Notices. Notice of an application for an order under section 12(d)(1)(J) of the Investment Company Act of 1940 (the “Act”) for an exemption from sections 12(d)(1)(A) and (B) of the Act and under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and (2) of the Act
31,280 words·~142 min read·
/register/2007/06/04/07-2774A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
BILLING CODE 6051-01-M RAILROAD RETIREMENT BOARD Agency Forms Submitted for OMB Review, Request for Comments SUMMARY: In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the Railroad Retirement Board
(RRB)is forwarding an Information Collection Request
(ICR)to the Office of Information and Regulatory Affairs (OIRA), Office of Management and Budget
(OMB)to request an extension of the following collection of information: 3220-0155, Supplement to Claim of Person Outside the United States. Under the Social Security Amendments of 1983 (Pub. L. 98-21), which amended Section 202(t) of the Social Security Act, the Tier I or the O/M (overall minimum) portion of an annuity and Medicare benefits payable under the Railroad Retirement Act to certain beneficiaries living outside the U.S., may be withheld effective January 1, 1985. The benefit withholding provision of Public Law 98-21 applies to divorced spouses, spouses, minor or disabled children, students, and survivors of railroad employees who
(1)initially became eligible for Tier I amounts, O/M shares, and Medicare benefits after December 31, 1984;
(2)are not U.S citizens or U.S. nationals; and
(3)have resided outside the U.S for more than six consecutive months starting with the annuity beginning date. The benefit withholding provision does not apply, however to a beneficiary who is exempt under either a treaty obligation of the U.S., in effect on August 1, 1956, or a totalization agreement between the U.S. and the country in which the beneficiary resides, or to an individual who is exempt under other criteria specified in Public Law 98-21. RRB Form G-45, Supplement to Claim of Person Outside the United States, is currently used by the RRB to determine applicability of the withholding provision of Public Law 98-21. Our ICR describes the information we seek to collect from the public. Completion of Form G-45 is required to obtain or retain benefits. One response is required of each respondent. Review and approval by OIRA ensures that we impose appropriate paperwork burdens. The RRB invites comments on the proposed collection of information to determine
(1)The practical utility of the collection;
(2)the accuracy of the estimated burden of the collection;
(3)ways to enhance the quality, utility and clarity of the information that is the subject of collection; and
(4)ways to minimize the burden of collections on respondents, including the use of automated collection techniques or other forms of information technology. Comments to RRB or OIRA must contain the OMB control number of the ICR. For proper consideration of your comments, it is best if RRB and OIRA receive them within 30 days of publication date. Previous Requests for Comments: The RRB has already published the initial 60-day notice (72 FR 13540 on March 22, 2007) required by 44 U.S.C. 3506(c)(2). That request elicited no comments. Information Collection Request
(ICR)*Title:* Supplement to Claim of Person Outside the United States. *OMB Control Number:* 3220-0155. *Form(s) submitted:* G-45. *Type of request:* Extension of a currently approved collection. *Affected public:* Individuals or households. *Abstract:* Under Public Law 98-21, the Tier I or overall minimum portion of an annuity and Medicare benefits payable under the Railroad Retirement Act to certain beneficiaries living outside the United States may be withheld. The collection obtains the information needed by the Railroad Retirement Board to implement the benefit withholding provisions of Public Law 98-21. *Changes Proposed:* The RRB proposes no changes to Form G-45. *The burden estimate for the ICR is as follows:* *Estimated annual number of respondents:* 100. *Total annual responses:* 100. *Total annual reporting hours:* 17. *Additional Information or Comments:* Copies of the forms and supporting documents can be obtained from Charles Mierzwa, the agency clearance officer (312-751-3363) or *Charles.Mierzwa@rrb.gov.* Comments regarding the information collection should be addressed to Ronald J. Hodapp, Railroad Retirement Board, 844 North Rush Street, Chicago, Illinois, 60611-2092 or *Ronald.Hodapp@rrb.gov* and to the OMB Desk Officer for the RRB, at the Office of Management and Budget, Room 10230, New Executive Office Building, Washington, DC 20503. Charles Mierzwa, Clearance Officer. [FR Doc. E7-10708 Filed 6-1-07; 8:45 am] BILLING CODE 7905-01-P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 27844; 812-13288] HealthShares TM , Inc. and XShares Advisors LLC; Notice of Application May 29, 2007. AGENCY: Securities and Exchange Commission (“Commission”). ACTION: Notice of an application for an order under section 12(d)(1)(J) of the Investment Company Act of 1940 (the “Act”) for an exemption from sections 12(d)(1)(A) and
(B)of the Act and under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and
(2)of the Act. *Summary of the Application:* The requested order would permit certain registered management investment companies and unit investment trusts registered under the Act (“UITs”) to acquire shares of certain registered open-end management investment companies and UITs, including those that operate as exchange-traded funds, that are outside the same group of investment companies as the acquiring investment companies. *Applicants:* HealthShares TM , Inc. (the “Corporation”) and XShares Advisors LLC (the “Advisor”). *Filing Dates:* The application was filed on May 2, 2006 and amended on February 13, 2007 and May 29, 2007. Applicants have agreed to file an amendment during the notice period, the substance of which is reflected in this notice. *Hearing or Notification of Hearing:* An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on June 20, 2007, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission's Secretary. ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. Applicants, 420 Lexington Avenue, Suite 2626, New York, NY 10170. FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202)551-6873, or Nadya B. Roytblat, Assistant Director, at
(202)551-6821 (Division of Investment Management, Office of Investment Company Regulation). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained for a fee at the Public Reference Desk, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington DC 20549-0102 (telephone
(202)551-5850). Applicants' Representations 1. The Corporation is an open-end management investment company registered under the Act and organized as a Maryland corporation. The Corporation is comprised of separate series that pursue distinct investment objectives and strategies (the “Funds”). The existing Funds are offered as exchange-traded funds that operate in reliance on an order from the Commission permitting their shares to be redeemed in large aggregations (“Creation Units”). 1 The Advisor is registered as an investment adviser under the Investment Advisers Act of 1940 (“Advisers Act”) and serves as investment adviser to the Funds. 2 1 HealthShares TM , Inc., et al., Investment Company Act Release Nos. 27553 (Nov. 17, 2006) (notice) and 27594 (Dec. 7, 2006) (order) (the “HealthShares TM Order”). 2 All references to the term “Advisor” includes successors-in-interest to the Advisor. Successors-in-interest are limited to any entity resulting from a name change, a reorganization of the Advisor into another jurisdiction or a change in the type of business organization. 2. Applicants request relief to permit registered management investment companies and UITs that are not part of the same “group of investment companies,” within the meaning of section 12(d)(1)(G)(ii) of the Act, as the Corporation (such registered management investment companies are “Investing Management Companies”, such UITs are “Investing Trusts”, and Investing Management Companies and Investing Trusts are collectively “Funds of Funds”), to acquire shares of the Funds in excess of the limits in section 12(d)(1)(A) of the Act, and to permit a Fund, any principal underwriter for a Fund, and any broker or dealer registered under the Securities Exchange Act of 1934 (“Broker”) to sell shares of a Fund to a Fund of Funds in excess of the limits of section 12(d)(1)(B) of the Act. Applicants request that the relief apply to:
(1)Each registered open-end management investment company or UIT that currently or subsequently is part of the same “group of investment companies,” within the meaning of section 12(d)(1)(G)(ii) of the Act, as the Corporation, and is advised or sponsored by the Advisor or any entity controlling, controlled by, or under common control with the Advisor (such registered open-end management investment companies or their series are “Open-end Funds”, such UITs or their series are “UIT Funds,” and both Open-end Funds and UIT Funds are included in the term “Funds”);
(2)each Fund of Funds that enters into a Participation Agreement (as defined below) with a Fund to purchase shares of the Fund; and
(3)any principal underwriter to a Fund or Broker selling shares of a Fund. 3 Applicants also seek an exemption from sections 17(a)(1) and
(2)of the Act to permit a Fund to sell shares to, and redeem its shares from, and engage in certain in-kind transactions with, a Fund of Funds that owns 5% or more of the shares of a Fund. A sponsor of a UIT is referred to as a “Sponsor.” 3 All entities that currently intend to rely on the requested order are named as applicants. Any other entity that relies on the order in the future will comply with the terms and conditions of the application. A Fund of Funds may rely on the requested order only to invest in the Funds and not in any other registered investment company. 3. Each Investing Management Company will be advised by an investment adviser within the meaning of section 2(a)(20)(A) of the Act and registered as an investment adviser under the Advisers Act (“Fund of Funds Adviser”). A Fund of Funds Adviser may contract with an investment adviser which meets the definition of section 2(a)(20)(B) of the Act (“Fund of Funds Subadviser”). Applicants state that the Funds of Funds will be interested in using the Funds as part of their overall investment strategy. Applicants' Legal Analysis A. Section 12(d)(1) 1. Section 12(d)(1)(A) of the Act, in relevant part, prohibits a registered investment company from acquiring shares of an investment company if the securities represent more than 3% of the total outstanding voting stock of the acquired company, more than 5% of the total assets of the acquiring company, or, together with the securities of any other investment companies, more than 10% of the total assets of the acquiring company. Section 12(d)(1)(B) of the Act prohibits a registered open-end investment company, its principal underwriter, and any broker or dealer from selling its shares to another investment company if the sale will cause the acquiring company to own more than 3% of the acquired company's voting stock, or if the sale will cause more than 10% of the acquired company's voting stock to be owned by investment companies generally. 2. Section 12(d)(1)(J) of the Act provides that the Commission may exempt any person, security, or transaction, or any class or classes of persons, securities or transactions, from any provision of section 12(d)(1) if the exemption is consistent with the public interest and the protection of investors. Applicants seek an exemption under section 12(d)(1)(J) to permit Funds of Funds to acquire shares of the Funds in excess of the limits in section 12(d)(1)(A), and a Fund, any principal underwriter for a Fund and any Broker to sell shares of a Fund to a Fund of Funds in excess of the limits of section 12(d)(1)(B). 3. Applicants state that the terms and conditions of the proposed arrangement will adequately address the policy concerns underlying sections 12(d)(1)(A) and (B), which include concerns about undue influence by a fund of funds over underlying funds, excessive layering of fees, and overly complex fund structures. Accordingly, applicants believe that the requested exemption is consistent with the public interest and the protection of investors. 4. Applicants believe that neither a Fund of Funds nor a Fund of Funds Affiliate would be able to exert undue influence over the Funds. 4 To limit the control that a Fund of Funds may have over a Fund, applicants propose a condition prohibiting the Fund of Funds Adviser or Sponsor of the Investing Trust, any person controlling, controlled by, or under common control with the Fund of Funds Adviser or Sponsor of the Investing Trust, and any investment company or issuer that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act that is advised or sponsored by the Fund of Funds Adviser or Sponsor of the Investing Trust, or any person controlling, controlled by, or under common control with the Fund of Funds Adviser or Sponsor of the Investing Trust (“Fund of Funds Advisory Group”) from controlling (individually or in the aggregate) a Fund within the meaning of section 2(a)(9) of the Act. The same prohibition would apply to the Fund of Funds Subadviser, any person controlling, controlled by or under common control with the Fund of Funds Subadviser, and any investment company or issuer that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act (or portion of such investment company or issuer) advised or sponsored by the Fund of Funds Subadviser or any person controlling, controlled by or under common control with the Fund of Funds Subadviser (“Fund of Funds Subadviser Group”). Applicants propose other conditions to limit the potential for undue influence over the Funds, including that no Fund of Funds or Fund of Funds Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Open-end Fund or Sponsor to a UIT Fund) will cause a Fund to purchase a security in an offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an Underwriting Affiliate (“Affiliated Underwriting”). An “Underwriting Affiliate” is a principal underwriter in any underwriting or selling syndicate that is an officer, director, member of an advisory board, Fund of Funds Adviser, Fund of Funds Subadviser, Sponsor of the Investing Trust, or employee of the Fund of Funds, or a person of which any such officer, director, member of an advisory board, Fund of Funds Adviser, Fund of Funds Subadviser, Sponsor of the Investing Trust, or employee is an affiliated person. An Underwriting Affiliate does not include any person whose relationship to a Fund is covered by section 10(f) of the Act. 4 A “Fund of Funds Affiliate” is a Fund of Funds Adviser, Fund of Funds Subadviser, a Sponsor of an Investing Trust, a promoter, or a principal underwriter of a Fund of Funds, and any person controlling, controlled by, or under common control with any of those entities. A “Fund Affiliate” is an investment adviser, Sponsor, promoter, or principal underwriter of a Fund, and any person controlling, controlled by, or under common control with any of those entities. 5. Applicants do not believe that the proposed arrangement will involve excessive layering of fees. The board of directors or trustees of each Investing Management Company, including a majority of the directors or trustees who are not “interested persons” (within the meaning of section 2(a)(19) of the Act) (“Disinterested Trustees”), will find that the advisory fees charged to the Investing Management Company are based on services provided that will be in addition to, rather than duplicative of, the services provided under the advisory contract(s) of any Open-end Fund in which the Investing Management Company may invest. In addition, a Fund of Funds Adviser, or trustee or Sponsor of an Investing Trust will waive fees otherwise payable to it by the Fund of Funds in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Open-end Fund under rule 12b-1 under the Act) received from a Fund by the Fund of Funds Adviser, trustee or Sponsor of the Investing Trust, or an affiliated person of the Fund of Funds Adviser, trustee or Sponsor of the Investing Trust, other than any advisory fees paid to the Fund of Funds Adviser, trustee or Sponsor of the Investing Trust or its affiliated person, by an Open-end Fund, in connection with the investment by the Fund of Funds in the Fund. Applicants also state that with respect to registered separate accounts that invest in a Fund of Funds, no sales load will be charged at the Fund of Funds level or at the Fund level. Other sales charges and service fees, as defined in Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc. (“NASD Conduct Rules”), if any, will only be charged at the Fund of Funds level or at the Fund level, not both. With respect to other investments in a Fund of Funds, any sales charges and/or service fees charged with respect to shares of the Fund of Funds will not exceed the limits applicable to a fund of funds as set forth in Rule 2830 of the NASD Conduct Rules. Further, applicants represent that each Fund of Funds will represent in the Participation Agreement that no insurance company sponsoring a registered separate account funding variable insurance contracts will be permitted to invest in the Fund of Funds unless the insurance company has certified to the Fund of Funds that the aggregate of all fees and charges associated with each contract that invests in the Fund of Funds, including fees and charges at the separate account, Fund of Funds, and Fund levels, will be reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the insurance company. 6. Applicants submit that the proposed arrangement will not create an overly complex fund structure. Applicants note that no Fund will acquire securities of any investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except to the extent permitted by an exemptive order that allows the Fund to purchase shares of an affiliated money market fund for short-term cash management purposes or rule 12d1-1 under the Act. Applicants also represent that to ensure that the Funds of Funds comply with the terms and conditions of the requested relief from section 12(d)(1)(A)of the Act, a Fund of Funds must enter into a participation agreement between the Corporation, on behalf of the relevant Fund, and the Funds of Funds (“Participation Agreement”) before investing in a Fund beyond the limits imposed by section 12(d)(1)(A). The Participation Agreement will require the Fund of Funds to adhere to the terms and conditions of the requested order. The Participation Agreement will include an acknowledgment from the Fund of Funds that it may rely on the requested order only to invest in the Funds and not in any other registered investment company. The Participation Agreement will further require each Fund of Funds that exceeds the 5% or 10% limitations in sections 12(d)(1)(A)(ii) and
(iii)of the Act to disclose in its prospectus that it may invest in the Funds, and to disclose, in “plain English,” in its prospectus the unique characteristics of the Fund of Funds investing in the Funds, including but not limited to the expense structure and any additional expenses of investing in the Funds. Each Fund of Funds also will comply with the disclosure requirements concerning the costs of investing in Funds set forth in Investment Company Act Release No. 27399. 7. Applicants also note that a Fund may choose to reject a direct purchase of shares in Creation Units by a Fund of Funds. To the extent that a Fund of Funds purchases shares of a Fund in the secondary market, the Fund would still retain its ability to reject purchases of its shares through its decision to enter into the Participation Agreement prior to any investment by the Fund of Funds in excess of the limits of section 12(d)(1)(A). B. Section 17(a) 1. Section 17(a) of the Act generally prohibits sales or purchases of securities between a registered investment company and any affiliated person of the company. Section 2(a)(3) of the Act defines an “affiliated person” of another person to include any person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the other person. 2. Applicants seek relief from section 17(a) to permit a Fund that is an affiliated person of a Fund of Funds because the Fund of Funds holds 5% or more of the Fund's shares to sell its shares to and redeem its shares from a Fund of Funds. Applicants believe that any proposed transactions directly between a Fund and Fund of Funds will be consistent with the policies of each Fund and Fund of Funds. The Participation Agreement will require any Fund of Funds that purchases shares from a Fund to represent that the purchase of shares from the Fund by a Fund of Funds will be accomplished in compliance with the investment restrictions of the Fund of Funds and will be consistent with the investment policies set forth in the Fund of Funds' registration statement. 5 5 To the extent that purchases and sales of shares of a Fund occur in the secondary market and not through principal transactions directly between a Fund of Funds and a Fund, relief from section 17(a) would not be necessary. However, the requested relief would apply to direct sales of shares in Creation Units by a Fund to a Fund of Funds and redemptions of those shares. The requested relief is also intended to cover the in-kind transactions that would accompany such sales and redemptions as described in the application for the HealthShares TM Order. 3. Section 17(b) of the Act authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if it finds that
(i)the terms of the proposed transaction are fair and reasonable and do not involve overreaching on the part of any person concerned;
(ii)the proposed transaction is consistent with the policies of each registered investment company involved; and
(iii)the proposed transaction is consistent with the general purposes of the Act. Section 6(c) of the Act permits the Commission to exempt any person or transactions from any provision of the Act if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. 4. Applicants submit that the proposed transactions satisfy the standards for relief under sections 17(b) and 6(c) of the Act. 6 Applicants state that the terms of the transactions are reasonable and fair and do not involve overreaching. Applicants note that any consideration paid for the purchase or redemption of shares directly from a Fund will be based on the net asset value of the Fund. Applicants state that the proposed transactions will be consistent with the policies of each Fund of Funds and Fund and with the general purposes of the Act. 6 Applicants acknowledge that receipt of any compensation by
(a)an affiliated person of a Fund of Funds, or an affiliated person of such person, for the purchase by the Fund of Funds of shares of a Fund or
(b)an affiliated person of a Fund, or an affiliated person of such person, for the sale by the Fund of its shares to a Fund of Funds is subject to section 17(e) of the Act. The Participation Agreement also will include this acknowledgment. Applicants' Conditions Applicants agree that any order granting the requested relief will be subject to the following conditions: 1. The members of a Fund of Funds Advisory Group will not control (individually or in the aggregate) a Fund within the meaning of section 2(a)(9) of the Act. The members of a Fund of Funds Subadviser Group will not control (individually or in the aggregate) a Fund within the meaning of section 2(a)(9) of the Act. If, as a result of a decrease in the outstanding voting securities of a Fund, the Fund of Funds Advisory Group or the Fund of Funds Subadviser Group, each in the aggregate, becomes a holder of more than 25% of the outstanding voting securities of a Fund, it (except for any member of the Fund of Funds Advisory Group or Fund of Funds Subadviser Group that is a separate account) will vote its shares of the Fund in the same proportion as the vote of all other holders of the Fund's shares. This condition does not apply to the Fund of Funds Subadviser Group with respect to a Fund for which the Fund of Funds Subadviser or a person controlling, controlled by, or under common control with the Fund of Funds Subadviser acts as the investment adviser within the meaning of section 2(a)(20)(A) of the Act (in the case of an Open-end Fund) or as the Sponsor (in the case of a UIT Fund). A registered separate account will seek voting instructions from its contract holders and will vote its shares in accordance with the instructions received and will vote those shares for which no instructions were received in the same proportion as the shares for which instructions were received. An unregistered separate account will either
(i)vote its shares of the Fund in the same proportion as the vote of all other holders of the Fund's shares; or
(ii)seek voting instructions from its contract holders and vote its shares in accordance with the instructions received and vote those shares for which no instructions were received in the same proportion as the shares for which instructions were received. 2. No Fund of Funds or Fund of Funds Affiliate will cause any existing or potential investment by the Fund of Funds in shares of a Fund to influence the terms of any services or transactions between the Fund of Funds or a Fund of Funds Affiliate and the Fund or a Fund Affiliate. 3. The board of directors or trustees of an Investing Management Company, including a majority of the Disinterested Trustees, will adopt procedures reasonably designed to assure that the Fund of Funds Adviser and any Fund of Funds Subadviser are conducting the investment program of the Investing Management Company without taking into account any consideration received by the Investing Management Company or a Fund of Funds Affiliate from a Fund or a Fund Affiliate in connection with any services or transactions. 4. Once an investment by a Fund of Funds in the securities of an Open-end Fund exceeds the limit in section 12(d)(1)(A)(i) of the Act, the board of trustees of the Open-end Fund (“Board”), including a majority of the Disinterested Trustees, will determine that any consideration paid by the Open-end Fund to a Fund of Funds or a Fund of Funds Affiliate in connection with any services or transactions:
(a)Is fair and reasonable in relation to the nature and quality of the services and benefits received by the Open-end Fund;
(b)is within the range of consideration that the Open-end Fund would be required to pay to another unaffiliated entity in connection with the same services or transactions; and
(c)does not involve overreaching on the part of any person concerned. This condition does not apply with respect to any services or transactions between an Open-end Fund and its investment adviser(s), or any person controlling, controlled by, or under common control with such investment adviser(s). 5. No Fund of Funds or Fund of Funds Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Open-end Fund or Sponsor to a UIT Fund) will cause a Fund to purchase a security in any Affiliated Underwriting. 6. The Board of an Open-end Fund, including a majority of the Disinterested Trustees, will adopt procedures reasonably designed to monitor any purchases of securities by the Open-end Fund in an Affiliated Underwriting once an investment by a Fund of Funds in the securities of the Fund exceeds the limit in section 12(d)(1)(A)(i) of the Act, including any purchases made directly from an Underwriting Affiliate. The Board of the Open-end Fund will review these purchases periodically, but no less frequently than annually, to determine whether the purchases were influenced by the investment by the Fund of Funds in the Open-end Fund. The Board of the Open-end Fund will consider, among other things,
(i)whether the purchases were consistent with the investment objectives and policies of the Open-end Fund;
(ii)how the performance of securities purchased in an Affiliated Underwriting compares to the performance of comparable securities purchased during a comparable period of time in underwritings other than Affiliated Underwritings or to a benchmark such as a comparable market index; and
(iii)whether the amount of securities purchased by the Open-end Fund in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years. The Board of the Open-end Fund will take any appropriate actions based on its review, including, if appropriate, the institution of procedures designed to assure that purchases of securities in Affiliated Underwritings are in the best interests of shareholders. 7. The Open-end Fund will maintain and preserve permanently in an easily accessible place a written copy of the procedures described in the preceding condition, and any modifications to such procedures, and will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any purchase in an Affiliated Underwriting occurred, the first two years in an easily accessible place, a written record of each purchase of securities in Affiliated Underwritings once an investment by a Fund of Funds in the securities of the Open-end Fund exceeds the limit in section 12(d)(1)(A)(i) of the Act, setting forth from whom the securities were acquired, the identity of the underwriting syndicate's members, the terms of the purchase, and the information or materials upon which the determinations of the Board of the Open-end Fund were made. 8. Before investing in a Fund in excess of the limits in section 12(d)(1)(A), the Fund of Funds and the Fund will execute a Participation Agreement stating, without limitation, that their boards of directors or trustees and their investment advisers, or Sponsors and trustees, as applicable, understand the terms and conditions of the order and agree to fulfill their responsibilities under the order. At the time of its investment in shares of an Open-end Fund in excess of the limit in section 12(d)(1)(A)(i), a Fund of Funds will notify the Open-end Fund of the investment. At such time, the Fund of Funds will also transmit to the Open-end Fund a list of the names of each Fund of Funds Affiliate and Underwriting Affiliate. The Fund of Funds will notify the Open-end Fund of any changes to the list of the names as soon as reasonably practicable after a change occurs. The Fund and the Fund of Funds will maintain and preserve a copy of the order, the agreement and, in the case of an Open-end Fund, the list with any updated information for the duration of the investment and for a period of not less than six years thereafter, the first two years in an easily accessible place. 9. Before approving any advisory contract under section 15 of the Act, the board of directors or trustees of each Investing Management Company, including a majority of the Disinterested Trustees, will find that the advisory fees charged under such advisory contract are based on services provided that will be in addition to, rather than duplicative of, the services provided under the advisory contract(s) of any Open-end Fund in which the Investing Management Company may invest. These findings and their basis will be recorded fully in the minute books of the appropriate Investing Management Company. 10. A Fund of Funds Adviser or trustee or Sponsor of an Investing Trust will waive fees otherwise payable to it by the Fund of Funds in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Open-end Fund under rule 12b-1 under the Act) received from a Fund by the Fund of Funds Adviser, trustee, or Sponsor of the Investing Trust, or an affiliated person of the Fund of Funds Adviser, trustee or Sponsor of the Investing Trust, other than any advisory fees paid to the Fund of Funds Adviser, trustee or Sponsor of the Investing Trust or its affiliated person, by an Open-end Fund, in connection with the investment by the Fund of Funds in the Fund. Any Fund of Funds Subadviser will waive fees otherwise payable to the Fund of Funds Subadviser, directly or indirectly, by the Investing Management Company in an amount at least equal to any compensation received from a Fund by the Fund of Funds Subadviser, or an affiliated person of the Fund of Funds Subadviser, other than any advisory fees paid to the Fund of Funds Subadviser or its affiliated person by an Open-end Fund, in connection with the investment by the Investing Management Company in the Fund made at the direction of the Fund of Funds Subadviser. In the event that the Fund of Funds Subadviser waives fees, the benefit of the waiver will be passed through to the Investing Management Company. 11. With respect to registered separate accounts that invest in a Fund of Funds, no sales load will be charged at the Fund of Funds level or at the Fund level. Other sales charges and service fees, as defined in Rule 2830 of the NASD Conduct Rules, if any, will only be charged at the Fund of Funds level or at the Fund level, not both. With respect to other investments in a Fund of Funds, any sales charges and/or service fees charged with respect to shares of the Fund of Funds will not exceed the limits applicable to a fund of funds as set forth in Rule 2830 of the NASD Conduct Rules. 12. No Fund will acquire securities of any investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except to the extent permitted by an exemptive order that allows the Fund to purchase shares of an affiliated money market fund for short-term cash management purposes or rule 12d1-1 under the Act. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Florence E. Harmon, Deputy Secretary. [FR Doc. E7-10700 Filed 6-1-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94-409, that the Securities and Exchange Commission will hold the following meeting during the week of June 4, 2007: A Closed Meeting will be held on Thursday, June 7, 2007 at 2 p.m. Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the Closed Meeting. Certain staff members who have an interest in the matters may also be present. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), (9)(B), and
(10)and 17 CFR 200.402(a)(3), (5), (7), 9(ii) and (10), permit consideration of the scheduled matters at the Closed Meeting. Commissioner Nazareth, as duty officer, voted to consider the items listed for the closed meeting in closed session. The subject matter of the Closed Meeting scheduled for Thursday, June 7, 2007 will be: Formal orders of investigations; Institution and settlement of injunctive actions; Institution and settlement of administrative proceedings of an enforcement nature; Resolution of litigation claims; and Other matters related to enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at
(202)551-5400. Dated: May 30, 2007 Nancy M. Morris, Secretary. [FR Doc. E7-10659 Filed 6-1-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-55825; File No. SR-Phlx-2007-38] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Automated Sending of Linkage Principal Acting as Agent Orders May 29, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on May 22, 2007, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the Exchange. The Exchange filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) 3 of the Act and Rule 19b-4(f)(5) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b-4(f)(5). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules to reflect a system change that is intended to specify when orders that are not executed automatically on the Exchange would be routed through the Intermarket Option Linkage (“Linkage”). 5 Specifically, the Exchange proposes to amend Exchange Rule 1080(c)(vi)(A)(1) to reduce the exposure period for marketable customer limit orders on the Exchange's limit order book that are eventually sent automatically to away markets a Linkage Principal Acting as Agent (“P/A”) Orders 6 when the Exchange's disseminated market is not the National Best Bid or Offer (“NBBO”). The exposure period would be reduced from the current three seconds to one second. 5 On July 28, 2000, the Commission approved a national market system plan for the purpose of creating and operating an intermarket options market linkage (“Linkage”) proposed by the American Stock Exchange LLC, the Chicago Board Options Exchange, Incorporated, and the International Securities Exchange, LLC. *See* Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR 48023 (August 4, 2000). Subsequently, Phlx, the Pacific Exchange, Inc. (n/k/a NYSE Arca, Inc.), and the Boston Stock Exchange, Inc. joined the Linkage Plan. *See* Securities Exchange Act Release Nos. 43573 (November 16, 2000), 65 FR 70851 (November 28, 2000); 43574 (November 16, 2000), 65 FR 70850 (November 28, 2000); and 49198 (February 5, 2004), 69 FR 7029 (February 12, 2004). 6 A “P/A Order” is an order for the principal account of a specialist (or equivalent entity on another Participant Exchange that is authorized to represent Public Customer orders), reflecting the terms of a related unexecuted Public Customer order for which the specialist is acting as agent. *See* Exchange Rule 1083(k)(i). The text of the proposed rule change is available on the Phlx's Web site at *http://www.phlx.com* , at the Exchange's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the 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 Phlx has substantially prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to modernize the Exchange's system to account for technological advances that have been made in the Exchange's systems and in the industry since the original adoption of the rule, 7 and to provide more efficient executions for customers with marketable limit orders on the Exchange's limit order book. 7 *See* Securities Exchange Act Release No. 51544 (April 14, 2005), 70 FR 20613 (April 20, 2005) (SR-Phlx-2005-03). Currently, under Exchange Rule 1080(c)(vi)(A)(1), when the Exchange's disseminated price on the opposite side of the market is not the NBBO, marketable public customer limit orders are exposed to the trading crowd and to participants in Phlx XL 8 for a period of three seconds following receipt. At the end of this three-second exposure period, if the Exchange's disseminated price on the opposite side of the market is still not the NBBO, any unexecuted contract remaining in such an order is automatically sent as a P/A Order through the Linkage to an exchange disseminating a price on the opposite side of the market that is the NBBO. 8 Phlx XL is the Exchange's fully electronic trading platform for options. *See* Securities Exchange Act Release No. 50100 (July 27, 2004), 69 FR 46612 (August 3, 2004) (SR-Phlx-2003-59). If, at the end of the three-second exposure period, the Exchange's disseminated price on the opposite side of the market is the NBBO, any unexecuted contracts remaining in the marketable public customer limit order are automatically executed on the Exchange up to the Exchange's disseminated size. Any remaining contracts are then sent as P/A Order(s) to the exchange(s) displaying the NBBO. If the marketable public customer limit order is canceled during the three-second period, no P/A Order is sent and the marketable public customer limit order would not be executed. The proposed system change would simply reduce the exposure period from three seconds to one second. The Exchange believes that the proposal to reduce the exposure period for marketable customer limit orders on the limit order book should provide more efficient and immediate executions. In addition, the Exchange believes that a one-second order exposure feature for inbound limit orders when the Exchange's disseminated price on the opposite side of the market is not the NBBO, together with the automatic execution of unexecuted contracts up to the Exchange's disseminated size when the Exchange's disseminated price becomes the NBBO and the automatic routing through Linkage of unexecuted contracts when the Exchange's disseminated prices is not the NBBO, will provide an effective means for avoiding trade-throughs. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act, 9 in general, and furthers the objectives of Section 6(b)(5) of the Act, 10 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, by providing more efficient executions for customers with marketable limit orders on the Exchange's limit order book. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change effects a change in an existing order-entry or trading system that:
(i)Does not significantly affect the protection of investors or the public interest;
(ii)does not impose any significant burden on competition; and
(iii)does not have the effect of limiting the access to or availability of the system, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and subparagraph (f)(5) of Rule 19b-4 thereunder. 12 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b-4(f)(5). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate 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 the furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Phlx-2007-38 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Phlx-2007-38. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2007-38 and should be submitted on or before June 25, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 13 13 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-10664 Filed 6-1-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58824; File No. SR-Amex-2007-52] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Floor Broker Zone Requirements in AEMI May 29, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on May 24, 2007, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by Amex. The Exchange filed the proposed rule change as a “non-controversial” rule change under Rule 19b-4(f)(6) under the Act, 3 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to adopt a specific zone (each a “Zone” or collectively, the “Zones”) requirement for floor brokers in equities and ETFs on the trading floor. The text of the proposed rule change is available on Exchange's Web site ( *http://www.amex.com* ), at Amex's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Amex 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. Amex has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, Proposed Rule Change 1. Purpose The Exchange proposes to amend the AEMI Rules 4 to require a floor broker to be located within the same Zone when submitting a Crowd Order in that Zone. 5 A floor broker may trade in any crowd on the floor of the Exchange, but, pursuant to existing Rule 1A—AEMI, must be physically present in the crowd to represent a Crowd Order in the AEMI Book. 6 Furthermore, upon leaving a crowd or logging out of his system, a floor broker must either:
(i)Cancel all crowd orders in the AEMI Book for securities in the crowd he is leaving,
(ii)electronically submit the orders in the form of percentage or limit order to the Specialist for handling, or
(iii)electronically route the crowd order to another floor broker in the crowd, via his hand held terminal. 7 4 *See* Securities Exchange Act Release No. 54552 (September 29, 2006), 71 FR 59546 (October 10, 2006) (order approving SR-Amex-2005-104) (“AEMI Approval Order”); *see also* Securities Exchange Act Release No. 54709 (November 3, 2006), 71 FR 65847 (November 9, 2006) (order approving SR-Amex-2006-72). 5 A Crowd Order is defined in Rule 1A—AEMI as an order in the AEMI Book that is represented by:
(1)A broker standing in the crowd or
(2)a bid or offer in the AEMI Book entered by a Registered Trader standing in the crowd. 6 The “AEMI Book” is the part of the AEMI platform that holds and automatically matches orders, bids, and offers submitted to it electronically by specialists, Registered Traders, Floor Brokers, and off-Floor members in accordance with these rules. 7 *See* AEMI Approval Order, 71 FR at 59551. The Exchange proposes, in Rule 1A—AEMI, to establish three trading Zones to reflect the specific identifiable areas on the trading floor where floor brokers are able to conduct business at each post/panel within the Zone. A floor broker will be considered to be in the Zone if he or she is physically present in the area set forth as part of that Zone. The Exchange believes that designating specific Zones on the trading floor will serve to distinguish the areas that benefit the interaction among the members on the trading floor. The Exchange proposes to require that a floor broker submitting a Crowd Order must be within the same Zone as where he is submitting the Crowd Order. As noted above, a floor broker, upon leaving a crowd or logging out of his system, must either:
(i)Cancel all crowd orders in the AEMI Book for securities in the crowd he is leaving,
(ii)electronically submit the orders in the form of percentage or limit order to the Specialist for handling, or
(iii)electronically route the crowd order to another floor broker in the crowd, via his hand held terminal. 8 The Exchange however, proposes two exceptions to the Zone requirement. First, a floor broker may leave a Zone to obtain “market looks” in securities located at panels that are part of another Zone. 9 Second, a floor broker may leave the Zone for the time necessary to change its hand held batteries without having to cancel all Crowd Orders, electronically submit orders to the Specialist for handling, or electronically route the Crowd Order to another floor broker in the Zone. 8 *Id.* 9 “Market looks” are quick snapshots of trading interest that brokers convey back to their customers. AEMI securities are traded on the Main Trading Floor, the Mezzanine, and the ground floor of the Exchange, which is called Harry's. In this regard, the Exchange proposes to designate Zones in only those three areas of the Trading Floor. The Main Trading Floor shall be designated as Zone A, the Mezzanine as Zone B, and Harry's as Zone C. The Exchange intends to disseminate to its members an information circular identifying the specific areas comprising each Zone. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Act 10 in general and furthers the objectives of Section 6(b)(5) of the Act 11 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, remove impediments to and perfect the mechanisms of a free and open market and a national market system, and, in general, protect investors and the public interest. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change:
(i)Does not significantly affect the protection of investors or the public interest;
(ii)does not impose any significant burden on competition; and
(iii)by its terms, does not become operative for 30 days after the date of filing, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 12 and subparagraph (f)(6) of Rule 19b-4 thereunder. 13 As required under Rule 19b-4(f)(6)(iii), 14 the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of the filing of the proposed rule change. 12 15 U.S.C. 78s(b)(3)(A). 13 17 CFR 240.19b-4(f)(6). 14 17 CFR 240.19b-4(f)(6)(iii). Amex has requested that the Commission waive the 30-day operative delay. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. 15 The Commission notes that the proposed rule change is modeled on NYSE Rules 70.20 and 70.30, which previously have been subject to a public notice period. 16 Amex's proposal does not appear to raise any novel regulatory issues and will allow Amex without undue delay to define what it means for a floor broker to be physically present in a crowd and thus permitted to represent a Crowd Order in the AEMI Book. 15 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 16 *See* Securities Exchange Act Release Nos. 54427 (September 12, 2006), 71 FR 54862 (September 19, 2006) (SR-NYSE-2006-58); and 55316 (February 20, 2007), 72 FR 8825 (February 27, 2007) (SR-NYSE-2007-14). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate 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 the furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Amex-2007-52 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Amex-2007-52. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section. Copies of such filing also will be available for inspection and copying at the principal office of Amex. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Amex-2007-52 and should be submitted on or before June 25, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 17 17 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-10680 Filed 6-1-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-55808; File No. SR-ISE-2007-33] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to an Amendment of the International Securities Exchange Holdings, Inc. Certificate of Incorporation and Bylaws May 23, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on May 8, 2007, the International Securities Exchange, LLC (“Exchange” or “ISE, LLC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the Exchange. The Exchange has designated the proposed rule change as concerned solely with the administration of the Exchange under Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b-4(f)(3) thereunder 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b-4(f)(3). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change ISE, LLC is proposing to amend the Certificate of Incorporation and Bylaws of International Securities Exchange Holdings, Inc. (“ISE Holdings” or “Company”). The text of the proposed rule change is available at ISE, LLC, on ISE, LLC's Web site *http://www.iseoptions.com,* and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the 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. ISE, LLC has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose ISE, LLC proposes to amend ISE Holdings' Certificate of Incorporation and Bylaws to remove the requirement that the President of the Company also be the Chief Executive Officer of the Company. Currently, the ISE Holdings Bylaws require that the President of the Company also be the Chief Executive Officer of the Company. 5 The Exchange believes that the proposed modification would provide the Board of Directors of ISE Holdings with the flexibility to structure management of the Company in a way that is most effective for attracting and keeping the industry's most talented people, and in turn provide the flexibility to attract and retain the best possible management team for the Company and its stockholders. 5 ISE Holdings Bylaws, Section 4.1. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(1) 6 that an exchange be so organized so as to have the capacity to be able to carry out the purposes of the Act and to comply, and (subject to any rule or order of the Commission pursuant to Section 17(d) 7 or 19(g)(2) 8 of the Act) to enforce compliance by its members and persons associated with its members, with the provisions of the Act, the rules and regulations thereunder, and the rules of the exchange. The Exchange also believes this proposed rule change furthers the objective of Section 6(b)(5) 9 that an exchange have rules that, among other things, are designed to remove impediments to and perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. 6 15 U.S.C. 78f(g)(1). 7 15 U.S.C. 78q(d). 8 15 U.S.C. 78s(g)(2). 9 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants or Others 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. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change has become effective pursuant to Section 19(b)(3)(A)(iii) 10 of the Act and Rule 19b-4(f)(3) thereunder because it is concerned solely with the administration of the Exchange. 11 At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate 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. 10 15 U.S.C. 78s(b)(3)(A)(iii). 11 17 CFR 240.19b-4(f)(3). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-ISE-2007-33 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-ISE-2007-33. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commissions Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the ISE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ISE-2007-33 and should be submitted on or before June 25, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 12 12 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-10666 Filed 6-1-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-55809; File No. SR-ISE-2007-34] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing of a Proposed Rule Change Relating to an Amendment to the International Securities Exchange, LLC Constitution and Amended and Restated LLC Agreement May 23, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on May 8, 2007, the International Securities Exchange, LLC (“Exchange” or “ISE, LLC”) filed with the Securities and Exchange Commission (the “Commission”) the proposed rule change as described in Items I, II, and III below, which items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change ISE, LLC is proposing to amend its Constitution and Amended and Restated LLC Agreement. The text of the proposed rule change is available on the Exchange's Web site at ( *http://www.iseoptions.com* ), at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the 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. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this proposed rule change is to amend the Exchange's Constitution and Amended and Restated LLC Agreement to:
(i)Remove the requirement that the President of the Exchange also be the Chief Executive Officer of the Exchange; and
(ii)change the number of directors from 15 to no less than 15 and no more than 16, so as to allow for the election, at the discretion the Sole LLC Member, 3 of a director who was employed by the Exchange at any time during the prior three years, but otherwise meets the definition of a “Non-Industry Director” as provided under the Exchange's Constitution. Currently, the Exchange's Constitution requires that the President of the Exchange also be the Chief Executive Officer of the Exchange 4 and that the number of directors on the Board of Directors be fixed at 15. 5 The Exchange believes that the proposed modifications would provide the flexibility to structure the Board of Directors in a way that is most effective for attracting and keeping the industry's most talented people, and in turn provide the flexibility to attract and retain the best possible management team for the Exchange and its members. 3 *See* Article I, Section 1.1 of the ISE, LLC Constitution, which defines the term “Sole LLC Member”. 4 Constitution, Section 4.1. 5 Constitution, Section 3.2. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(1) 6 that an exchange be so organized as to have the capacity to be able to carry out the purposes of the Act and to comply, and (subject to any rule or order of the Commission pursuant to Section 17(d) 7 or 19(g)(2) 8 of the Act) to enforce compliance by its members and persons associated with its members, with the provisions of the Act, the rules and regulations thereunder, and the rules of the exchange. The Exchange also believes this proposed rule change furthers the objective of Section 6(b)(5) 9 that an exchange have rules that, among other things, are designed to remove impediments to and perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. 6 15 U.S.C. 78f(g)(1). 7 15 U.S.C. 78q(d). 8 15 U.S.C. 78s(g)(2). 9 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants or Others 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. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which ISE, LLC consents, the Commission will: A. By order approve such proposed rule change; or B. institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: *Electronic comments:* • Use the Commission's Internet comment form *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-ISE-2007-34 on the subject line. *Paper comments:* • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-ISE-2007-34. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commissions Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the ISE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ISE-2007-34 and should be submitted on or before June 25, 2007. 10 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 10 Florence E. Harmon, Deputy Secretary. [FR Doc. E7-10667 Filed 6-1-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-55819; File No. SR-NASD-2007-033] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to Extension of NASD's Authority Under the Cease and Desist Pilot Program May 25, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on May 11, 2007, the National Association of Securities Dealers, Inc. (“NASD”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by NASD. NASD has filed the proposal as a “non-controversial” rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. On May 24, 2007, NASD filed Amendment No. 1 to the proposed rule change. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NASD is proposing to amend NASD Rules 9556, 9800, 9810, and 9860, to extend for an additional two-year period, to June 23, 2009, NASD's authority under the cease and desist pilot program. At this time, NASD is not proposing any substantive changes to the rules covered by the pilot program. The only changes regard extending the pilot's expiration date to June 23, 2009, and technical changes to the titles of the NASD executives who can authorize the initiation of cease and desist proceedings and certain cross-references in rules covered by the pilot program. Below is the text of the proposed rule change. Proposed new language is in *italics* ; proposed deletions are in [brackets]. 9556. Failure to Comply with Temporary and Permanent Cease and Desist Orders (Rule 9556, and amendments adopted by SR-NASD-98-80 to Rule 8310, *IM-8310-3(c)(1) (formerly* IM-8310-2(d)(1) *, renumbered by SR-NASD-2003-168* ), 9120(x), 9241(c), 9290, 9311(b), 9312(b), 9360 and the Rule 9800 Series, shall expire on June 23, [2007] *2009* , unless extended or permanently adopted by the Association pursuant to SEC approval at or before such date.)
(a)Notice of Suspension, Cancellation or Bar If a member, person associated with a member or person subject to NASD's jurisdiction fails to comply with a temporary or permanent cease and desist order issued under the Rule 9200, 9300 or 9800 Series, NASD staff—after receiving written authorization from *NASD's Chairman and CEO or NASD's Senior Executive Vice President for Regulatory Policy and Programs* [the President of NASD Regulatory Policy and Oversight or the Executive Vice President for NASD Regulatory Policy and Programs]—may issue a notice to such member or person stating that the failure to comply with the temporary or permanent cease and desist order within seven days of service of the notice will result in a suspension or cancellation of membership or a suspension or bar from associating with any member.
(b)through
(h)No Change. 9800. Temporary Cease and Desist Orders (The entire Rule 9800 Series, and related amendments adopted by SR-NASD-98-80 to Rule 8310, *IM-8310-3(c)(1) (formerly* IM-8310-2(d)(1) *, renumbered by SR-NASD-2003-168)* , 9120(x), 9241(c), 9290, 9311(b), 9312(b), and 9360, and by SR-NASD-2003-110 to Rule 9556, shall expire on June 23, [2007] *2009* , unless extended or permanently adopted by the Association pursuant to SEC approval at or before such date.) 9810. Initiation of Proceeding
(a)Department of Enforcement or Department of Market Regulation With the prior written authorization of *NASD's Chairman and CEO or NASD's Senior Executive Vice President for Regulatory Policy and Programs* [the President of NASD Regulatory Policy and Oversight or the Executive Vice President for NASD Regulatory Policy and Programs], the Department of Enforcement or the Department of Market Regulation may initiate a temporary cease and desist proceeding with respect to alleged violations of Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 thereunder; SEC Rules 15g-1 through 15g-9; NASD Rule 2110 (if the alleged violation is unauthorized trading, or misuse or conversion of customer assets, or based on violations of Section 17(a) of the Securities Act of 1933); NASD Rule 2120; or NASD Rule 2330 (if the alleged violation is misuse or conversion of customer assets). The Department of Enforcement or the Department of Market Regulation shall initiate the proceeding by serving a notice on a member or associated person (hereinafter “Respondent”) and filing a copy thereof with the Office of Hearing Officers. The Department of Enforcement or the Department of Market Regulation shall serve the notice by personal service, overnight commercial courier, or facsimile. If service is made by facsimile, the Department of Enforcement or the Department of Market Regulation shall send an additional copy of the notice by overnight commercial courier. The notice shall be effective upon service.
(b)through
(c)No Change. 9860. Violation of Temporary Cease and Desist Orders A Respondent who violates a temporary cease and desist order imposed under this Rule Series may have its association or membership suspended or canceled under Rule 9556. *NASD's Chairman and CEO or NASD's Senior Executive Vice President for Regulatory Policy and Programs* [The President of NASD Regulatory Policy and Oversight or the Executive Vice President for NASD Regulatory Policy and Programs] must authorize the initiation of any such proceeding in writing. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NASD 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. NASD has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose In May 2003, the Commission approved, on a two-year pilot basis, a rule change that gave NASD authority to issue temporary cease and desist orders (“TCDOs”) and made explicit NASD's ability to impose permanent cease and desist orders as a remedy in disciplinary cases. 5 The pilot program also gave NASD authority to enforce cease and desist orders. In June 2005, NASD extended the pilot program for an additional two-year period. 6 The current two-year pilot expires on June 23, 2007. NASD is proposing a rule change to extend the pilot program for an additional two-year period, to June 23, 2009. Such an extension will enable NASD to continue to issue and enforce temporary and permanent cease and desist orders. NASD's authority to issue TCDOs will expire after the additional two-year period unless the pilot program is further extended or adopted on a permanent basis with Commission approval. 5 *See* Securities Exchange Act Release No. 47925 (May 23, 2003), 68 FR 33548 (June 4, 2003) (SR-NASD-98-80). 6 *See* Securities Exchange Act Release No. 51860 (June 16, 2005), 70 FR 36427 (June 23, 2005) (SR-NASD-2005-061). NASD currently is seeking only to extend the pilot program period and make technical changes to the titles of the NASD executives who can authorize the initiation of cease and desist proceedings and certain cross-references in rules covered by the pilot program. NASD is not proposing any substantive changes to the rules covered by the pilot program at this time. Since the pilot program was first approved in 2003, NASD has issued only one TCDO and one permanent cease and desist order (in the same case, which is described below). Consequently, NASD believes that additional time is needed to make a meaningful determination about whether the program should continue and whether certain specific provisions should be modified and, if so, to what extent. In the one case initiated under the pilot program, NASD's Department of Enforcement (“Enforcement”) alleged that the member in question was engaged in widespread fraud that included, among other things, making material misrepresentations and omissions in connection with the private offering of its own stock, effecting unauthorized transactions, and using customer funds improperly. 7 Enforcement showed that not only was the member attempting to continue the fraudulent offering, it also was funneling money and assets to a non-NASD member affiliate. Enforcement alleged, and a hearing panel found, that a TCDO was necessary, because the member's continuation of the misconduct was likely to result in further dissipation or conversion of assets and other significant harm to investors before the completion of the underlying disciplinary proceeding. After the hearing panel issued a permanent cease and desist order following a full disciplinary hearing, the parties settled the case, resulting in the expulsion of the member, the bar of its owner, and the imposition of almost $12 million in fines and restitution. 7 *See* Securities Exchange Act Release No. 51270 (February 28, 2005) (summarizing NASD's cease and desist proceedings against former NASD member L.H. Ross & Company). The proposed extension of the pilot program for an additional two years will provide NASD with a mechanism to continue to take appropriate remedial action against a member or an associated person who has engaged (or is engaging) in violative conduct that could cause continuing harm to the investing public if not addressed expeditiously. At the same time, the pilot program continues to contain numerous procedural checks and safeguards to ensure that cease and desist proceedings are used prudently, sparingly, and fairly. In addition, the extension of the pilot program will allow NASD to analyze more thoroughly the pilot program's overall effectiveness. Accordingly, NASD believes it is appropriate to extend the pilot period regarding cease and desist orders for two years. \ The proposed rule change will become effective upon filing, will be operative on June 23, 2007, and will expire on June 23, 2009, unless extended or permanently adopted by NASD pursuant to Commission approval at or before such date. 2. Statutory Basis NASD believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act, 8 which requires, among other things, that NASD's rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The proposed rule change also is consistent with the provisions of Section 15A(b)(7) of the Act, 9 which provides that NASD members, or persons associated with its members, are appropriately disciplined for violations of any provisions of the Act or NASD's rules. The extension of the pilot program is consistent with NASD's obligations under the Act, because cease and desist orders are designed to stop violative conduct that is likely to cause dissipation or conversion of assets or other significant harm to investors. 8 15 U.S.C. 78 *o* -3(b)(6). 9 15 U.S.C. 78 *o* -3(b)(7). B. Self-Regulatory Organization's Statement on Burden on Competition NASD 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. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action 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) of the Act 10 and Rule 19b-4(f)(6) thereunder. 11 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate 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. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-NASD-2007-033 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASD-2007-033. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro/shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal office of NASD. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASD-2007-033 and should be submitted on or before June 25, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 12 12 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-10681 Filed 6-1-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-55818; File No. SR-NYSE-2007-48] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change Relating to Proposed Amendments to Rule 600 to Provide Guidance Regarding New and Pending Arbitration Claims in Light of the Consolidation of NYSE Regulation into NASD DR May 25, 2007. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the “Act”) 2 and Rule 19b-4 thereunder, 3 notice is hereby given that on May 23, 2007, the New York Stock Exchange LLC (“NYSE” or the “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the NYSE. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The NYSE proposes to amend current Rule 600 and adopt a new Rule 600A. As part of the consolidation of the member firm regulation function of NYSE Regulation, Inc. (“NYSE Regulation”) with the National Association of Securities Dealers, Inc. (“NASD”), NYSE Regulation will cease to provide an arbitration program, and its existing arbitration department (“NYSE Arbitration”) will be consolidated with that of NASD Dispute Resolution, Inc. (“NASD DR”). The proposed amendments provide that the arbitration rules of the Exchange shall apply only to NYSE arbitration cases pending prior to the effective date of the consolidation, and that, thereafter, claims involving member organizations, and/or associated persons, and/or other related parties will be arbitrated under the Codes of Arbitration Procedure of NASD DR. The text of the proposed rule is set forth below. Proposed new language is underlined. Rule 600 Arbitration Supplementary Material *Rules 600 through 639, with the exception of Rule 600A, apply only to arbitrations commenced prior to [insert effective date of the consolidation] and are otherwise of no force or effect. Notwithstanding the foregoing, arbitrations filed with NYSE Arca on or prior to January 31, 2007 continue to be governed by the NYSE Arca Rule 12 in effect on or prior to January 31, 2007, and arbitrations filed with NYSE Arca Equities on or prior to January 31, 2007 continue to be governed by the NYSE Arca Equities Rule 12 in effect on or prior to January 31, 2007. On and after [insert effective date of the consolidation] all such arbitrations shall, until concluded, be administered by NASD Dispute Resolution, Inc. (“NASD DR”) pursuant to a Regulatory Services Agreement with the Exchange.* Rule 600A *(a) Duty to Arbitrate.
(i)Any dispute, claim or controversy between a member organization and another member organization shall be arbitrated pursuant to the Codes of Arbitration Procedure of NASD DR; and,
(ii)any dispute, claim or controversy between a customer or non-member and a member organization and/or associated person and/or other related party, or between an associated person and a member organization and/or an associated person arising in connection with the business of such member organization and/or associated person in connection with his or her activities as an associated person, shall be arbitrated pursuant to NASD DR Codes of Arbitration Procedure as provided by any duly executed and enforceable written agreement, or upon the demand of the customer or non-member. However, such obligation to arbitrate shall not extend to any controversy that is not permitted to be arbitrated under NASD DR Codes of Arbitration Procedure.* *(b) Referrals. The Exchange may receive, investigate and take disciplinary action with respect to any referral it receives from an NASD DR arbitrator of any matter which comes to the attention of such arbitrator during and in connection with the arbitrator's participation in a proceeding, either from the record of the proceeding or from material or communications related to the proceeding, that the arbitrator has reason to believe may constitute a violation of the Exchange's Rules or the federal securities laws.* *(c) Failure to Arbitrate or to Pay an Arbitration Award. Any member organization or associated person who fails to submit to arbitration a matter required to be arbitrated pursuant to this Rule, or that fails to honor an arbitration award made pursuant to the Codes of Arbitration Procedure of NASD DR, or made under the auspices of any other self-regulatory organization, shall be subject to disciplinary proceedings in accordance with Exchange Rule 476.*
(d)Other Actions. The submission of any matter to arbitration as provided for under this Rule shall in no way limit or preclude any right, action or determination by the Exchange that it would otherwise be authorized to adopt, administer or enforce. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the NYSE 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 NYSE has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to provide guidance regarding both new and pending arbitration claims in light of the consolidation of NYSE Regulation into NASD DR. NYSE Arbitration currently administers an arbitration program for NYSE Regulation, governed by NYSE Regulation Rules 600 through 639. NYSE Arbitration also administers a program for NYSE Arca, Inc. (“NYSE Arca”) and NYSE Arca Equities, Inc. (“NYSE Arca Equities”), governed by what is referred to as “Rule 12.” 4 4 NYSE Arca and NYSE Arca Equities have two separate rules that govern arbitrations, one for Equity Trading Permit (“ETP”) holders, and one for Option Trading Permit (“OTP”) holders and OTP firms; both rules are known as “Rule 12.” Although Rule 12 has subsequently been amended, for purposes of administering NYSE Arca and NYSE Arca Equities arbitrations filed on or prior to January 31, 2007, NYSE Arbitration follows Rule 12 as it was in effect on that date. As part of the consolidation of NYSE Regulation with NASD, 5 NYSE Regulation will cease to administer an arbitration program, and its existing arbitration department will be consolidated with NASD DR. As a result, on or after the date of the consolidation, all arbitration claims filed prior to the date of the consolidation and previously subject to NYSE Regulation rules and administration will be administered by NASD DR pursuant to a Regulatory Services Agreement with the NYSE. 5 Additional information regarding the consolidation may be found in: SR-NASD-2007-23 (March 19, 2007) concerning proposed amendments to the By-Laws of NASD to implement governance and related changes to accommodate the consolidation of the member firm regulatory functions of NASD and NYSE Regulation, Inc.; and SR-NYSE-2007-22 (February 27, 2007) concerning proposed amendments to several NYSE rules which, among other matters, harmonize the rules with corresponding NASD regulatory requirements. However, the rules governing the administration of any particular arbitration will depend on the date the case was filed. This will ensure that any person that commenced arbitration under a particular set of arbitration rules will continue to have the case administered pursuant to those rules through to the case's conclusion. There are two categories of cases. First, NYSE arbitration cases filed before the effective date of the consolidation will continue to be governed by existing NYSE Regulation arbitration rules, as would pending NYSE Arca and NYSE Arca Equities cases filed on or after February 1, 2007. 6 Second, those NYSE Arca and NYSE Arca Equities cases filed on or prior to January 31, 2007 are (and will continue to be) governed by Rule 12. 6 *See* Release No. 34-55142 (January 19, 2007), 72 FR 3898 (January 26, 2007) (SR-NYSEArca-2006-54) and Release No. 34-55141 (January 19, 2007), 72 FR 3897 (January 26, 2007) (SR-NYSEArca-2006-55). Proposed Exchange Rule 600A provides detailed guidance concerning claims involving member organizations, and/or associated persons and/or other related parties, that are asserted on and after the date of the consolidation. First, any dispute, claim or controversy between a member organization and another member organization shall be arbitrated pursuant to the Codes of Arbitration Procedure of NASD DR. Second, any dispute, claim or controversy between a customer or a non-member and a member organization, and/or associated person and/or other related party shall be arbitrated pursuant to NASD DR Codes of Arbitration Procedure as provided by any duly executed and enforceable written agreement, or upon the demand of the customer or non-member. Third, any dispute, claim or controversy between an associated person and a member organization and/or an associated person arising in connection with the business of such member organization and/or associated person in connection with his or her activities as an associated person, shall be arbitrated pursuant to NASD DR Codes of Arbitration Procedure as provided by any duly executed and enforceable written agreement. In almost all cases the change from NYSE to NASD DR arbitration rules should not result in material, substantive differences to persons participating in the arbitration process. However, one difference is the treatment of employment discrimination claims. NASD DR rules provide that any claim alleging employment discrimination, including any sexual harassment claims, in violation of a statute, will be eligible for arbitration pursuant to either a pre-dispute or a post-dispute agreement to arbitrate. In contrast, Exchange Rule 600(f) permits claims to be arbitrated only when the parties have agreed to arbitrate the claim after it has arisen. Rule 600A will explicitly retain the Exchange's enforcement authority related to arbitration. In appropriate cases, arbitrators refer to the Exchange potential violations of the Exchange's Rules or the federal securities laws that come to their attention during and in connection with a proceeding. Rule 600A will specify that the Exchange will retain the ability to take action based on such referrals that may come from arbitrators in cases being arbitrated at NASD DR. Rule 600A will also retain the substance of current Exchange Rule 637, regarding the obligation to honor arbitration awards. It will provide that any Exchange member organization, or associated person of any Exchange member organization, that fails to honor an award of arbitrators rendered under the NASD DR Codes of Arbitration Procedure, or under the auspices of any other self-regulatory organization, shall be subject to disciplinary proceedings in accordance with Exchange Rule 476. It will also specify that failure to submit a matter to arbitration as required by Rule 600A will also subject the member organization to Exchange disciplinary action. Rule 600A will also specify that the submission of any matter to arbitration as provided for under the Rule shall in no way limit or preclude any right, action or determination by the Exchange that it would otherwise be authorized to adopt, administer or enforce. Finally, Supplementary Material added to existing Rule 600, and to become effective on the effective date of the consolidation, will specify that the current NYSE arbitration rules, Rules 600 through 639, will thereafter apply only to arbitrations commenced prior to the effective date of the consolidation and will be otherwise of no force or effect. The Supplementary Material will also specify that arbitrations filed with NYSE Arca or NYSE Arca Equities on or prior to January 31, 2007 will continue to be governed by Rule 12. This will ensure that those who commenced arbitrations under a particular set of arbitration rules will continue to have their cases administered pursuant to those same rules through to the cases' conclusion. The Supplementary Material will also note that from and after the effective date of the consolidation, all outstanding arbitrations shall, until concluded, be administered by NASD DR pursuant to a Regulatory Services Agreement with the Exchange. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the requirements of Section 6(b)(5) 7 of the Act, which requires, among other things, that the rules of an Exchange be designed to promote just and equitable principles of trade and to protect investors and the public interest. The proposed rule change will streamline the arbitration process and provide for a unified and more efficient arbitration forum with one set of arbitration rules and administrative procedures. This will allow resources to be devoted to maintaining and improving the NASD DR program, rather than splitting resources between two mainly duplicative programs. As a result of these improvements, the proposed rule change will better protect investors and the public interest. 7 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the self-regulatory organization consents, the Commission will:
(A)by order approve the proposed rule change, or
(B)institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSE-2007-48 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSE-2007-48. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro/shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the NYSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File number SR-NYSE-2007-48 and should be submitted on or before June 25, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 8 8 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-10661 Filed 6-1-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-55823; File No. SR-NYSE-2007-10] Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving Proposed Amendments to Interpretation to Rule 311(b)(5) (“Co-Designation of Principal Executive Officers”) as Modified by Amendment No. 1 May 29, 2007. I. Introduction On February 2, 2007, the New York Stock Exchange LLC (“NYSE” or the “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the “Act”), 2 and Rule 19b-4 thereunder, 3 a proposed rule change to amend Interpretation .05 to NYSE Rule 311(b)(5) regarding co-designation of principal executive officers. On April 16, 2007, the Exchange submitted Amendment No. 1 to the proposed rule change. The proposed rule change, as amended, was published for comment in the **Federal Register** on April 26, 2007. 4 The Commission received no comments on the proposal. This order approves the proposed rule change, as amended. 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78(a) *et seq.* 3 17 CFR 240.19b-4. 4 *See* Securities Exchange Act Release No. 55650 (April 19, 2007), 72 FR 20905. II. Description of the Proposal NYSE Rule 311 (“Formation and Approval of Member Organizations”) and specifically Section (b)(5) thereof currently provide that principal executive officers 5 shall exercise principal executive responsibility over the various areas of the business of the member corporation. Interpretation .05 to Rule 311(b)(5) (the “Interpretation”) sets forth the regulatory framework under which member organizations may request approval for assigning two persons as the principal executive officers for the same function pursuant to Rule 311(b)(5). The Rule currently provides that no understanding or agreement purporting to limit or apportion the joint and several responsibility of each such co-officer will be recognized by the Exchange. The Exchange now believes, however, that there are situations in which CCOs and COOs can exercise supervisory authority over discrete and naturally separate business functions, consistent with the internal corporate structure of the particular member organization. Accordingly, the Exchange has proposed to permit co-CCOs and co-COOs to allocate supervisory responsibility in a fashion acceptable to the Exchange. 6 5 The Exchange recognizes four such principal executive officers: chief executive officer (“CEO”), chief operations officer (“COO”), chief finance officer (“CFO”) and chief compliance officer (“CCO”). 6 The Exchange continues to believe that the authority vested in CEOs and CFOs is indivisible, thus the proposed amendments to the Interpretation would not apply to these principal executive officers. Specifically, where a member organization seeks to divide regulatory responsibility between more than one such principal executive officer bearing the same or similar titles without the assumption of joint and several responsibility, it must provide the Exchange with a plan acceptable to the Exchange allocating specific responsibility and making unambiguous provisions, especially for the supervision of areas where the separate functions interact. Joint and several responsibility would remain in effect for any area not specifically included in the plan approved by the Exchange. In addition, because the CCO of a member organization has unique responsibilities under NYSE Rule 342.30 (“Annual Reports”), the revised Interpretation would also require a representation that the certification required by Rule 342.30(e) will confirm the qualification of each such co-CCO and that the responsibility of the co-CCOs encompasses every aspect of the business of the member organization. Each of the co-CCOs would be required to meet with and advise the CEO as part of the Rule 342.30 certification process. III. Discussion After careful review, the Commission finds that the proposed rule change, as amended is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange 7 and, in particular, the requirements of Section 6 of the Act. 8 Specifically, the Commission finds that the proposal is consistent with Section (b)(5) of the Act, 9 in that the proposal has been designed to promote just and equitable principles of trade, and to protect investors and the public interest. The Commission believes that the proposal should provide the Exchange with flexibility in selecting, and offering positions to, qualified candidates to fill CCO and COO positions, thus helping to ensure skilled management of the Exchange. 7 The Commission has considered the amended proposed rule change's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 8 15 U.S.C. 78f. 9 15 U.S.C. 78f(b)(5). IV. Conclusion *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 10 that the proposed rule change (SR-NYSE-2007-10), as modified by Amendment No. 1, is approved. 10 15 U.S.C. 78s(b)(2). 11 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 Florence E. Harmon, Deputy Secretary. [FR Doc. E7-10668 Filed 6-1-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-55817; File No. SR-Phlx-2007-07] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendment No. 1 Thereto Relating to Index Linked Securities May 25, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on January 25, 2007, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. On May 9, 2007, Phlx filed Amendment No. 1 to the proposed rule change. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons and approves the proposal on an accelerated basis. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to amend Phlx Rule 803—Criteria for Listing—Tier 1, for the purpose of adopting generic listing standards pursuant to Rule 19b-4(e) under the Act 3 in connection with index-linked securities (“Index Securities”). The text of the proposed rule change is available on Phlx's Web site at *http://www.phlx.com* , at Phlx's principal office, and at the Commission's Public Reference Room. 3 17 CFR 240.19b-4(e). II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx 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 III below. The Phlx has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Under Rule 803(f), the Exchange may approve for listing and trading securities that cannot be readily categorized under the listing criteria for common and preferred securities, bonds, debentures, or warrants. 4 The Exchange proposes to add a new section
(n)to Phlx Rule 803 to provide generic listing standards to permit the listing and trading of Index Securities pursuant to Rule 19b-4(e) under the Act. 5 Rule 19b-4(e) provides that the listing and trading of a new derivative securities product by a self-regulatory organization (“SRO”) shall not be deemed a proposed rule change, pursuant to paragraph (c)(1) of Rule 19b-4 6 if the Commission has approved, pursuant to Section 19(b) of the Act, 7 the SRO's trading rules, procedures, and listing standards for the product class that would include the new derivatives product, and the SRO has a surveillance program for the product class. 8 4 *See* Securities Exchange Act Release No. 30466 (March 11, 1992), 57 FR 9301 (March 17, 1992) (SR-Phlx-92-01). 5 17 CFR 240.19b-4(e). The Exchange has previously received Commission approval to list and trade certain index options, exchange-traded funds and trust issued receipts pursuant to Rule 19b-4(e). *See* Securities Exchange Act Release Nos. 43683 (December 6, 2000), 65 FR 78235 (December 14, 2000) (SR-Phlx-00-67) (Index Options); 45178 (December 20, 2001), 66 FR 67610 (December 31, 2001) (SR-Phlx-00-68) (Trust Shares); and 44826 (September 20, 2001), 66 FR 49990 (October 1, 2001) (SR-Phlx-2001-75) (TIRs). 6 17 CFR 240.19b-4(c)(1). 7 15 U.S.C. 78s(b). 8 When relying on Rule 19b-4(e), the SRO must submit Form 19b-4(e) to the Commission within 5 business days after the SRO begins trading the new product(s). *See* Securities Exchange Act Release No. 40761 (December 8, 1998), 63 FR 70952 (December 22, 1998). Index Securities are designed for investors who desire to participate in a specific market segment or combination of market segments through index products. Each Index Security is intended to provide investors with exposure to an identifiable underlying market index. Despite the fact that Index Securities are linked to an underlying index, each will trade as a single, exchange-listed security. The Exchange proposes that generic listing standards appropriate for Index Securities provide that each index or combination of indexes (the “Underlying Index” or “Underlying Indexes”) meet the criteria set forth in proposed Phlx Rule 803(n) or an index previously approved for the trading of options or other derivative securities by the Commission under Section 19(b)(2) of the Act and rules thereunder. In all cases, an Underlying Index is required to have a minimum of
(10)component securities. The specific criteria for each underlying component security in proposed Phlx Rule 803(n) are set forth below in the section entitled “Eligibility Standards for Underlying Component Securities.” In general, the criteria for the underlying component securities of an Underlying Index is substantially similar to the requirements for index options set forth in Phlx Rule 1009A(a). Index-Linked Securities Index Securities are the non-convertible debt of an issuer that have a term of at least one
(1)year but not greater than thirty
(30)years. The issuer of an Index Security may or may not provide for periodic interest payments to holders based on dividends or other cash distributions paid on the securities comprising the Underlying Index or Indexes during a prescribed period. 9 The holder of an Index Security may or may not be fully exposed to the appreciation and/or depreciation of the underlying component securities. For example, an Index Security may be subject to a “cap” on the maximum principal amount to be repaid to holders or a “floor” on the minimum principal amount to be repaid to holders at maturity. The proposed generic listing standards may provide for accelerated returns based on a multiple of the positive performance of an index, but will not be applicable to Index Securities where the payment at maturity may be based on a multiple of negative performance of an underlying index or indexes. The structure of an Index Security may provide “principal protection,” *i.e.* , a minimum guaranteed amount to be repaid, or provide that the principal amount is fully exposed to the performance of a market index. An Index Security may also provide “contingent” protection of the principal amount, whereby the principal protection may disappear if the Underlying Index at any point in time during the life of such security reaches a certain pre-determined level. The Exchange believes that the flexibility to list a variety of Index Securities will offer investors the opportunity to more precisely focus their specific investment strategies. 9 Interest payments may be based on a fixed or floating rate. The original public offering price of Index Securities may vary with the most common offering price expected to be $10 or $1,000 per unit. The initial offering price for an Index Security will be established on the date the security is priced for sale to the public. The Exchange states that the final value of an Index Security will be determined on the valuation date at or near maturity consistent with the mechanics detailed in the prospectus for such Index Security. The Exchange states that Index Securities are expected to trade at a lower cost than the cost of trading each of the underlying component securities separately because of reduced commission and custody costs and are also expected to give investors the ability to maintain index exposure without the corresponding management or administrative fees and ongoing expenses. The Index Securities do not give the holder any right to receive a portfolio security, dividend payments, or any other ownership right or interest in the portfolio or index of securities comprising the Underlying Index. Index Securities may or may not be structured with accelerated upside returns based on the performance of the Underlying Index. 10 For example, an Index Security may provide for an accelerated return of 3-to-1 if the Underlying Index achieves a positive return at maturity. 10 *See* telephone conference between John Dayton, Director and Counsel, Phlx, and Jan Woo, Attorney, Division of Market Regulation, Commission, on May 25, 2007. The Exchange submits that Index Securities are “hybrid” securities whose rates of return are largely the result of the performance of Underlying Index or Indexes comprised of component securities. In connection with the listing and trading or the trading pursuant to unlisted trading privileges (“UTP”) of Index Securities, the Exchange will issue an Memorandum to members detailing the special risks and characteristics of each Index Security that it will list or trade. 11 Accordingly, the particular structure and corresponding risk of any Index Security traded on the Exchange will be highlighted and disclosed. 12 In particular, the Information Memorandum will set forth the Exchange's suitability rule that requires every member, either personally or through a general partner or an officer who is a holder of voting stock in his organization to use due diligence to learn the essential facts relative to every customer and to every order or account accepted by his organization. 13 11 *Id* . 12 The Exchange notes that members that carry customer accounts must be members of the NASD and would therefore be subject to the rules and regulations of the NASD, including NASD Rule 2310(a) and (b). Accordingly, NASD Notice to Members 03-71 (November 2003) (“Notice 03-71”) regarding non-conventional investments or “NCIs” applies to Exchange members recommending/selling index-linked securities to public customers. Notice 03-71 specifically reminds members in connection with NCIs (such as index-linked securities) of their obligations to:
(1)Conduct adequate due diligence to understand the features of the product;
(2)perform a reasonable-basis suitability analysis;
(3)perform customer-specific suitability analysis in connection with any recommended transactions;
(4)provide a balanced disclosure of both the risks and rewards associated with the particular product, especially when selling to retail investors;
(5)implement appropriate internal controls; and
(6)train registered persons regarding the features, risk and suitability of these products. 13 *See* Phlx Rule 746. Proposed Listing Criteria for Index-Linked Securities Eligibility Standards for Issuers The following standards are proposed for each issuer of Index Securities:
(1)Both the issue and the issuer of such security meet the criteria set forth in Phlx Rule 803(f) except that the minimum public distribution and minimum public shareholders requirement will not be applicable to an issue traded in thousand dollar denominations. In addition, the minimum public shareholders requirement will not apply if the securities are redeemable at the option of the holders thereof on at least a weekly basis.
(2)The issue has a minimum term of one
(1)year but not greater than thirty
(30)years.
(3)The issue must be the non-convertible debt of the issuer.
(4)The payment at maturity may or may not provide for a multiple of the positive performance of an underlying index or indexes; however, in no event will payment at maturity be based on a multiple of the negative performance of an underlying index or indexes.
(5)The issuer will be expected to have a minimum tangible net worth in excess of $250,000,000, and to otherwise substantially exceed the earnings requirements set forth in Phlx Rule 803(a)(2). In the alternative, the issuer will be expected:
(A)To have a minimum tangible net worth of $150,000,000 and to otherwise substantially exceed the earnings requirement set forth in Phlx Rule 803(a)(2), and
(B)not to have issued securities where the original issue price of all the issuer's other index-linked note offerings (combined with index-linked note offerings of the issuer's affiliates) listed on a national securities exchange or traded through the facilities of Nasdaq exceeds 25% of the issuer's net worth.
(6)The issuer is in compliance with Rule 10A-3 under the Act. Description of Underlying Indexes Each Underlying Index will either be
(i)an index meeting the specific criteria set forth in proposed Phlx Rule 803(n); or
(ii)an index approved for the trading of options or other derivative securities by the Commission under Section 19(b)(2) of the Act and rules thereunder. However, in all cases, an Underlying Index must contain at least ten
(10)component securities. The Exchange will require that all changes to an Underlying Index, including the deletion and addition of underlying component securities, index rebalancings and changes to the calculation of the index, will be made in accordance with the proposed generic criteria or the Commission's Section 19(b)(2) order approving a similar derivative product based on the Underlying Index. If a broker-dealer is responsible for maintaining (or has a role in maintaining) the Underlying Index, such broker-dealer is required to erect and maintain a “firewall,” in a form satisfactory to the Exchange, to prevent the flow of information regarding the Underlying Index from the index production personnel to the sales and trading personnel. 14 In addition, an Underlying Index that is maintained by a broker-dealer is also required to be calculated by an independent third party who is not a broker-dealer. 14 For certain indexes, an index provider, such as Dow Jones, may select the components and calculate the index, but overseas broker-dealer affiliates of U.S. registered broker-dealers may sit on an “advisory” committee that recommends component selections to the index provider. In such case, the Exchange would ensure that appropriate information barriers and insider trading policies exist for this advisory committee. Eligibility Standards for Underlying Securities Index Securities will be subject to the criteria in proposed Phlx Rule 803(n)(7) and
(8)for initial and continued listing. For an Underlying Index to be appropriate for the initial listing of and Index Security, such Index must either be approved for the trading of options or other derivative securities by the Commission under Section 19(b)(2) of the Act and rules thereunder or meet the following requirements: • Each component security must have a minimum market value of at least $75 million, except that for each of the lowest weighted Underlying Securities in the index in the aggregate account for no more than 10% of the weight of the index, the market value can be at least $50 million; • Each component security must have a trading volume in each of the last six months of not less than 1,000,000 shares, except that for each of the lowest weighted Underlying Securities in the index that in the aggregate account for no more than 10% of the weight of the index, the trading volume shall be at least 500,000 shares in each of the last six months; • In the case of a capitalization-weighted index, the lesser of the five highest weight Underlying Securities in the index or the highest weighted Underlying Securities in the index that in the aggregate represent at least 30% of the total number of Underlying Securities in the index, each have an average monthly trading volume of at least 2,000,000 shares over the previous six months; • No component security will represent more than 25% of the weight of the index, and the five highest weighted component securities in the index will not in the aggregate account for more than 50% of the weight of the index (60% for an index consisting of fewer than 25 Underlying Securities); • 90% of the index's numerical index value and at least 80% of the total number of component securities will meet the then current criteria for standardized options trading set forth in Exchange Rule 1009; • Each component security shall be
(A)securities (other than foreign country securities and American Depository Receipts (“ADRs”)), that are
(1)issued by an Act reporting company which is listed on a national securities exchange and
(2)NMS stocks, as defined in Rule 600 of Regulation NMS, 15 or
(B)foreign country securities or ADRs, provided that foreign country securities or foreign country securities underlying ADRs having their primary trading market outside the United States on foreign trading markets that are not members of the Intermarket Surveillance Group (“ISG”) or parties to comprehensive surveillance sharing agreements with the Exchange will not, in the aggregate, represent more than 20% of the dollar weight of the index. 15 *See* 17 CFR 242.600(b)(47). The proposed continued listing criteria set forth in proposed Rule 803(n)(8)(A) regarding the underlying components of an Underlying Index provides that the Exchange will commence delisting or removal proceedings of an Index Security if any of the standards set forth in the initial eligibility criteria of proposed Rule 803(n)(7) are not continuously maintained, except that: • The criteria that no single component represent more than 25% of the weight of the index and the five highest weighted components in the index can not represent more than 50% (or 60% for indexes with less than 25 components) of the weight of the Index, need only be satisfied for capitalization weighted and price weighted indexes as of the first day of January and July in each year; • The total number of components in the index may not increase or decrease by more than 33-1/3% from the number of components in the index at the time of its initial listing, and in no event may be less than ten
(10)components; • The trading volume of each component security in the index must be at least 500,000 shares for each of the last six months, except that for each of the lowest weighted components in the index that in the aggregate account for no more than 10% of the weight of the index, trading volume must be at least 400,000 shares for each of the last six months; and • In a capitalization-weighted index, the lesser of the five highest weighted component securities in the index or the highest weighted component securities in the index that in the aggregate represent at least 30% of the total number of stocks in the index have had an average monthly trading volume of at least 1,000,000 shares over the previous six months. In connection with an Index Security that is listed pursuant to proposed Rule 803(n)(7)(l), the Exchange will commence delisting or removal proceedings if an underlying index or indexes fails to satisfy the maintenance standards or conditions for such index or indexes as set forth by the Commission in its order under Section 19(b)(2) of the Act approving the index or indexes for the trading of options or other derivatives. As set forth in proposed Rule 803(n)(8)(C), the Exchange will also commence delisting or removal proceedings of an Index Security (unless the Commission has approved the continued trading of the Index Security), under any of the following circumstances: • If the aggregate market value or the principal amount of the securities publicly held is less than $400,000; • If the value of the Underlying Index or composite value of the Underlying Indexes is no longer calculated and widely disseminated on at least a 15-second basis during the time the security is traded on the Exchange; or • If such other event shall occur or condition exists which is the opinion of the Exchange makes further dealings on the Exchange inadvisable. The Phlx represents that Index Securities listed and traded on the Exchange will be required to be in compliance with rule 10A-3 under the Act. 16 16 *See* Rule 10A-3(c)(7), 17 CFR 240.10A-3(c)(7). Exchange Rules Applicable to Index-Linked Securities Index Securities will be treated as equity instruments and will be subject to all Exchange rules governing the trading of equity securities, including, among others, rule governing XLE, the Exchange's equity trading system, and related trading halt provisions pursuant to Phlx Rule 133. Exchange equity margin rules and the trading hours of 8 a.m. to 6 p.m. will apply to transactions in Index Securities. In addition, the Exchange represents that it will prepare and distribute, if appropriate, an Information Memorandum that describes the product to each member organization highlighting the particular structure and corresponding risks of an Index Security. In particular, the Memorandum will set forth the Exchange's suitability rule that sets forth certain requirements for member organizations recommending a transaction in Index Securities. In addition, the Information Memorandum will note that all of the Exchange's equity trading rules will be applicable to trading in the Index Securities. The Memorandum will also reference the member requirements to deliver a prospectus to each investor purchasing newly issued Index Securities prior to or concurrently with the confirmation of a transaction. The Exchange will closely monitor activity in Index Securities to identify and deter any potential improper trading activity in Index Securities. The Exchange represents that its surveillance procedures will be adequate to properly monitor the trading of Index Securities. Specifically, the Phlx will rely on its existing surveillance procedures governing equities, options and exchange-traded funds. The Exchange will develop procedures to closely monitor activity in the Index Security and related Underlying Securities to identify and deter potential improper trading activity. Proposed Rule 803(n)(10) provides that the Exchange will implement written surveillance procedures for Index Securities. The Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. For Index Securities where the Underlying Index is maintained by a broker-dealer, the broker-dealer will be required to erect a “firewall” around the personnel responsible for the maintenance of the Underlying Index or who have access to information concerning changes and adjustments to the Underlying Index, and the Underlying Index will be calculated by a third party who is not a broker-dealer. Any advisory committee, supervisory board, or similar entity that advises an Index Licensor or Administrator or that makes decisions regarding the Underlying Index or portfolio composition, methodology, and related matters would be required to implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material, non-public information regarding the applicable Underlying Index or portfolio. Proposed Phlx Rule 136(c)-(e) sets out Phlx's trading halt parameters for all of the Exchange's derivative securities products, including Index Securities. In particular, proposed Phlx Rule 136(c) sets out that, where the Exchange is the listing market for an Index Security, if the Intraday Indicative Value (“IIV”) or the index value applicable to that series of Index Security is not being disseminated as required, the Exchange may halt trading during the day in which the interruption to the dissemination of the IIV of the index value occurs. If the interruption to the dissemination of the IIV or the index value persists past the trading day in which it occurred, the Exchange would halt trading no later than the beginning of the trading day following the interruption. Proposed Phlx Rule 136(d) provides how and when the Exchange will halt trading in a series of Index Securities traded pursuant to UTP if the primary listing market halts trading in that series of Shares because the IIV or the index value applicable to that series of Shares is not being disseminated as required. Proposed Phlx Rule 136(e) provides definitions used in Phlx Rule 136. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 17 in general, and furthers the objectives of Section 6(b)(5) of the Act 18 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. 17 15 U.S.C. 78f(b). 18 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were either solicited or received. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File No. SR-Phlx-2007-07 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Phlx-2007-07. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2007-07 and should be submitted on or before June 25, 2007. IV. Discussion and Commission's Findings After careful consideration, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 19 In particular, the Commission finds that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act, 20 which requires, among other things, that the Exchange's rules be designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. 19 In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 20 15 U.S.C. 78f(b)(5). A. Generic Listing Standards for Index Securities To list and trade Index Securities, the Exchange currently must file a proposed rule change with the Commission pursuant to Section 19(b)(1) of the Act 21 and Rule 19b-4 thereunder. 22 However, Rule 19b-4(e) provides that the listing and trading of a new derivative securities product by a SRO will not be deemed a proposed rule change pursuant to Rule 19b-4(c)(1) if the Commission has approved, pursuant to Section 19(b) of the Act, the SRO's trading rules, procedures, and listing standards for the product class that would include the new derivative securities product, and the SRO has a surveillance program for the product class. The Exchange's proposed rules for the listing and trading of Index Securities pursuant to Rule 19b-4(e) fulfill these requirements. 21 15 U.S.C. 78s(b)(1). 22 17 CFR 240.19b-4. The Exchange's ability to rely on Rule 19b-4(e) to list and trade Index Securities that meet the requirements of proposed Phlx Rule 803(n) should reduce the time frame for bringing these securities to the market and thereby reduce the burdens on issuers and other market participants, while also promoting competition and making Index Securities available to investors more quickly. The Commission has previously approved generic listing standards that are substantially similar to the Exchange's proposal. 23 In approving these securities for Exchange trading, the Commission considered applicable Exchange rules that govern their trading. The Commission believes that the proposed generic listing standards for Index Securities should fulfill the intended objective of Rule 19b-4(e) and allow Index Securities that satisfy these standards to commence trading without the need for public comment and Commission approval. 24 23 *See* Securities Exchange Act Release Nos. 55687 (May 1, 2007), 72 FR 25824 (May 7, 2007) (SR-NYSE-2007-27) (adopting generic listing standards for index linked securities); and 51563 (April 15, 2005), 70 FR 21257 (Aril 25, 2005) (SR-Amex-2005-001) (approving the generic listing standards for index-linked securities). 24 The Commission notes that the failure of a particular product or index to comply with the proposed generic listing standards under Rule 19b-4(e), however, would not preclude the Exchange from submitting a separate filing pursuant to Section 19(b)(2), requesting Commission approval to list and trade such product. B. Listing and Trading Index Securities Taken together, the Commission finds that the Exchange's proposal contains adequate rules and procedures to govern the listing and trading of Index Securities listed pursuant to Rule 19b-4(e) on the Exchange. All Index Securities listed under the proposed generic standards will be subject to the full panoply of Exchange rules and procedures that currently govern the trading of equity securities on the Exchange. As set forth more fully above, the Exchange has proposed size, earnings, and minimum tangible net worth requirements for each Index Security issuer, as well as minimum distribution and holder, principal amount/market value, and term thresholds for each issuance of Index Securities. The Exchange's proposed listing criteria include minimum market capitalization, monthly trading volume, and relative weighting requirements for each Index Security and the components underlying each such security. These requirements are designed to ensure that the trading markets for the Underlying Index components are adequately capitalized and sufficiently liquid, and that no one component dominates the Underlying Index. The Commission believes that these requirements should minimize the potential for manipulation. The Commission notes that each component security of an Index Security (other than foreign country securities and ADRs) must be issued by a reporting company under the Act, listed on a national securities exchange, and be an “NMS stock,” as such term is defined in Rule 600 of Regulation NMS. 25 The Commission believes that such a requirement will contribute to the transparency of the Underlying Index. Alternatively, such component securities may also be foreign country securities or ADRs, so long as the foreign country securities or foreign country securities underlying ADRs having their primary trading market on foreign markets that are not ISG members or parties to comprehensive surveillance agreements with the Exchange do not, in the aggregate, represent more than 20 percent of the dollar weight of the Underlying Index. The Commission also believes that the requirement that 90 percent of the index's numerical value and at least 80 percent of the total number of component securities be eligible for standardized options trading should prevent an Index Security from being a vehicle for trading options on a security not otherwise options eligible. The Commission also notes that, by requiring pricing information for the relevant Underlying Index or Indexes and the Index Security to be readily available, the proposed listing standards should help ensure a fair and orderly market for Index Securities listed and traded pursuant to Rule 19b-4(e). 25 17 CFR 240.600(b)(47). The Exchange has also developed delisting criteria that will permit it to suspend trading of an Index Security in circumstances that make further dealings in the product on the Exchange inadvisable. The Commission believes that the delisting criteria should help ensure that a minimum level of liquidity exists for each Index Security to allow for the maintenance of fair and orderly markets. Also, in the event that the value of the Underlying Index is no longer calculated and widely disseminated on at least a 15-second basis, the Exchange may halt trading during the day on which the interruption first occurs; however, if the interruption persists past the trading day on which it occurred, the Exchange will halt trading no later than the beginning of the trading day following the interruption and will commence delisting proceedings. C. Surveillance The Commission notes that any Index Security approved for listing and trading would be subject to the Exchange's existing surveillance procedures governing equities, options, and exchange-traded funds, as well as procedures the Exchange represents it will develop to closely monitor activity in Index Securities and their underlying components. The Exchange has represented that its surveillance procedures will be adequate to properly monitor the trading of Index Securities listed pursuant to these proposed generic listing standards. D. Information Memorandum The Exchange has represented that it will distribute, as appropriate, an Information Memorandum to members describing the product, the structure of the product, and the corresponding risks of the Index Security. In addition, the Information Memorandum will set forth the Exchange's suitability requirements with respect to recommendations in transactions in Index Securities to customers and the prospectus delivery requirements. The Memorandum will also identify the Exchange's trading rules governing the Index Securities. E. Firewall Procedures The Exchange has further represented that, if the Underlying Index is maintained by a broker-dealer, such broker-dealer will establish a “firewall” around personnel responsible for the maintenance of the Underlying Index. As an added measure, a third-party who is not a broker-dealer will calculate the Underlying Index. In addition, the Exchange has stated that any advisory committee, supervisory board, or similar entity that advises an Index Licensor or Administrator or that makes decisions regarding the Underlying Index or portfolio composition, methodology, and related matters will be subject to procedures designed to prevent the use and dissemination of material, non-public information. F. Acceleration The Commission finds good cause for approving the proposed rule change before the 30th day after the date of publication of notice of filing thereof in the **Federal Register** . The Exchange requested accelerated approval of the proposal to enable the Exchange to immediately list and trade Index Securities. The Commission notes that the Exchange's proposed generic listing standards are substantially similar to previously approved listing standards for Index Securities 26 and presently is not aware of any regulatory issue that should cause it to revisit that finding or would preclude the trading of such securities on the Exchange. Therefore, accelerating approval of this proposal should benefit investors by creating, without undue delay, additional competition in the market for Index Securities, subject to the standards and representations discussed herein. Therefore, the Commission finds good cause, consistent with Section 19(b)(2) of the Act, 27 to approve the proposed rule change on an accelerated basis. 26 *See supra* note 22. 27 15 U.S.C. 78s(b)(2). V. Conclusion *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR-Phlx-2007-07), as amended, is hereby approved on an accelerated basis. 28 28 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 29 29 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-10665 Filed 6-1-07; 8:45 am] BILLING CODE 8010-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #10883 and #10884] Iowa Disaster #IA-00008 AGENCY: U.S. Small Business Administration. ACTION: Notice. SUMMARY: This is a Notice of the Presidential declaration of a major disaster for the State of Iowa (FEMA-1705-DR), dated 05/25/2007. *Incident:* Severe Storms, Flooding and Tornadoes. *Incident Period:* 05/05/2007 through 05/07/2007. *Effective Date:* 05/25/2007. *Physical Loan Application Deadline Date:* 07/24/2007. *Economic Injury
(EIDL)Loan Application Deadline Date:* 02/25/2008. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the President's major disaster declaration on 05/25/2007, applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: *Primary Counties (Physical Damage and Economic Injury Loans):* Cass, Fremont, Harrison, Ida, Mills, Montgomery, Page, Pottawattamie, Shelby, Taylor, and Union. *Contiguous Counties (Economic Injury Loans Only):* Iowa: Adair, Adams, Audubon, Buena Vista, Carroll, Cherokee, Clarke, Crawford, Decatur, Guthrie, Madison, Monona, Ringgold, Sac, and Woodbury. Missouri: Atchison, Nodaway, and Worth. Nebraska: Burt, Cass, Douglas, Otoe, Sarpy, and Washington. *The Interest Rates are:* Percent *For Physical Damage:* Homeowners with Credit Available Elsewhere 5.750 Homeowners without Credit Available Elsewhere 2.875 Businesses with Credit Available Elsewhere 8.000 Other (Including Non-Profit Organizations) with Credit Available Elsewhere 5.250 Businesses and Non-Profit Organizations without Credit Available Elsewhere 4.000 *For Economic Injury:* Businesses & Small Agricultural Cooperatives without Credit Available Elsewhere 4.000 The number assigned to this disaster for physical damage is 10883B and for economic injury is 108840. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E7-10710 Filed 6-1-07; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #10866 and #10867] Kansas Disaster Number KS-00018 AGENCY: U.S. Small Business Administration. ACTION: Amendment 4. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for the State of Kansas (FEMA-1699—DR), dated 05/06/2007. *Incident:* Severe Storms, Tornadoes, and Flooding. *Incident Period:* 05/04/2007 through 05/18/2007. *Effective Date:* 05/25/2007. *Physical Loan Application Deadline Date:* 07/05/2007. *EIDL Loan Application Deadline Date:* 02/06/2008. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the Presidential disaster declaration for the State of Kansas, dated 05/06/2007 is hereby amended to include the following areas as adversely affected by the disaster: *Primary Counties:* Clay, Cloud, Comanche, Leavenworth, Lyon, Reno, Rice, Saline, and Shawnee. *Contiguous Counties:* Kansas: Atchison, Chase, Coffey, Douglas, Geary, Greenwood, Harvey, Jackson, Jefferson, Johnson, Marion, Mcpherson, Morris, Osage, Pottawatomie, Republic, Riley, Sedgwick, Wabaunsee, Washington, and Wyandotte. Missouri: Platte. Oklahoma: Harper, and Woods. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Roger B. Garland, Acting Associate Administrator for Disaster Assistance. [FR Doc. E7-10709 Filed 6-1-07; 8:45 am] BILLING CODE 8025-01-P DEPARTMENT OF STATE [Public Notice 5821] Culturally Significant Object Imported for Exhibition Determinations: Paul Gaugin's “The Purau Tree” and Paul Cézanne's “A Modern Olympia” SUMMARY: Notice is hereby given of the following determinations: Pursuant to the authority vested in me by the Act of October 19, 1965 (79 Stat. 985; 22 U.S.C. 2459), Executive Order 12047 of March 27, 1978, the Foreign Affairs Reform and Restructuring Act of 1998 (112 Stat. 2681, *et seq.* ; 22 U.S.C. 6501 note, *et seq.* ), Delegation of Authority No. 234 of October 1, 1999, Delegation of Authority No. 236 of October 19, 1999, as amended, and Delegation of Authority No. 257 of April 15, 2003 [68 FR 19875], I hereby determine that the objects Paul Gaugin's “The Purau Tree” and Paul Cézanne's “A Modern Olympia”, imported from abroad for temporary exhibition within the United States, are of cultural significance. The objects are imported pursuant to loan agreements with the foreign owners or custodians. I also determine that the exhibition or display of Paul Gaugin's “The Purau Tree” from on or about September 17, 2007, until on or about September 30, 2010, and the exhibition or display of Paul C?zanne's “A Modern Olympia” from on or about September 17, 2007, until on or about January 30, 2011, in the Nineteenth-Century European Paintings and Sculpture Galleries, The Metropolitan Museum of Art, New York, New York, and at possible additional exhibitions or venues yet to be determined, is in the national interest. Public Notice of these Determinations is ordered to be published in the **Federal Register** . FOR FURTHER INFORMATION CONTACT: For further information, including a list of the exhibit objects, contact Wolodymyr Sulzynsky, Attorney-Adviser, Office of the Legal Adviser, U.S. Department of State (telephone:
(202)453-8050). The address is U.S. Department of State, SA-44, 301 4th Street, SW., Room 700, Washington, DC 20547-0001. Dated: May 22, 2007. C. Miller Crouch, Principal Deputy Assistant Secretary for Educational and Cultural Affairs, Department of State. [FR Doc. E7-10701 Filed 6-1-07; 8:45 am] BILLING CODE 4710-05-P DEPARTMENT OF TRANSPORTATION Federal Transit Administration [Docket Number: FTA-2007-27172] Final Guidance on New Starts/Small Starts Policies and Procedures and Notice of Availability of Updated Reporting Instructions AGENCY: Federal Transit Administration, DOT. ACTION: Notice of Availability of Final Guidance on New Starts/Small Starts Policies and Procedures and Updated Reporting Instructions. SUMMARY: This notice conveys the Federal Transit Administration's
(FTA)Final Guidance on New Starts/Small Starts Policies and Procedures. This Policy Guidance complements FTA's previous Guidance on New Starts Policies and Procedures, dated May 22, 2006, by providing further updates and enhancements to the procedures for project planning and development necessary to receive New or Small Starts funding. This notice also announces the availability of FTA's *Reporting Instructions for the Section 5309 New Starts Criteria,* which must be followed when reporting New Starts information for evaluation during the FY 2009 project evaluation cycle, as well as for any requests to enter into preliminary engineering, final design, or a full funding grant agreement until further notice. Finally, this notice provides the schedule for reporting of information for FTA's FY 2009 New Starts budget evaluations. EFFECTIVE DATE: These policies and procedures will take effect on June 4, 2007. FOR FURTHER INFORMATION CONTACT: Ron Fisher, Office of Planning and Environment, telephone
(202)366-4033, Federal Transit Administration, U.S. Department of Transportation, 1200 New Jersey Avenue, SE., East Building, Washington, DC 20590 or *Ronald.Fisher@dot.gov.* Availability of Comments Considered in the Development of this Guidance, and of the New Starts Reporting Instructions A copy of the notice of availability of the proposed Guidance, issued on February 12, 2007, and comments and material received from the public as a part of its review of the proposed Guidance, are part of docket FTA-2007-27172 and are available for inspection or copying at the Docket Management Facility, U.S. Department of Transportation, West Building, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590 between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. You may retrieve the Guidance and comments online through the Document Management System
(DMS)at: *http://dms.dot.gov.* Enter docket number 27172 in the search field. The DMS is available 24 hours each day, 365 days each year. Electronic submission and retrieval help and guidelines are available under the help section of the Web site. An electronic copy of this document may also be downloaded by using a computer, modem and suitable communications software from the Government Printing Office's Electronic Bulletin Board Service at
(202)512-1661. Internet users may also reach the Office of the Federal Register's home page at: *http://www.nara.gov/fedreg* and the Government Printing Office's Web page at: *http://www.gpoaccess.gov/fr/index.html.* FTA's Reporting Instructions for the Section 5309 New Starts Criteria is available on FTA's Web site for New Starts planning and project development at *http://www.fta.dot.gov/planning/planning_environment_5221.html.* Schedule for Reporting the new Starts Project Justification and Local Financial Commitment Criteria for Evaluation in the FY 2009 Annual Report on Funding Recommendations The formal deadline for reporting information on the New Starts and Small Starts project justification and local financial commitment criteria— *i.e.* , the New and Small Starts templates and supporting land use and financial information—for evaluation in the *FY 2009 Annual Report on Funding Recommendations* is September 7, 2007. In addition, FTA requests, for projects already in the New Starts or Small Starts “pipeline” (projects in preliminary engineering, final design, or Small Starts project development), that information related to travel forecasts, operating and maintenance cost methodologies, and service annualization factors *as appropriate* be submitted by July 30, 2007 *if this information is different from what was submitted last year.* This advanced submission of information helps FTA staff to understand the information underlying the New or Small Starts project justification criteria, and helps to ensure that the information reported in the formal New or Small Starts templates is sufficient for FTA's evaluation and rating of candidate projects. Both the “advanced” and formal submission of information should be sent to the FTA Office of Planning and Environment (TPE), 1200 New Jersey Avenue, SE., East Building, Washington, DC, 20590. In addition, FTA's consultants for financial and land use reviews will be contacting sponsors of projects in the pipeline in late-August 2007 to provide additional direction on transmitting specific information to them for these reviews. As conveyed in the Policy Guidance, which follows, only projects that are candidates for a funding recommendation (i.e., seeking either an FFGA or PCGA), or which have undergone significant scope, cost, or financial changes, need submit information for evaluation. FTA considers requests for project entry into preliminary engineering, final design, or Small Starts project development at any time of the year. For sponsors who hope to have their proposed New Starts project approved into preliminary engineering or Small Starts project approved into project development in time for inclusion in the *FY 2009 Annual Report,* a complete request (with previously FTA-accepted travel forecasts, baseline alternative, build and baseline capital costs, and achievement of other project readiness requirements, *as appropriate* ) must be submitted to FTA no later than September 7, 2007. FTA encourages sponsors of such projects to contact FTA as soon as possible to assess their readiness for preliminary engineering and project development and to prepare their request for advancement. Projects supported by incomplete or premature requests will not be considered for inclusion in the *FY 2009 Annual Report.* FTA encourages sponsors of candidate New Starts projects to follow the *Reporting Instructions* closely, and to submit complete information according to the deadlines established above. FTA's period for completing its FY 2009 budget evaluations is very short. FTA staff is committed to working closely with project sponsors to resolve any questions or issues with their submittals, but cannot guarantee the acceptance and inclusion of any revised or updated information after September 30, 2007 in time for the FY 2009 evaluation. Project sponsors should contact the FTA Office of Planning and Environment, or their FTA Regional Office, if they have any questions regarding the submission of information for evaluation, or the process for developing such information. Response to Comments and New and Small Starts Program Changes The purpose of this notice is to convey the Final Guidance on New Starts/Small Starts Policies and Procedures, reflecting the changes implemented as a result of comments received on the February 12, 2007 notice of availability. FTA finds that there is good cause to make this guidance effective upon publication of this notice because sponsors of projects seeking New and Small Starts funding must have adequate time to prepare information that FTA will use to evaluate projects for inclusion in the President's FY 2009 budget request to Congress. 1. Information Required of Grantee a. Operating Efficiencies and Environmental Benefits *FTA adopts as final its proposal to no longer require the submission by New Starts project sponsors of information on FTA's measures for operating efficiencies and environmental benefits.* The elimination of these two requirements is intended to reduce the reporting effort of New Starts project sponsors. FTA has not found that current measures for these two evaluation criteria distinguish, in any meaningful way, the differences between projects. Moreover, FTA believes that the operating efficiencies of New Starts projects are essentially captured under FTA's current measure for cost effectiveness. Until measures can be developed that provide salient information for the environmental benefits criterion that better differentiates the characteristics of projects, grantee submission of the information is not required. FTA's *Reporting Instructions for the Section 5309 New Starts Criteria* have been updated to reflect this change. *Comments:* Nearly all of the respondents agreed with this proposal, although many expressed support for the eventual development by FTA of a more effective measure for environmental benefits. *Response:* FTA agrees that New Starts projects can make important and meaningful contributions to an improved environment, and believes that their environmental benefits ought to be better captured in the evaluation and rating process. To that end, FTA has been studying a number of potential environmental benefits measures which better distinguish New Starts projects from each other. These measures will be proposed some time in the future and FTA will seek comment on them at that time. At this time, however, FTA will continue to use its current evaluation measure of the Environmental Protection Agency's ambient air quality rating. b. Transit Supportive Land Use Patterns and Policies *FTA adopts as final its proposal that the resubmission of information on transit supportive land use patterns and policies for the purposes of the Annual Report on Funding Recommendations be optional for both New Starts and Small Starts.* While land use ratings rarely change over the course of a project's development, project sponsors have the option of submitting information for this criterion should they believe that the new information would improve their project's rating. *Comments:* Most respondents agreed with the proposal, with some additional suggestions. Several respondents felt that in the absence of an annual requirement FTA should make clear that land use remains an important part of FTA's evaluation and continue to encourage local governments, with transit agency support, to take supportive land use actions during the course of project development. Others suggested that FTA should continue to raise the standard for land use ratings as a project advances, and require that a project sponsor submit land use information prior to being permitted entry into final design. Finally, a few respondents requested that FTA consider new information for re-evaluation at any time if a sponsor believes that this information will result in improving its project's land use rating. *Response:* FTA's proposal to no longer require annual land use reporting should not be construed in any way as a diminishment of its support for good transit-oriented land use planning. Indeed, FTA will re-evaluate a project's transit-supportive land use plans and policies annually if its sponsor desires to submit significant new information. While annual re-evaluations will be at the discretion of project sponsors, FTA will continue to evaluate and rate transit-supportive land use at the time of a request to enter preliminary engineering, and will require a formal re-evaluation and rating of transit-supportive land use at the time of a sponsor's request to advance a project into final design. c. Annual Report on Funding Recommendations *FTA adopts as final its proposal to no longer require New Starts and Small Starts project sponsors to submit information for evaluation for the Annual Report on Funding Recommendations if their project is not likely to be ready for a funding recommendation. Such information is required, however, for New Starts projects in or near final design, or for projects which have experienced a significant change since its last evaluation.* This policy change is intended to reduce the reporting burden for candidate New and Small Starts projects in their earlier stages of development while at the same time better align FTA's annual project evaluation responsibilities with its statutorily-required *Annual Report on Funding Recommendations.* *Comments:* Most of those commenting on this proposal agreed with it. A few respondents suggested that FTA should make reporting optional in cases where local funding processes and conditions would make a new rating necessary or desirable. A few others expressed concern about what FTA would report in the absence of a formal resubmission of the information supporting the New Starts criteria. Questions on the proposal included what would constitute a “significant” change requiring a new evaluation and rating for projects not being considered for funding; how far in advance FTA would notify sponsors of the need to resubmit updated information; and what criteria FTA would use to determine if a project is a candidate for a funding recommendation. *Response:* FTA views its *Annual Report on Funding Recommendations* as a complementary document to the Administration's annual budget request. FTA's proposal was intended to reduce the annual reporting burden on candidate New Starts project sponsors which have not yet reached a level of development necessary to warrant consideration for a funding recommendation. So long as a project sponsor submits information when requesting approval into preliminary engineering and final design (or, for Small Starts, project development) and the project continues to advance on schedule with insignificant changes to its scope, cost, and/or financial plan, additional submissions and a formal re-evaluation (until the time of its consideration by FTA for funding), strikes FTA as unnecessary. However, when a project experiences a significant event e.g., a loss of local revenues that brings into question its local financial commitment; a change in project scope that would have a significant impact on its operation and hence transportation benefits; or an increase in its cost estimate that requires a re-examination of its financial plan and/or threatens the project's cost effectiveness—a formal re-evaluation and re-rating will be required. The examples above serve as general guidelines that might trigger a re-evaluation; the decision on the need for such an evaluation will be made by FTA on a case-by-case basis. The decision to re-rate a project would be made and transmitted by FTA in the previous year's Annual Report on Funding Recommendations or by letter no later than April 30 prior to the Fall preparation of the next Annual Report, thus providing the sponsor ample time to address any causes of concern and prepare updated information for evaluation. On the other hand, and at the discretion of project sponsors, FTA will re-evaluate projects that have taken positive steps since preliminary engineering, such as gaining additional funding commitments or reducing project costs that are expected to improve the project's rating for the *Annual Report on Funding Recommendations.* In the case where a re-evaluation is not necessary, FTA will report all recent relevant and validated information on a candidate project for the *Annual Report.* The primary focus will be placed on reporting the progress demonstrated by the project sponsor in terms of meeting its schedule, addressing NEPA requirements and design uncertainties, and garnering local funding commitments. For projects advancing under a project development agreement
(PDA)with FTA, adherence to the milestones included in the PDA will be noted. Modest changes to the project scope and cost estimate will also be reported (as noted above, major changes would require a formal re-evaluation and rating). It is anticipated that most of this information will be collected over the course of the year as part of FTA's normal project oversight responsibilities. In limited cases it may be necessary for project sponsors to submit supporting documentation on changes in the local financial commitment for their project, although it is not expected that a full financial plan would need to be submitted. Projects that demonstrate readiness for a funding recommendation will be required to submit updated New Starts criteria and be evaluated and rated, thus ensuring complete information for decision-making. In the absence of any comments on the criteria proposed by FTA to determine when a project will be considered for funding, FTA will continue to utilize the threshold it currently follows: That is, projects expected to be approved into final design by the Spring after the Fall preparation of *Annual Report on Funding Recommendations.* Small Starts projects that have completed NEPA by the Fall preparation of the *Annual Report* would also be considered to be a funding candidate and would be subject to reporting and evaluation. 2. FTA Review of Key Documents * FTA will not adopt at this time the proposed requirement that potential New Starts and Small Starts project sponsors in alternatives analysis provide a timely opportunity for FTA comment on documents describing the alternatives at their conceptual, detailed, and final stages of development. FTA is inclined, however, to establish this requirement at such time that it has the resources and systems in place to address stakeholder concerns with the proposal. In addition, FTA may propose as a requirement at some time in the future the review of, and comment upon, other key products of the alternatives analysis study process. * The intent of this proposal was to ensure that FTA be involved early in a corridor planning study that might result in the selection of a candidate New or Small Starts project. FTA believes that such involvement produces a number of benefits to the study effort, including the provision of technical assistance for improving the information available to support local decision-making and the management of both FTA and local expectations for advancement of the study and the resulting locally-preferred alternative. This proposed requirement supports FTA's goal of working closely with sponsors of alternatives analysis studies to ensure that communication of Federal and local concerns occurs at the appropriate time so that they can be resolved quickly and avoid negative impact of the study's progress and cost. *Comments:* Comments received on this proposal generally recognized the benefit of engaging FTA early in the project development process, but expressed significant concerns about making such engagement a formal requirement whereby FTA would officially review and approve the documents mentioned. Concerns expressed by the majority of commenters included the perceived insertion of FTA into the local decision-making process, the timeliness of FTA's review of the materials, and the potential time and costs these requirements could add to the project development process. *Response:* SAFETEA-LU gives FTA the responsibility to ensure that reasonable alternatives are considered in alternative analyses for a project to be eligible for New Starts funding, and that these alternatives are developed in such a way that their costs, benefits, and impacts can be properly presented to decision makers and stakeholders. Documentation and submission to FTA of the descriptions of alternatives at the conceptual, detailed, and final level of definition assists FTA in carrying out this responsibility. FTA believes that such a Federal-local partnership better protects the public interest, which FTA places as its over-arching goal for the New and Small Starts program. FTA's proposal was not intended to undermine local decision-making authority, which FTA holds to be a core principle of alternatives analysis studies. Furthermore, FTA's proposal never contemplated an approval of the alternatives (except for FTA's long-standing approval of the New Starts “baseline” alternative). Rather, FTA's reviews would simply highlight for study sponsors the issues surrounding the development of the alternatives that must be addressed in order for a locally preferred alternative to advance into preliminary engineering as quickly as possible. Nevertheless, FTA is concerned that enforcing this requirement without being able to commit to a timeframe for its review would fail to give project sponsors important information for their project schedules. Therefore, over the next several months, FTA will collect information on existing review times that will help inform us of a reasonable period for the reviews of various products of alternatives analysis studies. Moreover, FTA is currently researching the use of enhanced, technology-based information management systems to improve the efficiency, accountability, and transparency of FTA reviews. In the meantime, FTA will continue to strongly encourage project sponsors to submit documents to FTA for review on the descriptions of alternatives and technical methods and results, as described in FTA guidance and workshops. FTA assures study sponsors that the timely review of these documents is an agency priority. 3. Travel Forecasts a. Validation Against Travel Patterns *FTA adopts as final the proposal—for implementation in May 2009—that travel forecasts for both New and Small Starts submitted in support of a request to enter preliminary engineering
(PE)or project development
(PD)be based on travel models that have been validated against data sufficient to describe current ridership patterns.* The purpose of this policy is to ensure that sufficient data on current ridership patterns are available to understand the key markets served by the existing transit system and to check the grasp of those markets by the local travel forecasting procedures. Without adequate data, the identification of purpose and need for a major transit project is substantially limited by the absence of insight into the functions and limitations of the existing transit system. Further, the inability to test the travel forecasting procedures for their understanding of those functions and limitations reduces the credibility of forecasts for transit alternatives in the future. *Comments:* Comments reflected a variety of topics ranging from funding to survey bias, with no topic receiving more than one-third of the nineteen total responses. There was concern that collecting data and then calibrating travel models every five years was costly; that five years was an arbitrary timeline; and that by the time the travel models were calibrated, it would be time to begin data collection efforts again. Other comments indicated that alternative methods of data collection such as automated counts, farebox counts, vehicle location systems and/or telephone surveys should substitute for or supplement system-wide ridership surveys. Comments also noted the difficulty of eliminating survey bias and the need to provide survey requirements to ensure that data is collected uniformly by project sponsors. *Response:* During the past five years, a large number of project sponsors have proceeded through alternatives analysis without any useful data on current ridership patterns. The locally preferred alternatives emerging from those analyses have included guideway-expansion projects whose forecasts were prepared without any insight into the ridership patterns on recently opened initial guideway projects in the metropolitan area. Other project sponsors have proceeded with forecasts for initial projects that would depend heavily on park-ride access but without any data on park-ride facilities and express-bus services opened relatively recently in the area. In these circumstances, the forecasting procedures are uninformed by readily available information on travel markets that are key to understanding the benefits of proposed major investments in transit facilities. Consequently, the uncertainties in the forecasts are large and the risks are significant that the forecasts—and therefore the project evaluation and ratings—will be substantially in error. In these circumstances, any unexpected characteristics in the forecasts become cause for concern and potential delay as project sponsors struggle—without data—to document the reasonableness of the unusual characteristics or to correct the forecasting tools. Therefore, FTA thinks it in the best interest of all parties to have sufficient data on key travel markets, travel forecasting procedures that are tested with those data, and a clear understanding of current ridership patterns as they inform the purpose and need for a major transit project. Further, FTA views the costs of such data collection as very small relative to the value of the information obtained, to the costs of other tasks (engineering, environmental, and others) necessary to project development, and to the costs of the projects proposed for funding. FTA agrees that a 5-year horizon—or any fixed point in time—is arbitrary and potentially not useful in many cases. In metropolitan areas with relatively slow growth in population and employment, and with a relatively stable transit system and transit ridership, a 10-year-old on-board survey plus current on-off counts may well be sufficient to prepare useful information on current ridership patterns. Conversely, in rapidly growing areas that have opened the initial guideway facility in the past three years, a 4-year-old survey of bus riders may well be an insufficient basis for understanding the potential performance of a second guideway line. Therefore, FTA will consider the adequacy of data on existing ridership patterns on a case-by-case basis. Project sponsors are advised to discuss with FTA—well in advance of a planned alternatives analysis—the nature, extent, timing, and quality of local data sources on current transit ridership patterns. Finally, this policy requires the availability of sufficient data on current travel patterns but not the specific method(s) for obtaining that data. Methods for obtaining information from individual riders might include personal interviews with a very limited number of questions, phone surveys, intercepts of riders at stations/stops rather than on board, and other emerging methods. Further, advances in automated passenger counters, farecard systems, automatic vehicle locator systems, and other data-collection methods may reduce the need for information from individual riders. Detailed on-off passenger counts, for example, might be used to update the sample expansion of an older on-board survey. In other circumstances, those counts might be used to estimate station-to-station trip tables, informed by a limited amount of rider-specific information. In general, FTA anticipates that project sponsors will tailor the strategy for data assembly to their individual circumstances to ensure that sufficient useful information is available as efficiently as possible. b. Mode-Specific Effects *FTA adopts as final its proposal to allow project sponsors that seek to introduce a new transit mode to an area to claim credits (implemented through what is commonly called a mode-specific constant) for the user benefits caused by attributes of that mode beyond the travel time and cost measures currently available in the local travel model. FTA will continue to work closely with sponsors of projects that have calibrated mode-specific constants to ensure that they are using constants that are generally consistent with the methods and values permitted for sponsors of projects which are new to an area.* This policy establishes a reasonable approach to crediting alternatives that represent new transit modes locally with the mobility benefits caused by changes in transit service characteristics that are universally omitted from current travel forecasting methods. The policy applies to both the transit guideways identified as locally preferred alternatives and to guideway-like elements of baseline alternatives used to evaluate proposed projects. The approach gives credit—and additional user benefits—based on the specific attributes of the alternative as they are perceived by travelers. FTA will assign credits for characteristics in three categories:
(1)Guideway-like characteristics (equivalent to a maximum of eight minutes of travel-time savings);
(2)span of good service (up to three minutes); and
(3)passenger amenities (up to four minutes). Further, FTA will define a discount of up to 20 percent on the weight applied to time spent on the transit vehicle. These credits and discount are applied to the calculation of user benefits only; ridership forecasts will not be affected. This policy is effective immediately except in the case of baseline alternatives in areas that are considering expansion of existing guideway systems. The policy will apply to those alternatives beginning in May 2008 so that project sponsors have sufficient time to modify their travel forecasting procedures. FTA will issue technical guidance on the application of this policy in the May 2007 Reporting Instructions. *Comments:* The most frequent comment was a request that walk access be given a similar user benefit credit as park and ride access trips. Other comments expressed the concern that these credits would penalize both transit agencies seeking to expand an existing mode as well as those agencies with an already well validated travel model. Respondents requested greater transparency on the process of calculating user benefit credits. In addition, respondents would like to utilize local information to supplement the calculation of credits to user benefits in their region. *Response:* Because of the large size of the “transportation analysis zones” used in travel models to represent the geography of metropolitan areas, nearly all current travel models overestimate the potential walk access market for fixed guideways. Many of the walk-to-guideway and walk-from-guideway trips represented in these models would actually require a bus connection. Because a walk-guideway-walk trip is subject to this error at both ends of the guideway trip—and the errors are multiplicative—FTA cannot grant credits for walk-only travel on guideways where the size of that travel market is inevitably and grossly overstated. However, in an effort to capture all credible benefits and reward good practice in local travel models, FTA will consider the full crediting of these benefits for walk-access as well as drive-access transit trips when the local travel models support accurate accounting of walk to guideway walk trips. Therefore, project sponsors may propose the full set of credits where they believe that the local travel models handle walk-access to fixed guideways with sufficient accuracy. This policy in no way penalizes areas that have existing guideway transit systems and have calibrated forecasting procedures with transit-mode-specific constants and coefficient discounts for guideway transit. The policy remedies a large disadvantage previously faced by sponsors of an initial guideway project in a given metropolitan area. Technical assistance in the application of the constants can be requested of FTA by contacting the FTA Office of Planning and Environment at
(202)366-4033. 4. Evaluation Criteria a. Overall Project Justification Rating FTA adopts as final its proposal to replace the current three-tiered overall project rating scale of “low,” “medium,” and “high” with a five-tiered rating scale of “low,” “medium-low,” “medium,” “medium-high,” and “high” as directed in SAFETEA-LU. This policy was intended to modify the current overall ratings to be consistent with the ratings specified in SAFETEA-LU, which requires that projects be given an overall rating based on a five-tier scale of “high,” “medium-high,” “medium,” “medium-low,” and “low.” The application of this modest change will be documented in a separate summary document on the FY 2009 New Starts Evaluation and Rating Process, to be issued by June 30, 2007. *Comments:* Almost all comments received were supportive of the proposed change to the five-tiered rating scale. A few commenters asked for clarification on the decision rules. *Response:* The overall rating is determined by the average of the rating for project justification and for local financial commitment. When the average of these ratings is unclear (e.g., project justification rating of “medium-high” and local financial commitment rating of “medium”), FTA will round up the overall rating to the higher rating (e.g., project justification rating of “medium-high” and local financial commitment rating of “medium” yields an overall rating of “medium-high”) except in the following circumstances: • A “medium” overall rating requires a rating of at least “medium” for both project justification and local financial commitment. • A “medium-low” overall rating requires a rating of at least “medium-low” for both project justification and local financial commitment. b. Simplified Rating of Local Financial Commitment *FTA adopts as final its policy to add a decision rule that Small Starts and Very Small Starts projects that meet the conditions for a simplified financial rating be given a rating of “high” if their sponsors request no more than a 50% Small Starts share, while those requesting between 50% and 80% share receive no less than a “medium” rating.* Agencies currently receive a simplified financial rating of “medium” if they can demonstrate they have a reasonable plan to secure funding for the local share of capital costs; that the additional operating and maintenance costs of the project are less than 5% of the agency's operating budget; and that the agency is in good operating condition. By giving higher ratings to projects seeking less Small Starts funding, FTA is providing an incentive for a project to request a lower percentage of Small Starts funding, thus allowing for the program to benefit more localities. *Comments:* Nearly half of the respondents supported this proposal. Of those who did not, comments cited this incentive would make it difficult to put together entry level projects; it would dilute other financial considerations of a project sponsor and it may disadvantage high quality projects as measured by other criteria. In addition, other comments requested greater flexibility in the amount of local match or the ability to consider the economic health of the area while still competing for a “high” financial rating. *Response:* Projects which meet the aforementioned conditions for streamlined evaluation and rating will in every case receive a rating sufficient to advance in development and be considered for Small Starts funding, regardless of the local share. FTA believes that the ability of project sponsors to contribute a higher non-Small Starts funding share represents a measure of local commitment to a project that should be recognized in the ratings. FTA further believes that providing higher ratings for requests of less Small Starts funding is entirely consistent with SAFETEA-LU provisions that specify local share as an evaluation consideration. Finally, by specifying that projects seeking Small Starts funding must be under $250 million in total cost and $75 million in Small Starts funding, SAFETEA-LU constrains higher cost projects to less than 50 percent in Small Starts funding. c. Mobility Measures for Transit Dependents *FTA adopts as final its proposal to replace the current measure of mobility benefits for transit dependents with three easily computed measures:
(1)The share of user benefits that accrue to transit dependents;
(2)user benefits per project passenger mile for transit dependents; and
(3)the number of project riders who are transit dependent.* This policy addresses the dimensions of a project's improvements to mobility:
(1)The extent that it benefits transit dependents compared to their representation in the metropolitan area;
(2)the magnitude of the increase in mobility for each traveler normalized by the length of their journey on the project; and
(3)the number of travelers affected. The overall rating for mobility for transit dependents will be based on the ratings of each of these three dimensions of mobility. The procedures for developing these measures are provided in FTA's updated *Reporting Instructions for the Section 5309 New Starts Criteria* , available simultaneously with this notice. *Comments:* Three-quarters of the respondents were concerned that these measures do not take into account the evolving definition of a transit dependent. Thus, project sponsors who attempt to improve service to those who choose to be transit dependent may not be able to capture this segment by income or employment data. Further, respondents noted that measuring benefits per passenger mile may skew the results to favor long haul transit. In addition, several respondents cited that the NEPA documentation assesses the project benefits to low income and minority populations and may be a more meaningful tool in addressing overall transit equity. *Response:* Because travel models stratify the metropolitan population by either auto ownership or income, the current state of the practice can ascertain the mobility impacts of a project on carless households or the lowest income group used in a travel model. Carless and lower income households are reasonable surrogates for transit dependents. Forecasts of benefits for some other definition would require a new methodology to be implemented for every area seeking Small Starts funding, instead of relying on existing travel models. As noted, long haul transit with infrequent stops may rate well for the user-benefit-per-mile measure. Finally, using NEPA documents to address transit dependent mobility improvements is problematic given that there is no standardized approach for reporting project benefits in NEPA documentation. d. Subfactors for Local Financial Commitment *FTA adopts as final the three proposed changes to the evaluation and rating of local financial commitment for both New and Small Starts, all of which are related to the sub-factors used to develop the ratings for the stability and reliability of the capital and operating finance plans. These changes include for both the capital and operating plans:
(1)Eliminating the completeness sub-factor;
(2)merging the existing capacity and cost estimates and planning assumptions sub-factors together; and
(3)re-weighting the remaining sub-factors.* This policy is intended to both simplify FTA's evaluations of local financial commitment and better align considerations of the uncertainty associated with financial planning assumptions with the factor they affect. The application of this modest change will be documented in a separate summary document on the *FY 2009 New Starts Evaluation and Rating Process,* and FTA's *Guidelines and Standards for Assessing Local Financial Commitment.* Both documents will be available no later than June 30, 2007. *Comments:* All comments received were supportive of the proposed changes to the evaluation and rating of local financial commitment. *Response:* FTA will reduce the number of subfactors used to develop the ratings for the stability and reliability of the capital and operating finance plans from five to three. The three subfactors will be weighted as follows to arrive at a summary capital/operating rating:
(1)Current capital/operating condition (25%);
(2)commitment of capital/operating funds (25%); and
(3)cost estimates/planning assumptions/capacity (50%). The three measures used to determine the overall local financial commitment rating and their weights will be maintained at:
(1)The share of non-New Starts funding (20%);
(2)the stability and reliability of the capital finance plan (50%); and
(3)the stability and reliability of the operating finance plan (30%). All FTA decision rules for determining a rating for local financial commitment will remain in place as well. e. Innovative Contractual Agreements for Operations *FTA adopts as final its policy that the degree to which a project employs innovative contractual agreements will be considered in the evaluation and rating of the operating finance plan for both New and Small Starts.* This policy is intended to encourage project sponsors to examine innovative operating arrangements that might result in cost savings. FTA will increase the operating plan rating one level from “medium” to “medium-high” or from “medium-high” to “high” if the project sponsor can demonstrate it has provided the opportunity for the operation and maintenance of the project to be contracted out. The operating plan rating will not increase if the operating finance plan rating is below a medium. FTA will revise its guidance documents, including the *Guidelines and Standards for Addressing Local Financial Commitment* , to reflect this change. *Comments:* Nearly half of the respondents requested that similar considerations be made for transit agencies that have studied such innovative arrangements, regardless of whether the arrangement was implemented or not. Other comments cited the concern that this proposal could disrupt existing labor union contracts. The last set of comments cited the lack of statutory basis to provide an additional weight for this consideration. *Response:* The operating plan rating will be increased for project sponsors that can provide evidence that the operations and maintenance of the project will be contracted out or that simply an *opportunity* has been given for contracting out but that there were substantive reasons for not doing so. FTA believes that current statutes do not prohibit the implementation of this proposal. f. Rating Information in Planning Studies *FTA adopts as final its proposal that alternatives analysis
(AA)final reports and AA/Draft Environmental Impact Statements (Draft EISs) must present—for all alternatives—the information used by FTA to assign New or Small Starts ratings if that information has been vetted by FTA. If the information has not been vetted with FTA, then the absence of the information must be highlighted in the document.* The intent of this policy is to comply with FTA requirements for AAs and the Council on Environmental Quality for DEISs by identifying information relevant and important to a decision on a locally preferred alternative. If this requirement cannot be met, publication of the AA or AA/DEIS would not be delayed; rather, the absence of the information and its relevance must be explained in the AA or AA/DEIS. *Comments:* Many opposed the proposal stating that the NEPA and New Starts process should be independent. Others opposed the proposal because of potential project delays citing the lack of FTA staff to review the information. Others agreed that FTA should allow that a disclosure statement be used in alternatives analysis documents when fully vetted information is not available, which would summarize the New Starts process and explain that information addressing the criteria has not yet been completed. *Response:* It has been FTA's long standing policy to integrate the NEPA and New Starts processes because they share common goals. The Council on Environmental Quality regulations state that “an environmental impact statement should at least indicate those considerations, including factors not related to environmental quality, which are likely to be relevant and important to a decision.” For projects seeking New or Small Starts funding, rating information that determines whether the project can qualify for funding is “relevant and important to a decision.” Regarding concerns over project delays, this policy will not delay a document/project if information on the New Starts criteria has not been vetted with FTA. In such cases, the absence of such information would simply be acknowledged without prejudice with a statement that it has not yet been fully vetted with FTA and therefore no assurances can be given that the alternatives considered, including the locally preferred alternative, would be eligible or competitive for New or Small Starts funding. The inclusion of such a statement simply provides the public and local decision makers full disclosure of the actions necessary to advance the preferred alternative into the New or Small Starts project development process. g. Other Factors *FTA adopts as final its proposal to incorporate under “other factors” two specific considerations. First, if a proposed New or Small Starts project is a principal element of a congestion management strategy, in general, and an auto pricing strategy, in particular, the project justification rating could be increased. Second, if a New or Small Starts project addresses significant transportation problems or opportunities in a corridor and the appropriateness of the preferred alternative as a response, FTA will consider the contents of the “make-the-case document” as a standard criterion under “other factors.” A “high” make-the-case rating could increase the project's overall rating and a “low” make-the-case rating could decrease the overall rating. FTA further continues to encourage the reporting, under “other factors,” of information on a project's economic development impacts. Particularly compelling information may be used by FTA to increase a project's “project justification” rating.* Each of the considerations has the potential of changing the overall project justification rating. The first consideration can only increase the rating while the second can either increase or decrease the rating. The details of how these factors will be applied, along with consideration of the economic development factor will be described in an update to its summary document on the *New Starts Evaluation and Rating Process* , available no later than June 30, 2007. *Comments:* In response to the first consideration, comments indicated that a congestion pricing strategy is not effective except in large cities with substantial investment in transit infrastructure. The second consideration was largely supported with just over half of the respondents citing their support. Of those who opposed the consideration, the reason cited was that FTA would be evaluating a document and not the project itself. *Response:* The first consideration supports the Department's initiative to address congestion using pricing strategies. Successful pricing strategies have been introduced in medium-sized cities. The purpose of the second consideration, the make-the-case document, is intended to marshal the best available arguments for the proposed project based on the analytical results of planning and project development findings. As such, FTA believes that it provides important information in assessing project merit that complements the mechanical application of ratings and numbers. FTA will base its rating on the extent to which a compelling case is made that addresses this purpose. Issued on: May 30, 2007. James S. Simpson, Administrator. [FR Doc. 07-2774 Filed 5-31-07; 11:09 am]
Connectionstraces to 15
Traces to 15 documents
U.S. Code
- Federal agency responsibilities§ 3506
- Open meetings§ 552b
- Registration, responsibilities, and oversight of self-regulatory organizations§ 78s
- National securities exchanges§ 78f
- Public information; agency rules, opinions, orders, records, and proceedings§ 552
- Definitions and application§ 78c
- Records and reports§ 78q
- Short title§ 78a
- Immunity from seizure under judicial process of cultural objects imported for temporary exhibition or display§ 2459
- Purposes§ 6501
CFR
register
public-private-law
8 references not yet in our index
- Pub. L. 98-21
- Pub. L. 94-409
- 17 CFR 240.19
- 15 USC 78
- 15 USC 78(a)
- 17 CFR 240.10
- 17 CFR 240.600(b)(47)
- 79 Stat. 985
Citation graph
cites case law
Notices
Notice of an application for an order under section 12(d)(1)(J) of the Investment Company Act of 1940 (the “Act”) for an exemption from sections 12(d)(1)(A) and (B) of the Act and under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and (2) of the Act
Pub. L.Pub. L. 98-21
Pub. L.Pub. L. 94-409
Cite17 CFR 240.19
Cites 23 · showing 12Cited by 0 across 0 sources