors, and agents maintain and make those documents and records available upon request from HHS, the OIG, the Comptroller General, or their designees. States operating risk adjustment programs should already have the documents and records of accounting procedures needed for periodic audits. Therefore we estimate that the additional burden associated with this requirement is the time, effort, and additional labor cost required to maintain and archive the records. We assume that it would take an insurance operations analyst 10 hours (at $38.49 an hour) to maintain records. Therefore, the average cost for each state would be approximately $385. Because one State will operate risk adjustment for the 2014 benefit year, we estimate an aggregate cost of $385 to comply with this requirement in the first year.
A State operating a risk adjustment program would be required to submit by December 31st of the first benefit year an interim summary report on the first 10 months of risk adjustment activities, in order to obtain re-certification for the third benefit year. The cost of complying with this provision is the time and effort to write the interim report and submit it to HHS. We estimate it would take an insurance management analyst 16 hours (at $51 per hour) and a senior manager 2 hours (at $77 per hour) to prepare the interim summary report. Therefore, we estimate it would cost each state operating risk adjustment $970 to submit this report to HHS (an aggregate cost of $970 in the 2014 benefit year). A State operating a risk adjustment program would submit and make public, a summary report of its risk adjustment program operations for each benefit year after the first benefit year for which the State operates the program. We propose that this summary report include the results of a programmatic and financial audit for each benefit year conducted by an independent qualified auditing entity. We believe the cost of this annual report would be the same as the cost of producing the interim first-year report above, except for the cost of audits required in subsequent years, and these annual audit costs are estimated later in this RIA. These estimates also include the administrative costs related to the requirement for State-operated risk adjustment programs to keep accurate accounting for each benefit year of all receipts and expenditures related to risk adjustment payments, charges, and administration of the program.
States would face a variety of costs due to the monitoring requirements in this proposed rule. Conducting oversight of the Exchanges, State-operated risk adjustment and reinsurance programs, administration of the advance payments of the premium tax credit or cost-sharing reductions, and other activities require independent external audits, investigations, rectification of errors, and the development of summary reports which would be submitted to HHS. The estimated total audit costs for State reinsurance, risk adjustment and Exchange programs are presented in Table V.2. It is expected that 18 States will establish State Exchanges in 2014 and we assume that number will stay the same during the period covered by the RIA. We also assume that each State would conduct a financial audit and a programmatic audit annually, which would encompass reinsurance and risk adjustment programs. Financial audit costs are estimated based on prices among the big four audit firms for governmental entities of similar size to those of the anticipated State Exchanges for a financial statement audit and Yellowbook Report (report on internal controls) that reflects different levels of cost for small, medium, and large entities, for entities with low, medium, and high risk. Programmatic audit estimates reflect the experience of Federal entitlement programs similar to Medicaid audited under an A–133 program compliance supplement, and vary only by the size of the program (small medium and large). For example, a small Exchange judged to have low
Exchanges and non-Exchange entities associated with FFEs and agents and brokers permitted by States to assist consumers would incur costs to comply with the privacy and security standards for PII, informing individuals about related policies, procedures and technologies developing policies and procedures, executing training, posting privacy policies on Web sites and providing reports of any violations to HHS. Issuers would also incur expenses to provide privacy and security training to their customer service representatives. It is anticipated that Exchanges and issuers' IT systems will need minimal changes to comply with these provisions.
The proposed rule would require the enrollee satisfaction survey vendors engaged by issuers to meet HHS standards. Survey vendors would apply for approval annually in order to administer enrollee satisfaction surveys to QHP enrollees on behalf of a QHP issuer. Vendors would incur costs to submit the annual applications to HHS and to meet the requirements necessary to meet approval.
The proposed rule would also amend existing requirements so that SHOPs would no longer be required to accept paper applications and applications by telephone. This could reduce the cost of operating a SHOP. A SHOP would also incur costs to develop uniform standards for the termination of a group's coverage in a QHP and to keep sufficient records of terminations and reasonable accommodations.
Under the Executive Order, HHS is required to consider alternatives to issuing rules and alternative regulatory approaches. HHS considered the following alternatives while developing this proposed rule:
Under this alternative, HHS would require a single standard for Exchanges across the nation regardless of whether the Exchange was established and operated by a State or was Federally-facilitated. The proposed rule would defer to State discretion in oversight of QHPs. This element of State flexibility would be precluded if greater uniformity in operations and standards were to be imposed. Greater standardization would have an uncertain impact on Federal oversight activities but would likely impose greater costs of compliance on State operations and issuers of QHPs in those States.
Under this alternative, HHS would place more responsibility on States and State Exchanges to interpret and meet statutory requirements. This approach could create a number of problems. If every State developed its own monitoring standards, oversight of different Exchanges could be quite uneven, as States across the country have varying levels of fiscal resources with which to monitor activities. States currently have certain levels of responsibility under the Affordable Care Act to oversee standards for Exchanges, QHPs, and other programs. State Exchanges also have latitude in the number, type, and standardization of plans they certify and accept into the Exchange as QHPs.
There are a number of provisions in the Affordable Care Act that devolve responsibilities from the Federal government to States. Increased devolution could decrease the need of Federal oversight, while granting States increased flexibility to regulate Exchanges within their borders. There would also be a decrease in oversight-related activities for the Federal government such as HHS investigations or audits. On the other hand, States would likely face an increase in their own oversight activities and related costs.
HHS believes that the options adopted for this proposed rule strike the best balance of ensuring efficient operation and integrity of Exchanges and the reinsurance and risk adjustment programs while providing flexibility to the States and minimizing the burden on States.
The Regulatory Flexibility Act (RFA) requires agencies that issue a rule to analyze options for regulatory relief of small businesses if a rule has a significant impact on a substantial number of small entities. The RFA generally defines a “small entity” as—(1) A proprietary firm meeting the size standards of the Small Business Administration (SBA), (2) a nonprofit organization that is not dominant in its field, or (3) a small government jurisdiction with a population of less than 50,000 (States and individuals are not included in the definition of “small entity”). HHS uses as its measure of significant economic impact on a substantial number of small entities a change in revenues of more than 3 percent to 5 percent. HHS anticipates that the proposed rule would not have a significant economic impact on a substantial number of small entities.
As discussed in the Web Portal final rule published on May 5, 2010 (75 FR 24481), HHS examined the health insurance industry in depth in the RIA we prepared for the proposed rule on establishment of the Medicare Advantage program (69 FR 46866, August 3, 2004). In that analysis it was determined that there were few, if any, insurance firms underwriting comprehensive health insurance policies (in contrast, for example, to travel insurance policies or dental discount policies) that fell below the size thresholds for “small” business established by the SBA (currently $7 million in annual receipts for health issuers).
Some of the agents and brokers affected by the provisions of this proposed rule may be small entities and would incur costs to comply with the provisions of this proposed rule. The size threshold for “small” business established by the SBA is currently $7 million in annual receipts for insurance agencies and brokerages. We anticipate that agents and brokers will continue to be an important source of assistance for many consumers seeking access to health insurance coverage through an Exchange, including those who own and/or are employed by small businesses. Due to lack of data, HHS is unable to estimate how many agents and brokers permitted by States to assist consumers would be small entities. We invite comments on this issue.
Section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995 requires that agencies assess anticipated costs and benefits before issuing any proposed rule that includes a Federal mandate that could result in expenditure in any one year by State, local or tribal governments, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. In 2013, that threshold level is approximately $141 million.
UMRA does not address the total cost of a proposed rule. Rather, it focuses on certain categories of cost, mainly those “Federal mandate” costs resulting from—(1) imposing enforceable duties on State, local, or tribal governments, or on the private sector; or (2) increasing the stringency of conditions in, or decreasing the funding of, State, local, or tribal governments under entitlement programs.
The proposed rule would direct States to undertake oversight activities for State Exchanges, State-operated reinsurance and risk adjustment programs. The costs related to oversight activities, recordkeeping, reporting and audits are estimated to be approximately $2.8 million in 2014. There are no mandates on local or tribal governments. The private sector, for example, QHP issuers and agents and brokers, would incur costs to comply with the record maintenance and reporting requirements set forth in this proposed rule. The related costs are estimated to be approximately $21.8 million in 2014. However, consistent with policy embodied in UMRA, this proposed rule has been designed to be a low-burden alternative for State, local and tribal governments, and the private sector while achieving the objectives of the Affordable Care Act.
Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications.
States are the primary regulators of health insurance coverage. States will continue to apply State laws regarding health insurance coverage. However, if any State law or requirement prevents the application of a Federal standard, then that particular State law or requirement would be preempted. State requirements that are more stringent than the Federal requirements would be not be preempted by this proposed rule. Accordingly, States have significant latitude to impose requirements with respect to health insurance coverage that are more restrictive than the Federal law.
States would continue to license, monitor and regulate all agents and brokers, both inside and outside of Exchanges. All State laws related to agents and brokers, including State laws related to appointments, contractual relationships with issuers, and licensing and marketing requirements, would continue to apply. Under the proposed rule, States would have the option to operate only a State-based SHOP while the Exchange is operated as an FFE. The proposed rule would also provide additional flexibility to States with respect to the operation of a SHOP-specific Navigator program when the State operates only a SHOP Exchange. The State Exchange oversight program builds on State oversight efforts, where possible, by coordinating with State authorities to address compliance issues and concerns. HHS would coordinate enforcement actions for QHP issuers with State efforts in order to streamline the oversight of QHP issuers by States and to avoid inappropriate duplication of enforcement actions. Because QHPs are one of several commercial market insurance products operating in State markets, HHS would not seek to inappropriately duplicate or interfere with the traditional regulatory roles played by the State DOIs. HHS would generally confine its QHP oversight to Exchange-specific requirements and attributes. HHS would also seek to work collaboratively with State DOIs on topics of mutual concern, in the interest of efficiently deploying oversight resources and avoiding needlessly duplicative regulatory roles. HHS may consider the regulatory action taken by a State against a QHP issuer as a factor in determining whether to decertify a QHP. As mentioned earlier in the preamble, HHS recognizes that States play an important role in handling consumer cases related to health insurance and HHS anticipates that States will continue to assist consumers with these grievances and complaints. QHP issuers are expected to comply with standards established by State law and regulation for cases forwarded to an issuer by a State in which it offers QHPs.
The requirements specified in this proposed rule would impose direct costs on State and local governments and we seek comments on how to minimize those costs. State Exchanges and State-operated reinsurance and risk-adjustment programs would be required to undertake oversight, record maintenance and reporting activities.
In compliance with the requirement of Executive Order 13132 that agencies examine closely any policies that may have Federalism implications or limit the policymaking discretion of the States, HHS has engaged in efforts to consult with and work cooperatively with affected States. Throughout the process of developing this proposed rule, HHS has attempted to balance the States' interests in regulating health insurance issuers, and the Congress' intent to provide uniform protections to consumers in every State. By doing so, it is HHS' view that it has complied with the requirements of Executive Order 13132. Under the requirements set forth in section 8(a) of Executive Order 13132, and by the signatures affixed to this rule, HHS certifies that the CMS Center for Consumer Information and Insurance Oversight
This proposed rule is subject to the Congressional Review Act provisions of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.), which specifies that before a rule can take effect, the Federal agency promulgating the rule shall submit to each House of the Congress and to the Comptroller General a report containing a copy of the rule along with other specified information, and has been transmitted to the Congress and the Comptroller General for review.
Health care, Health insurance, Reporting and recordkeeping requirements.
Health care, Health insurance, Reporting and recordkeeping requirements, and State regulation of health insurance.
Administrative practice and procedure, Adverse selection, Health care, Health insurance, Health records, Organization and functions (Government agencies), Premium stabilization, Reporting and recordkeeping requirements, Reinsurance, Risk adjustment, Risk corridors, Risk mitigation, State and local governments.
Administrative practice and procedure, Health care access, Health insurance, Reporting and recordkeeping requirements, State and local governments, Cost-sharing reductions, Advance payments of premium tax credit, Administration and calculation of advance payments of the premium tax credit, Plan variations, Actuarial value.
Administrative practice and procedure, Advertising, Advisory Committees, Brokers, Conflict of interest, Consumer protection, Grant programs-health, Grants administration, Health care, Health insurance, Health maintenance organization (HMO), Health records, Hospitals, American Indian/Alaska Natives, Individuals with disabilities, Loan programs-health, Organization and functions (Government agencies), Medicaid, Public assistance programs, Reporting and recordkeeping requirements, State and local governments, Sunshine Act, Technical assistance, Women, and Youth.
For the reasons set forth in the preamble, the Department of Health and Human Services proposes to amend 45 CFR parts 144, 147, 153, 155, and 156 as set forth below:
Secs. 2701 through 2763, 2791, and 2792 of the Public Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and 300gg-92).
(c) * * * If the coverage is offered to an association member other than in connection with a group health plan, the coverage is considered individual health insurance coverage for purposes of 45 CFR parts 144 through 148. * * *
(1) A grandfathered health plan offered in the individual health insurance market, the 12-month period that is designated as the policy year in the policy documents of the individual health insurance coverage. If there is no designation of a policy year in the policy document (or no such policy document is available), then the policy year is the deductible or limit year used under the coverage. If deductibles or other limits are not imposed on a yearly basis, the policy year is the calendar year.
(2) A non-grandfathered health plan offered in the individual health insurance market, or in a market in which the State has merged the individual and small group risk pools, beginning January 1, 2015, a calendar year for which health insurance coverage provides coverage for health benefits.
Secs. 2701 through 2763, 2791, and 2792 of the Public Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and 300gg-92), as amended.
(a)
(1) * * *
(ii) * * * For purposes of this paragraph (a)(1), rating area is determined in the small group market using the group policyholder's principal business address and in the individual market using the primary policyholder's address.
(a)
(b) * * *
(2) * * * As of January 1, 2015, health insurance coverage in the individual market or in a market in which the State has merged the individual and small group risk pools must be offered on a calendar year basis.
(c) * * *
(2) An issuer that denies health insurance coverage to an individual or an employer in any service area, in accordance with paragraph (c)(1)(ii) of this section, may not offer coverage in the individual, small group, or large group market, as applicable, for a period of 180 calendar days after the date the coverage is denied. This paragraph (c)(2) does not limit the issuer's ability to renew coverage already in force or relieve the issuer of the responsibility to renew that coverage.
(d) * * *
(1) * * *
(ii) It is applying this paragraph (d)(1) uniformly to all employers or individual in the large group, small group, or individual market, as applicable, in the State consistent with applicable State law and without regard to the claims experience of those individuals, employers and their employees (and their dependents) or any health status-related factor relating to such individuals, employees, and dependents.
(2) An issuer that denies health insurance coverage to any employer or individual in a State under paragraph (d)(1) of this section may not offer coverage in the large group, small group, or individual market, as applicable, in the State before the later of either of the following dates:
7. Section 147.106 is amended by revising paragraphs (a) and (d)(1) introductory text to read as follows:
(a)
(d) * * *
(1) An issuer may elect to discontinue offering all health insurance coverage in the individual, small group, or large group market, or all markets, in a State in accordance with applicable State law only if—
8. The authority citation for part 153 continues to read as follows:
Secs. 1321, 1341–1343, Pub. L. 111–148, 24 Stat. 119.
9. Section 153.20 is amended by revising the definition of “contributing entity” to read as follows:
10. Section 153.240 is amended by revising paragraph (c) to read as follows:
(c)
(a)
(1) All reinsurance contributions received from HHS for reinsurance payments and for administrative expenses;
(2) All claims for reinsurance payments received from issuers of reinsurance-eligible plans;
(3) All reinsurance payments made to issuers of reinsurance-eligible plans; and
(4) All administrative expenses incurred for the reinsurance program.
(b)
(c)
(1) Provide to HHS the results of the audit, in the manner and timeframe to be specified by HHS;
(2) Ensure that the audit addresses the prohibitions set forth in § 153.265;
(3) Identify to HHS any material weakness or significant deficiency identified in the audit, and address in writing to HHS how the State intends to correct any such material weakness or significant deficiency; and
(4) Make public a summary of the results of the audit, including any material weakness or significant deficiency, in the manner and timeframe to be specified by HHS.
A State that establishes a reinsurance program must ensure that its applicable reinsurance entity does not use any funds for the support of reinsurance operations, including any reinsurance contributions provided under the national contribution rate for administrative expenses, for any of the following purposes:
(a) Staff retreats;
(b) Promotional giveaways;
(c) Excessive executive compensation; or
(d) Promotion of Federal or State legislative or regulatory modifications.
(c) * * *
(4)
(d) * * *
(3) In addition to requirements set forth in paragraphs (d)(1) and (d)(2) of this section, to obtain recertification from HHS to operate risk adjustment for a third benefit year, the State must, in the first benefit year for which it operates risk adjustment, provide to HHS an interim report, in a manner specified by HHS, including a detailed summary of its risk adjustment activities in the first 10 months of the benefit year, no later than December 31 of the applicable benefit year.
(4) To obtain recertification from HHS to operate risk adjustment for each benefit year after the third benefit year, each State operating a risk adjustment program must submit to HHS and make public a detailed summary of its risk adjustment program operations for the most recent benefit year for which risk adjustment operations have been completed, in the manner and timeframe specified by HHS.
(i) The summary must include the results of a programmatic and financial audit for each benefit year of the State-operated risk adjustment program conducted by an independent qualified auditing entity in accordance with generally accepted auditing standards.
(ii) The summary must identify to HHS any material weakness or significant deficiency identified in the audit and address in writing to HHS how the State intends to correct any such material weakness or significant deficiency.
If a State is operating a risk adjustment program, it must keep an accounting of all receipts and expenditures related to risk adjustment payments and charges and the administration of risk adjustment-related functions and activities for each benefit year.
(a) * * *
(1) * * *
(i) Such plan or coverage is not major medical coverage, subject to paragraph (a)(3) of this section.
(3) Notwithstanding paragraph (a)(1)(i) of this section, a health insurance issuer must make reinsurance contributions for lives covered by its group health insurance coverage even if the insurance coverage does not constitute major medical coverage, if –
(i) The group health plan provides health insurance coverage for those covered lives through more than one insurance policy that in combination constitute major medical coverage but individually do not;
(ii) The lives are not covered by self-insured coverage of the group health plan (except for self-insured coverage limited to excepted benefits); and
(iii) The health insurance coverage under the policy offered by the health insurance issuer represents a percentage of the total health insurance coverage offered in combination by the group health plan greater than the percentage offered under any of the other policies. For purposes of this paragraph, the percentage of coverage offered under various policies is determined based on the average premium per covered life for those policies. In the event that the percentage of coverage for two or more insurance policies is equal, the issuer of the policy that provides the greatest portion of in-network hospitalization benefits will be responsible for reinsurance contributions.
(h)
(c)
(b)
(a)
(b)
Title I of the Affordable Care Act, sections 1301, 1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 1331, 1334, 1402, 1411, 1412, 1413, Pub. L. 111–148, 124 Stat. 119 (42 U.S.C. 18021–18024, 18031–18033, 18041–18042, 18051, 18054, 18071, and 18081–18083.
(a)
(1) An Exchange that facilitates the purchase of health insurance coverage in QHPs in the individual market and that provides for the establishment of a SHOP; or
(2) An Exchange that provides only for the establishment of a SHOP.
(3)
(b) * * *
(1) The Exchange is able to carry out the required functions of an Exchange consistent with subparts C, D, E, H, and K of this part unless the State is approved to operate only a SHOP by HHS pursuant to § 155.100(a)(2), in which case the Exchange must perform the minimum functions described in subpart H and all applicable provisions of other subparts referenced therein;
(2) The Exchange is capable of carrying out the information reporting requirements in accordance with section 36B of the Code, unless the State is approved to operate only a SHOP by HHS pursuant to § 155.100(a)(2); and
(f)
(2) If an electing State has an approved or conditionally approved Exchange pursuant to § 155.100(a)(2) by January 1, 2013, HHS must (directly or through agreement with a not-for-profit entity) establish and operate an Exchange that facilitates the purchase of health insurance coverage in QHPs in the individual market and operate such Exchange within the State. In this case, the requirements in § 155.120(c), § 155.130 and subparts C, D, E, and K of this part will apply to the Exchange operated by HHS.
(c) * * *
(2) * * *
(ii) Encompass the same geographic area for its regional or subsidiary SHOP and its regional or subsidiary Exchange except:
(A) In the case of a regional Exchange established pursuant to § 155.100(a)(2), the regional SHOP must encompass a geographic area that matches the combined geographic areas of the individual market Exchanges established to serve the same set of States establishing the regional SHOP; and
(B) In the case of a subsidiary Exchange established pursuant to § 155.100(a)(2), the combined geographic area of all subsidiary SHOPs established in the State must encompass the geographic area of the individual market Exchange established to serve the State.
(a)
(c) * * *
(3) * * *
(i) Disclose and display all QHP information provided by the Exchange or directly by QHP issuers consistent with the requirements of § 155.205(b)(1) and § 155.205(c), and display a Web link to the Exchange Web site;
(vii) For the Federally-facilitated Exchange, prominently display language notifying consumers that the agent's or broker's Web site is not the Exchange Web site, that the agent or broker's Web site might not display all QHP data available on the Exchange Web site, that the agent or broker has entered into an agreement with HHS pursuant to paragraph (d) of this section, and that the agent or broker agrees to conform to the standards specified in paragraph (c) and (d) of this section.
(4) When an Internet Web site of an agent or broker is used to complete the QHP selection in the Federally-facilitated Exchange, and an agent or broker permits another agent or broker to access or use the Web site pursuant to an arrangement, the agent or broker who makes the Web site available must provide a list of agents and brokers who enter into such an arrangement to the Federally-facilitated Exchange, and must ensure that any agent or broker accessing or using the Web site pursuant to the arrangement:
(i) Complies with paragraphs (c) and (d) of this section; and
(ii) Complies with the policies and procedures that the agent or broker making the Web site available has established pursuant to paragraph (d)(4) of this section.
(d) * * *
(4) In the Federally-facilitated Exchange, comply with the following standards:
(i) Establish policies and procedures to ensure compliance with paragraph (d)(3) of this section;
(ii) Train its employees, representatives, contractors and agents with respect to the policies and procedures established pursuant to paragraph (d)(3) of this section on a periodic basis; and
(iii) Ensure as a condition of contract or agreement that its employees, representatives, contractors, agents comply with the policies and procedures established pursuant to paragraph (d)(3) of this section.
(f)
(2) The notice must include the intended date of termination, but if it does not specify a date of termination, or the date provided is not acceptable to HHS, HHS may set a different termination date that will be no less than 30 days from the date on the agent or broker's notice of termination.
(3) When termination becomes effective, the agent or broker will not be able to assist any individual through the Federally-facilitated Exchange, but the agent or broker must continue to protect PII created, collected, use or disclosed during the term of the agreement with the Federally-facilitated Exchange.
(g)
(2) An agent or broker may be determined noncompliant if HHS finds that the agent or broker violated—
(i) Any standard specified under this section;
(ii) Any term or condition of its agreement with the Federally-facilitated Exchange required under paragraph (d) of this section, including but not limited to compliance with Federally-Facilitated Exchange privacy and security standards;
(iii) Any State law applicable to agents or brokers, as required under paragraph (e) of this section, including but not limited to State laws related to confidentiality and conflicts of interest; or
(iv) Any Federal law applicable to agents or brokers.
(3) HHS will notify the agent or broker of the specific finding of noncompliance or pattern of noncompliance, and after 30 days from the date of the notice, may terminate the agreement for cause if the matter is not resolved to the satisfaction of HHS.
(4) After the period in paragraph (f)(3) of this section has elapsed, the agent or broker will no longer be registered with the Federally-facilitated Exchange or able to transact data through a secure connection with HHS.
(h)
(2)
(3)
(a)
(a)
(b)
(c)
(i)
(ii)
(2) Incident or breach management. The entity where an incident or breach occurs is responsible for managing the incident or breach in accordance with the entity's documented incident handling and breach notification procedures.
(3)
(j) [Reserved]
(k)
(1) Provide notice to the applicant indicating that information necessary to complete an eligibility determination is missing, specifying the missing information, and providing instructions on how to provide the missing information; and
(2) Provide the applicant with a period of no less than 15 days and no more than 90 days from the date on which the notice described in paragraph (k)(1) of this section is sent to the applicant to provide the information needed to complete the application to the Exchange.
(3) During the period described in paragraph (k)(2) of this section, the Exchange must not proceed with an applicant's eligibility determination or provide advance payments of the premium tax credit or cost-sharing reductions, unless an application filer has provided sufficient information to determine his or her eligibility for enrollment in a QHP through the Exchange, in which case the Exchange must make such a determination for enrollment in a QHP.
(b) * * *
(1)(i) The Exchange must verify whether an applicant is eligible for minimum essential coverage other than through an eligible employer-sponsored plan, Medicaid, CHIP, or the BHP, using information obtained by transmitting identifying information specified by HHS to HHS for verification purposes.
(ii) The Exchange must verify whether an applicant has already been determined eligible for coverage through Medicaid, CHIP, or the BHP, if a BHP is operating in the service area of the Exchange, within the State or States in which the Exchange operates using information obtained from the agencies administering such programs.
(2) Consistent with § 164.512(k)(6)(i) of this subchapter, a health plan that is a government program providing public benefits, is expressly authorized to disclose protected health information, as that term is defined at § 160.103 of this subchapter, that relates to eligibility for or enrollment in the health plan to HHS for verification of applicant eligibility for minimum essential coverage as part of the eligibility determination process for advance payments of the premium tax credit or cost-sharing reductions.
(h)
(a)
(b) [Reserved]
(d) * * *
(10) It has been determined by the Exchange that a qualified individual was not enrolled in QHP coverage, was not enrolled in the QHP selected by the individual, or is eligible for but is not receiving advance payments of the premium tax credit or cost-sharing reductions as a result of misconduct on the part of a non-Exchange entity providing enrollment assistance or conducting enrollment activities. For purposes of this provision, misconduct includes, but is not limited to, the failure of the non-Exchange entity to comply with applicable standards under this part, part 156 of this subchapter, or other applicable Federal or State laws, as determined by the Exchange.
(b) * * *
(b) * * *
(6) * * *
(i) Require all QHP issuers to make any change to rates at a uniform time that is no more frequently than quarterly.
(ii) In the FF–SHOP, rates may be updated quarterly with effective dates of January 1, April 1, July 1, or October 1 of each calendar year, beginning with rates effective no sooner than July 1, 2014. The updated rates must be submitted to HHS at least 60 days in advance of the effective date of the rates.
(c)
(d)
(f) The SHOP must:
(1) Accept applications from SHOP application filers; and
(2) Provide the tools to file an application via an Internet Web site.
(a)
(b)
(2) In the FF–SHOP, an employer may terminate coverage for all enrollees covered by the employer group health plan effective on the last day of any month, provided that the employer has given notice to the FF–SHOP on or before the 15th day of any month. If notice is given after the 15th of the month, the FF–SHOP may terminate the coverage on the last day of the following month.
(c)
(2) In an FF–SHOP—
(i) For a given month of coverage, premium payment is due by the first day of the coverage month.
(ii) If premium payment is not received 31 days from the first of the coverage month, the FF–SHOP may terminate the qualified employer for lack of payment.
(iii) If a qualified employer is terminated due to lack of premium payment, but within 30 days following its termination the qualified employer requests reinstatement, pays all premiums owed including any prior premiums owed for coverage during the grace period, and pays the premium for the next month's coverage, the FF–SHOP must reinstate the qualified employer in its previous coverage.
(d)
(i) The employee or dependent is no longer eligible for coverage under the employer's group health plan;
(ii) The employee requests that the SHOP terminate the coverage of the employee or a dependent of the employee under the employer's group health plan;
(iii) The QHP in which the employee is enrolled terminates or is decertified as described in § 155.1080;
(iv) The enrollee changes from one QHP to another during the employer's annual open enrollment period or during a special enrollment period in accordance with § 155.725(j); or
(v) The enrollee's coverage is rescinded in accordance with § 147.128 of this subchapter.
(2) In the FF–SHOP, termination is effective on the last day of the month in which the FF–SHOP receives notice of an event described in paragraph (d)(1) of this section, and notice must have been received by the FF–SHOP prior to the proposed date of termination.
(e)
(f)
(1) Beginning on or after January 1, 2015; and
(2) In any SHOP providing qualified employers with the option described in § 155.705(b)(2) or the option described in § 155.705(b)(4) before January 1, 2015, beginning with the date that option is offered.
(a)
(1) Keep an accurate accounting of Exchange receipts and expenditures in accordance with generally accepted accounting principles (GAAP).
(2) Monitor and report to HHS on Exchange related activities.
(3) Collect and report to HHS performance monitoring data.
(b)
(1) A financial statement presented in accordance with GAAP by April 1 of each year,
(2) Eligibility and enrollment reports, and
(3) Performance monitoring data.
(c)
(1) Provide to HHS the results of the annual external audit; and
(2) Inform HHS of any material weakness or significant deficiency and any intended corrective action identified in the audit;
(d)
(1) Compliance with paragraph (a)(1) of this section;
(2) Compliance with requirements under subparts D, E, and K of this part;
(3) Processes and procedures designed to prevent improper eligibility determinations and enrollment transactions; and
(4) Identification of errors that have resulted in incorrect eligibility determinations.
(a)
(1) Accommodate periodic auditing of the State Exchange's financial records; and
(2) Enable HHS or its designee(s) to inspect facilities, or otherwise evaluate the State- Exchange's compliance with Federal standards.
(b)
(1) Information concerning management and operation of the State Exchange's financial and other record keeping systems;
(2) Financial statements, including cash flow statements, and accounts receivable and matters pertaining to the costs of operations;
(3) Any financial reports filed with other Federal programs or State authorities;
(4) Data and records relating to the State Exchange's eligibility verifications and determinations, enrollment transactions, appeals, and plan variation certifications; and
(5) Qualified health plan contracting (including benefit review) data and consumer outreach and Navigator grant oversight information.
(c) A State Exchange must make all records and must ensure its contractors, subcontractors, and agents must make all records in paragraph (a) of this section available to HHS, the OIG, the Comptroller General, or their designees, upon request.
Title I of the Affordable Care Act, sections 1301–1304, 1311–1313, 1321, 1322, 1324, 1334, 1342–1343, and 1401–1402, Pub. L. 111–148, 124 Stat. 119 (42 U.S.C. 18042).
(d) * * *
(3)
(i) With respect to the individual market or markets in which the individual and small group risk pools were merged by the State pursuant to paragraph (c) of this section, on an annual basis.
(ii) With respect to the small group market, on an annual basis, and beginning the quarter after HHS issues notification that the FF–SHOP can process quarterly rate updates, on a quarterly basis.
(d) * * *
(1) * * *
(i) (A) Effective in plan years beginning on or after January 1, 2015, requirements regarding termination of coverage established in § 155.735 of this subchapter, if applicable to the coverage being terminated; otherwise
(B) General requirements regarding termination of coverage established in § 155.270 of this subchapter.
(iii) (A) Effective in plan years beginning on or after January 1, 2015, requirements regarding termination of coverage effective dates as set forth in § 155.735 of this subchapter, if applicable to the coverage being terminated; otherwise
(B) Requirements regarding termination of coverage effective dates as set forth in § 156.270(i).
When a QHP issuer that offers one or more QHPs in a Federally-facilitated Exchange undergoes a change of ownership as recognized by the State in which the issuer offers the QHP, the QHP issuer must notify HHS of the change in a manner to be specified by HHS, and provide the legal name and Taxpayer Identification Number (TIN) of the new owner and the effective date of the change at least 30 days prior to the effective date of the change of ownership. The new owner must agree to adhere to all applicable statutes and regulations.
(a)
(1) Standards of subpart C of part 156 with respect to each of its QHPs on an ongoing basis;
(2) Exchange processes, procedures, and standards in accordance with subparts H and K of part 155 and, in the small group market, § 155.705 of this subchapter;
(3) Standards of § 155.220 of this subchapter with respect to assisting with enrollment in QHPs; and
(4) Standards of § 156.705 and § 156.715 for maintenance of records and compliance reviews for QHP issuers operating in a Federally-facilitated Exchange or FF–SHOP.
(b)
(1) Specify the delegated activities and reporting responsibilities;
(2) Provide for revocation of the delegated activities and reporting standards or specify other remedies in instances where HHS or the QHP issuer determines that such parties have not performed satisfactorily;
(3) Specify that the delegated or downstream entity must comply with all applicable laws and regulations relating to the standards specified under paragraph (a) of this section;
(4) Specify that the delegated or downstream entity must permit access by the Secretary and the OIG or their designees in connection with their right to evaluate through audit, inspection, or other means, to the delegated or downstream entity's books, contracts, computers, or other electronic systems, including medical records and documentation, relating to the QHP issuer's obligations in accordance with Federal standards under paragraph (a) of this section until 10 years from the final date of the agreement period; and
(5) Contain specifications described in paragraph (b) of this section by no later than January 1, 2015, for existing agreements; and no later than the effective date of the agreement for agreements that are newly entered into as of October 1, 2013.
(c)
(2) If a QHP issuer provides an individual assigned to a plan variation more cost-sharing reductions than required under the applicable plan variation, taking into account § 156.425(b) concerning continuity of deductibles and out-of-pocket amounts (if applicable), then the QHP issuer will not be eligible for reimbursement of any excess cost-sharing reductions provided to the enrollee, and may not seek reimbursement from the enrollee or the applicable provider for any of the excess cost-sharing reductions.
(d)
(1) If, pursuant to a reassignment under this paragraph (d), a QHP issuer reassigns an enrollee from a more generous plan variation to a less generous plan variation of a QHP (or a standard plan without cost-sharing reductions), the QHP issuer will not be eligible for reimbursement for any of the excess cost-sharing reductions provided to the enrollee following the effective date of eligibility required by the Exchange, and may not seek reimbursement from the enrollee or the applicable provider for any of the excess cost-sharing reductions.
(2) If, pursuant to a reassignment under this paragraph (d), a QHP issuer reassigns an enrollee from a less generous plan variation (or a standard plan without cost-sharing reductions) to a more generous plan variation of a QHP, the QHP issuer must recalculate the enrollee's liability for cost sharing paid between the effective date of eligibility required by the Exchange and the date the issuer effectuated the change, and must refund any excess cost sharing paid by or for the enrollee during such period, no later than 30 calendar days after discovery of the improper assignment.
(c)
(a)
(b)
(c)
(a)
(1) Periodically audit financial records related to QHP issuers' participation in a Federally-facilitated Exchange, and evaluate the ability of QHP issuers to bear the risk of potential financial losses; and
(2) Conduct compliance reviews or otherwise monitor QHP issuers' compliance with all Exchange standards applicable to issuers offering QHPs in a Federally-facilitated Exchange as listed in this part.
(b)
(c)
(d)
(a)
(b)
(1) The QHP issuer's books and contracts, including the QHP issuer's policy manuals and other QHP plan benefit information provided to the QHP issuer's enrollees;
(2) The QHP issuer's policies and procedures, protocols, standard operating procedures, or other similar manuals related to the QHP issuer's activities in the Federally-facilitated Exchange;
(3) Any other information reasonably necessary for HHS to—
(i) Evaluate the QHP issuer's compliance with QHP certification standards and other Exchange standards applicable to issuers offering QHPs in the Federally-facilitated Exchange;
(ii) Evaluate the QHP's performance, including its adherence to an effective compliance plan, within the Federally-facilitated Exchange;
(iii) Verify that the QHP issuer has performed the duties attested to as part of the QHP certification process; and
(iv) Assess the likelihood of fraud or abuse.
(c)
(d)
(1) A compliance review under this section will be carried out as an onsite or desk review based on the specific circumstances.
(2) Unless otherwise specified, nothing in this section is intended to preempt Federal laws and regulations
(e)
(a)
(1) Civil money penalties as specified in § 156.805; and
(2) Decertification of a QHP offered by the non-compliant QHP issuer in a Federally-facilitated Exchange as described in § 156.810.
(b)
(a)
(1) Misconduct in the Federally-facilitated Exchange or substantial non-compliance with the Exchange standards applicable to issuers offering QHPs in the Federally-facilitated Exchange under subparts C through G of part 153 of this subchapter;
(2) Limiting the QHP's enrollees' access to medically necessary items and services that are required to be covered as a condition of the QHP issuer's ongoing participation in the Federally-facilitated Exchange, if the limitation has adversely affected or has a substantial likelihood of adversely affecting one or more enrollees in the QHP offered by the QHP issuer;
(3) Imposing on enrollees premiums in excess of the monthly beneficiary premiums permitted by Federal standards applicable to QHP issuers participating in the Federally-facilitated Exchange;
(4) Engaging in any practice that would reasonably be expected to have the effect of denying or discouraging enrollment into a QHP offered by the issuer (except as permitted by this part) by qualified individuals whose medical condition or history indicates the potential for a future need for significant medical services or items;
(5) Intentionally or recklessly misrepresenting or falsifying information that it furnishes—
(i) To HHS; or
(ii) To an individual or entity upon which HHS relies to make its certifications or evaluations of the QHP issuer's ongoing compliance with Exchange standards applicable to issuers offering QHPs in the Federally-facilitated Exchange;
(6) Failure to remit user fees assessed under § 156.50(c); or
(7) Failure to comply with the cost-sharing reductions and advance payments of the premium tax credit standards of subpart E of this part.
(b)
(1) The QHP issuer's previous or ongoing record of compliance;
(2) The level of the violation, as determined in part by—
(i) The frequency of the violation, taking into consideration whether any violation is an isolated occurrence, represents a pattern, or is widespread; and
(ii) The magnitude of financial and other impacts on enrollees and qualified individuals; and
(3) Aggravating or mitigating circumstances, or other such factors as justice may require, including complaints about the issuer with regard to the issuer's compliance with the medical loss ratio standards required by the Affordable Care Act and as codified by applicable regulations.
(c)
(d)
(1) The QHP issuer against whom the civil money penalty is being imposed, whose notice must include the following:
(i) A description of the basis for the determination;
(ii) The basis for the penalty;
(iii) The amount of the penalty;
(iv) The date the penalty is due;
(v) An explanation of the issuer's right to a hearing under subpart J of this part; and
(vi) Information about where to file the request for hearing.
(e)
(2) HHS will notify the QHP issuer in writing of any penalty that has been assessed and of the means by which the responsible entity may satisfy the judgment.
(3) The QHP issuer has no right to appeal a penalty with respect to which it has not requested a hearing in accordance with subpart J of this part unless the QHP issuer can show good cause, as determined under § 156.905(b), for failing to timely exercise its right to a hearing.
(a)
(1) The QHP issuer substantially fails to comply with the Federal laws and regulations applicable to QHP issuers participating in the Federally-facilitated Exchange;
(2) The QHP issuer substantially fails to comply with the standards related to the risk adjustment, reinsurance, or risk corridors programs under 45 CFR Part 153, including providing HHS with valid risk adjustment, reinsurance or risk corridors data;
(3) The QHP issuer substantially fails to comply with the transparency and marketing standards in §§ 156.220 and 156.225;
(4) The QHP issuer substantially fails to comply with the standards regarding advance payments of the premium tax credit and cost-sharing in subpart E of this part;
(5) The QHP issuer is operating in the Federally-facilitated Exchange in a manner that hinders the efficient and effective administration of the Exchange;
(6) The QHP no longer meets the conditions of the applicable certification criteria;
(7) Based on credible evidence, the QHP issuer has committed or participated in fraudulent or abusive activities, including submission of false or fraudulent data;
(8) The QHP issuer substantially fails to meet the requirements under § 156.230 related to network adequacy standards or, § 156.235 related to inclusion of essential community providers;
(9) The QHP issuer substantially fails to comply with the law and regulations related to internal claims and appeals and external review processes; or
(10) The State recommends to HHS that the QHP should no longer be available in a Federally-facilitated Exchange.
(b)
(2)
(c)
(1) The effective date of the decertification, which will be a date specified by HHS that is no earlier than 30 days after the date of issuance of the notice;
(2) The reason for the decertification, including the regulation or regulations that are the basis for the decertification;
(3) For the written notice to the QHP issuer, information about the effect of the decertification on the ability of the issuer to offer the QHP in the Federally-facilitated Exchange and must include information about the procedure for appealing the decertification by making a hearing request; and
(4) The written notice to the QHP enrollees must include information about the effect of the decertification on enrollment in the QHP and about the availability of a special enrollment period, as described in § 155.420 of this subchapter.
(d)
(1) The effective date of the decertification, which will be a date specified by HHS; and
(2) The information required by paragraphs (c)(2) through (c)(4) of this section.
(e)
(1)
(i) If the decertification is under paragraph (c) of this section, the decertification will not take effect prior to the issuance of the final administrative decision in the appeal, notwithstanding the effective date specified in the notice under paragraph (c)(1) of this section.
(ii) If the decertification is under paragraph (d) of this section, the decertification will be effective on the date specified in the notice of decertification, but the certification of the QHP may be reinstated immediately upon issuance of a final administrative decision that the QHP should not be decertified.
(2) [Reserved]
In this subpart, unless the context indicates otherwise:
(a) The ALJ has the authority, including all of the authority conferred
(b) The ALJ's authority includes the authority to modify, consistent with the Administrative Procedures Act (5 U.S.C. 552a), any hearing procedures set out in this subpart.
(c) The ALJ does not have the authority to find invalid or refuse to follow Federal statutes or regulations.
(a) A respondent has a right to a hearing before an ALJ if it files a request for hearing that complies with § 156.907(a), within 30 days after the date of issuance of either HHS' notice of proposed assessment under § 156.805, notice of decertification of a QHP under § 156.810(c) or § 156.810(d). The request for hearing should be addressed as instructed in the notice of proposed determination. “Date of issuance” is five (5) days after the filing date, unless there is a showing that the document was received earlier.
(b) The ALJ may extend the time for filing a request for hearing only if the ALJ finds that the respondent was prevented by events or circumstances beyond its control from filing its request within the time specified above. Any request for an extension of time must be made promptly by written motion.
(a) The request for hearing must do the following:
(1) Identify any factual or legal bases for the assessment or decertifications with which the respondent disagrees.
(2) Describe with reasonable specificity the basis for the disagreement, including any affirmative facts or legal arguments on which the respondent is relying.
(b) Identify the relevant notice of assessment or decertification by date and attach a copy of the notice.
The ALJ may permit CMS to amend its notice of assessment or decertification, or permit the respondent to amend a request for hearing that complies with § 156.907(a), if the ALJ finds that no undue prejudice to either party will result.
An ALJ will order a request for hearing dismissed if the ALJ determines that:
(a) The request for hearing was not filed within 30 days as specified by § 156.905(a) or any extension of time granted by the ALJ pursuant to § 156.905(b).
(b) The request for hearing fails to meet the requirements of § 156.907.
(c) The entity that filed the request for hearing is not a respondent under § 156.901.
(d) The respondent has abandoned its request.
(e) The respondent withdraws its request for hearing.
HHS has exclusive authority to settle any issue or any case, without the consent of the ALJ at any time before or after the ALJ's decision.
(a) The ALJ may grant the request of an entity, other than the respondent, to intervene if all of the following occur:
(1) The entity has a significant interest relating to the subject matter of the case.
(2) Disposition of the case will, as a practical matter, likely impair or impede the entity's ability to protect that interest.
(3) The entity's interest is not adequately represented by the existing parties.
(4) The intervention will not unduly delay or prejudice the adjudication of the rights of the existing parties.
(b) A request for intervention must specify the grounds for intervention and the manner in which the entity seeks to participate in the proceedings. Any participation by an intervenor must be in the manner and by any deadline set by the ALJ.
(c) The Department of Labor (DOL) or the Internal Revenue Service (IRS) may intervene without regard to paragraphs (a)(1) through (a)(3) of this section.
(a) The ALJ has the authority to hear and decide the following issues:
(1) Whether a basis exists to assess a civil money penalty against the respondent.
(2) Whether the amount of the assessed civil money penalty is reasonable.
(3) Whether a basis exists to decertify a QHP offered by the respondent in the Federally-facilitated Exchange.
(b) In deciding whether the amount of a civil money penalty is reasonable, the ALJ—
(1) Will apply the factors that are identified in § 156.805 for civil money penalties.
(2) May consider evidence of record relating to any factor that HHS did not apply in making its initial determination, so long as that factor is identified in this subpart.
(c) If the ALJ finds that a basis exists to assess a civil money penalty, the ALJ may sustain, reduce, or increase the penalty that HHS assessed
(a) All hearings before an ALJ are on the record. The ALJ may receive argument or testimony in writing, in person, or by telephone. The ALJ may receive testimony by telephone only if the ALJ determines that doing so is in the interest of justice and economy and that no party will be unduly prejudiced. The ALJ may require submission of a witness' direct testimony in writing only if the witness is available for cross-examination.
(b) The ALJ may decide a case based solely on the written record where there is no disputed issue of material fact the resolution of which requires the receipt of oral testimony.
Any attorney who is to appear on behalf of a party must promptly file, with the ALJ, a notice of appearance.
No party or person (except employees of the ALJ's office) may communicate in any way with the ALJ on any matter at issue in a case, unless on notice and opportunity for both parties to participate. This provision does not prohibit a party or person from inquiring about the status of a case or asking routine questions concerning administrative functions or procedures.
(a) Any request to the ALJ for an order or ruling must be by motion, stating the relief sought, the authority relied upon, and the facts alleged. All motions must be in writing, with a copy served on the opposing party, except in either of the following situations:
(1) The motion is presented during an oral proceeding before an ALJ at which both parties have the opportunity to be present.
(2) An extension of time is being requested by agreement of the parties or with waiver of objections by the opposing party.
(b) Unless otherwise specified in this subpart, any response or opposition to a motion must be filed within 20 days of the party's receipt of the motion. The
(a) Every submission filed with the ALJ must be filed in triplicate, including one original of any signed documents, and include:
(1) A caption on the first page, setting forth the title of the case, the docket number (if known), and a description of the submission (such as “Motion for Discovery”).
(2) The signatory's name, address, and telephone number.
(3) A signed certificate of service, specifying each address to which a copy of the submission is sent, the date on which it is sent, and the method of service.
(b) A party filing a submission with the ALJ must, at the time of filing, serve a copy of such submission on the opposing party. An intervenor filing a submission with the ALJ must, at the time of filing, serve a copy of the submission on all parties. Service must be made by mailing or hand delivering a copy of the submission to the opposing party. If a party is represented by an attorney, service must be made on the attorney.
(a) For purposes of this subpart, in computing any period of time, the time begins with the day following the act, event, or default and includes the last day of the period unless it is a Saturday, Sunday, or legal holiday observed by the Federal government, in which event it includes the next business day. When the period of time allowed is less than seven days, intermediate Saturdays, Sundays, and legal holidays observed by the Federal government are excluded from the computation.
(b) The period of time for filing any responsive pleading or papers is determined by the date of receipt (as defined in § 156.901) of the submission to which a response is being made.
(c) The ALJ may grant extensions of the filing deadlines specified in these regulations or set by the ALJ for good cause shown (except that requests for extensions of time to file a request for hearing may be granted only on the grounds specified in § 156.905(b)).
After receipt of the request for hearing, the ALJ assigned to the case or someone acting on behalf of the ALJ will send a letter to the parties that acknowledges receipt of the request for hearing, identifies the docket number assigned to the case, provides instructions for filing submissions and other general information concerning procedures, and sets out the next steps in the case.
(a) The parties must identify any need for discovery from the opposing party as soon as possible, but no later than the time for the reply specified in § 156.937(c). Upon request of a party, the ALJ may stay proceedings for a reasonable period pending completion of discovery if the ALJ determines that a party would not be able to make the submissions required by § 156.937 without discovery. The parties should attempt to resolve any discovery issues informally before seeking an order from the ALJ.
(b) Discovery devices may include requests for production of documents, requests for admission, interrogatories, depositions, and stipulations. The ALJ orders interrogatories or depositions only if these are the only means to develop the record adequately on an issue that the ALJ must resolve to decide the case.
(c) Each discovery request must be responded to within 30 days of receipt, unless that period of time is extended for good cause by the ALJ.
(d) A party to whom a discovery request is directed may object in writing for any of the following reasons:
(1) Compliance with the request is unduly burdensome or expensive.
(2) Compliance with the request will unduly delay the proceedings.
(3) The request seeks information that is wholly outside of any matter in dispute.
(4) The request seeks privileged information. Any party asserting a claim of privilege must sufficiently describe the information or document being withheld to show that the privilege applies. If an asserted privilege applies to only part of a document, a party withholding the entire document must state why the nonprivileged part is not segregable.
(5) The disclosure of information responsive to the discovery request is prohibited by law.
(e) Any motion to compel discovery must be filed within 10 days after receipt of objections to the party's discovery request, within 10 days after the time for response to the discovery request has elapsed if no response is received, or within 10 days after receipt of an incomplete response to the discovery request. The motion must be reasonably specific as to the information or document sought and must state its relevance to the issues in the case.
(a) Within 60 days of its receipt of the acknowledgment provided for in § 156.931, the respondent must file the following with the ALJ:
(1) A statement of its arguments concerning CMS's notice of assessment or decertification (respondent's brief), including citations to the respondent's hearing exhibits provided in accordance with paragraph (a)(2) of this section. The brief may not address factual or legal bases for the assessment or decertification that the respondent did not identify as disputed in its request for hearing or in an amendment to that request permitted by the ALJ.
(2) All documents (including any affidavits) supporting its arguments, tabbed and organized chronologically and accompanied by an indexed list identifying each document.
(3) A statement regarding whether there is a need for an in-person hearing and, if so, a list of proposed witnesses and a summary of their expected testimony that refers to any factual dispute to which the testimony will relate.
(4) Any stipulations or admissions.
(b) Within 30 days of its receipt of the respondent's submission required by paragraph (a) of this section, CMS will file the following with the ALJ:
(1) A statement responding to the respondent's brief, including the respondent's proposed hearing exhibits, if appropriate. The statement may include citations to CMS's proposed hearing exhibits submitted in accordance with paragraph (b)(2) of this section.
(2) Any documents supporting CMS's response not already submitted as part of the respondent's proposed hearing exhibits, organized and indexed as indicated in paragraph (a)(2) of this section (CMS's proposed hearing exhibits).
(3) A statement regarding whether there is a need for an in-person hearing and, if so, a list of proposed witnesses and a summary of their expected testimony that refers to any factual dispute to which the testimony will relate.
(4) Any admissions or stipulations.
(c) Within 15 days of its receipt of CMS's submission required by
(a) Any proposed hearing exhibit submitted by a party in accordance with § 156.937 is deemed part of the record unless the opposing party raises an objection to that exhibit and the ALJ rules to exclude it from the record. An objection must be raised either in writing prior to the prehearing conference provided for in § 156.941 or at the prehearing conference. The ALJ may require a party to submit the original hearing exhibit on his or her own motion or in response to a challenge to the authenticity of a proposed hearing exhibit.
(b) A party may introduce a proposed hearing exhibit following the times for submission specified in § 156.937 only if the party establishes to the satisfaction of the ALJ that it could not have produced the exhibit earlier and that the opposing party will not be prejudiced.
An ALJ may schedule one or more prehearing conferences (generally conducted by telephone) on the ALJ's own motion or at the request of either party for the purpose of any of the following:
(a) Hearing argument on any outstanding discovery request.
(b) Establishing a schedule for any supplements to the submissions required by § 156.937 because of information obtained through discovery.
(c) Hearing argument on a motion.
(d) Discussing whether the parties can agree to submission of the case on a stipulated record.
(e) Establishing a schedule for an in-person hearing, including setting deadlines for the submission of written direct testimony or for the written reports of experts.
(f) Discussing whether the issues for a hearing can be simplified or narrowed.
(g) Discussing potential settlement of the case.
(h) Discussing any other procedural or substantive issues.
(a) In all cases before an ALJ—
(1) CMS has the burden of coming forward with evidence sufficient to establish a prima facie case;
(2) The respondent has the burden of coming forward with evidence in response, once CMS has established a prima facie case; and
(3) CMS has the burden of persuasion regarding facts material to the assessment or decertification; and
(4) The respondent has the burden of persuasion regarding facts relating to an affirmative defense.
(b) The preponderance of the evidence standard applies to all cases before the ALJ.
(a) The ALJ will determine the admissibility of evidence.
(b) Except as provided in this part, the ALJ will not be bound by the Federal Rules of Evidence. However, the ALJ may apply the Federal Rules of Evidence where appropriate; for example, to exclude unreliable evidence.
(c) The ALJ excludes irrelevant or immaterial evidence.
(d) Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or by considerations of undue delay or needless presentation of cumulative evidence.
(e) Although relevant, evidence is excluded if it is privileged under Federal law.
(f) Evidence concerning offers of compromise or settlement made in this action will be inadmissible to the extent provided in the Federal Rules of Evidence.
(g) Evidence of acts other than those at issue in the instant case is admissible in determining the amount of any civil money penalty if those acts are used under § 156.805 of this part to consider the entity's prior record of compliance, or to show motive, opportunity, intent, knowledge, preparation, identity, or lack of mistake. This evidence is admissible regardless of whether the acts occurred during the statute of limitations period applicable to the acts that constitute the basis for liability in the case and regardless of whether HHS' notice sent in accordance with § 156.805 referred to them.
(h) The ALJ will permit the parties to introduce rebuttal witnesses and evidence.
(i) All documents and other evidence offered or taken for the record will be open to examination by all parties, unless the ALJ orders otherwise for good cause shown.
(j) The ALJ may not consider evidence regarding the willingness and ability to enter into and successfully complete a corrective action plan when that evidence pertains to matters occurring after HHS' notice under § 156.805(d) or § 156.810(c) or § 156.810(d).
(a) Any testimony that is taken in-person or by telephone is recorded and transcribed. The ALJ may order that other proceedings in a case, such as a prehearing conference or oral argument of a motion, be recorded and transcribed.
(b) The transcript of any testimony, exhibits and other evidence that is admitted, and all pleadings and other documents that are filed in the case constitute the record for purposes of an ALJ decision.
(c) For good cause, the ALJ may order appropriate redactions made to the record.
Generally, each party is responsible for 50 percent of the transcript cost. Where there is an intervenor, the ALJ determines what percentage of the transcript cost is to be paid for by the intervenor.
Each party is entitled to file proposed findings and conclusions, and supporting reasons, in a posthearing brief. The ALJ will establish the schedule by which such briefs must be filed. The ALJ may direct the parties to brief specific questions in a case and may impose page limits on posthearing briefs. Additionally, the ALJ may allow the parties to file posthearing reply briefs.
The ALJ will issue an initial agency decision based only on the record and on applicable law; the decision will contain findings of fact and conclusions of law. The ALJ's decision is final and appealable after 30 days unless it is modified or vacated under § 156.957.
(a) The ALJ may sanction a party or an attorney for failing to comply with an order or other directive or with a requirement of a regulation, for abandonment of a case, or for other actions that interfere with the speedy, orderly or fair conduct of the hearing. Any sanction that is imposed will relate reasonably to the severity and nature of the failure or action.
(b) A sanction may include any of the following actions:
(1) In the case of failure or refusal to provide or permit discovery, drawing negative fact inferences or treating such failure or refusal as an admission by deeming the matter, or certain facts, to be established.
(2) Prohibiting a party from introducing certain evidence or
(3) Striking pleadings, in whole or in part.
(4) Staying the case.
(5) Dismissing the case.
(6) Entering a decision by default.
(7) Refusing to consider any motion or other document that is not filed in a timely manner.
(8) Taking other appropriate action.
(a) The Administrator of CMS (which for purposes of this section may include his or her delegate), at his or her discretion, may review in whole or in part any initial agency decision issued under § 156.953.
(b) The Administrator may decide to review an initial agency decision if it appears from a preliminary review of the decision (or from a preliminary review of the record on which the initial agency decision was based, if available at the time) that:
(1) The ALJ made an erroneous interpretation of law or regulation.
(2) The initial agency decision is not supported by substantial evidence.
(3) The ALJ has incorrectly assumed or denied jurisdiction or extended his or her authority to a degree not provided for by statute or regulation.
(4) The ALJ decision requires clarification, amplification, or an alternative legal basis for the decision.
(5) The ALJ decision otherwise requires modification, reversal, or remand.
(c) Within 30 days of the date of the initial agency decision, the Administrator will mail a notice advising the respondent of any intent to review the decision in whole or in part.
(d) Within 30 days of receipt of a notice that the Administrator intends to review an initial agency decision, the respondent may submit, in writing, to the Administrator any arguments in support of, or exceptions to, the initial agency decision.
(e) This submission of the information indicated in paragraph (d) of this section must be limited to issues the Administrator has identified in his or her notice of intent to review, if the Administrator has given notice of an intent to review the initial agency decision only in part. A copy of this submission must be sent to the other party.
(f) After receipt of any submissions made pursuant to paragraph (d) of this section and any additional submissions for which the Administrator may provide, the Administrator will affirm, reverse, modify, or remand the initial agency decision. The Administrator will mail a copy of his or her decision to the respondent.
(g) The Administrator's decision will be based on the record on which the initial agency decision was based (as forwarded by the ALJ to the Administrator) and any materials submitted pursuant to paragraphs (b), (d), and (f) of this section.
(h) The Administrator's decision may rely on decisions of any courts and other applicable law, whether or not cited in the initial agency decision.
(a)
(1) Filing a notice of appeal in that court within 30 days from the date of a final order.
(2) Simultaneously sending a copy of the notice of appeal by registered mail to HHS.
(b)
(c)
If any entity fails to pay an assessment after it becomes a final order, or after the court has entered final judgment in favor of CMS, CMS refers the matter to the Attorney General, who brings an action against the entity in the appropriate United States district court to recover the amount assessed.
In an action brought under § 156.961, the validity and appropriateness of the final order described in § 156.945 is not subject to review.
(a) A case is a communication brought by a complainant that expresses dissatisfaction with a specific person or entity subject to State or Federal laws regulating insurance, concerning the person or entity's activities related to the offering of insurance, other than a communication with respect to an adverse benefit determination as defined in § 147.136(a)(2)(i) of this subchapter. Issues related to adverse benefit determinations are not addressed in this section and are subject to the provisions in § 147.136 of this subchapter governing internal claims appeals and external review.
(b) QHP issuers operating in a Federally-facilitated Exchange must investigate and resolve, as appropriate, cases from the complainant forwarded to the issuer by HHS. Cases received by a QHP issuer operating in a Federally-facilitated Exchange directly from a complainant or the complainant's authorized representative will be handled by the issuer through its internal customer service process.
(c) Cases may be forwarded to a QHP issuer operating in a Federally-facilitated Exchange through a casework tracking system developed by HHS or other means as determined by HHS.
(d) Cases received by a QHP issuer operating in a Federally-facilitated Exchange from HHS must be resolved within 15 calendar days of receipt of the case. Urgent cases as defined in § 156.1010(e) that do not otherwise fall within the scope of § 147.136 of this subchapter must be resolved no later than 72 hours after receipt of the case. Where applicable State laws and regulations establish timeframes for case resolution that are stricter than the standards contained in this paragraph, QHP issuers operating in a Federally-facilitated Exchange must comply with such stricter laws and regulations.
(e) For cases received from HHS by a QHP issuer operating in a Federally-facilitated Exchange, an urgent case is one in which there is an immediate need for health services because the non-urgent standard could seriously jeopardize the enrollee's or potential enrollee's life, or health or ability to attain, maintain, or regain maximum function.
(f) For cases received from HHS, QHP issuers operating in a Federally-facilitated Exchange are required to notify complainants regarding the disposition of the as soon as possible upon resolution of the case, but in no event later than seven (7) business days after the case is resolved. Notification may be by verbal or written means as determined most appropriate by the QHP issuer.
(g) For cases received from HHS, QHP issuers operating in a Federally-facilitated Exchange must use the casework tracking system developed by HHS, or other means as determined by
(h) Cases received by a QHP issuer operating in a Federally-facilitated Exchange from a State in which the issuer offers QHPs must be investigated and resolved according to applicable State laws and regulations. With respect to cases directly handled by the State, HHS or any other appropriate regulatory authority, QHP issuers operating in a Federally-facilitated Exchange must cooperate fully with the efforts of the State, HHS, or other regulatory authority to resolve the case.
(a)
(b)
(1) Sign and submit an application form for approval in accordance with paragraph (a) of this section;
(2) Ensure, on an annual basis, that appropriate staff participate in enrollee satisfaction survey vendor training and successfully complete a post-training certification exercise as established by HHS;
(3) Ensure the accuracy of their data collection, calculation and submission processes and attest to HHS the veracity of the data and these processes;
(4) Sign and execute a standard HHS data use agreement, in a form and manner to be determined by HHS, that establishes protocols related to the disclosure, use, and reuse of HHS data;
(5) Adhere to the enrollee satisfaction survey protocols and technical specifications in a manner and form required by HHS;
(6) Develop and submit to HHS a quality assurance plan and any supporting documentation as determined to be relevant by HHS. The plan must describe in adequate detail the implementation of and compliance with all required protocols and technical specifications described in paragraph (b)(5) of this section;
(7) Adhere to privacy and security standards established and implemented under § 155.260 of this subchapter by the Exchange with which they are associated;
(8) Comply with all applicable State and Federal laws;
(9) Become a registered user of the enrollee satisfaction survey data warehouse to submit files to HHS on behalf of its authorized QHP contracts;
(10) Participate in and cooperate with HHS oversight for quality-related activities, including, but not limited to: review of the enrollee satisfaction survey vendor's quality assurance plan and other supporting documentation; analysis of the vendor's submitted data and sampling procedures; and site visits and conference calls; and,
(11) Comply with minimum business criteria as established by HHS.
(c)
Within 15 calendar days of the date of a payment and collections report from HHS, the issuer must, in a format specified by HHS, either:
(a) Confirm to HHS that the amounts identified in the payment and collections report for the timeframe specified in the report accurately reflects applicable payments owed by the issuer to HHS and the payments owed to the issuer by HHS; or
(b) Describe to HHS any inaccuracy it identifies in the payment and collections report.
(a) A QHP issuer that is directly contacted by a potential applicant may, at the Exchange's option, enroll such applicant in a QHP in a manner that is considered through the Exchange. In order for the enrollment to be made directly with the issuer in a manner that is considered to be through the Exchange, the QHP issuer needs to comply with at least the following requirements:
(1)
(ii) The QHP issuer's Web site provides applicants the ability to view QHPs offered by the issuer with the data elements listed in § 155.205(b)(1)(i) through (viii) of this subchapter.
(iii) The QHP issuer's Web site clearly distinguishes between QHPs for which the consumer is eligible and other non-QHPs that the issuer may offer, and indicate that APTC and CSRs apply only to QHPs offered through the Exchange.
(iv) The QHP issuer informs all applicants of the availability of other QHP products offered through the Exchange and displays the Web link to or describes how to access the Exchange Web site.
(v) The QHP issuer's Web site allows applicants to select and attest to an APTC amount, if applicable, in accordance with § 155.310(d)(2) of this subchapter.
(2)
(i) Receives training on QHP options and insurance affordability programs, eligibility, and benefits rules and regulations;
(ii) Complies with the Exchange's privacy and security standards adopted
(iii) Complies with applicable State law related to the sale, solicitation, and negotiation of health insurance products, including applicable State law related to agent, broker, and producer licensure; confidentiality; and conflicts of interest.
(3)
(i) The premium it charges to an enrollee is the same amount as was accepted by the Exchange in its certification of the QHP issuer after accounting for any applicable APTC.
(ii) No later than 30 calendar days after discovery of an incorrect amount it has charged an enrollee, retroactively correct any incorrect amounts collected.
(iii) For issuers of QHPs in a Federally-facilitated Exchange, it allows HHS to review the premiums charged to qualified individuals through compliance reviews as set forth in § 156.715(a).
(b)
(a)
(1) Follow the premium payment process established by the Exchange in accordance with § 155.240.
(2) Offer method of payment options that do not discriminate against individuals without bank accounts or credit cards.
(b) [Reserved]