Notices. Notice of Intent to Grant Exclusive License SUMMARY: This notice is issued in accordance with 35 U

37,998 words·~173 min read·/register/2007/09/13/07-4501

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

BILLING CODE 4410-01-P DEPARTMENT OF LABOR Office of the Secretary Submission for OMB Review: Comment Request September 10, 2007. The Department of Labor

(DOL)hereby announces the submission the following public information collection request

(ICR)to the Office of Management and Budget

(INA)to establish the H-1C program to reduce the shortage of qualified nurses in Health Professional Shortage Areas (HPSAs). The ETA and Employment Standards Administration

(ESA)promulgated regulations at 20 CFR part 655, subparts L and M, governing the filing and enforcement of attestations by facilities seeking to employ aliens as registered nurses in HPSAs on a temporary basis. (See 65 FR 51149, Aug. 22, 2000.) The NRDAA allows qualified hospitals to employ temporary foreign workers as registered nurses for up to three

(3)years under the H-1C visas. Facilities seeking H-1C visas are required to file attestations with the Secretary of Labor. Each facility must attest that

(1)It meets the definition of “facility” based on the Social Security Act and the Public Health Service Act,

(2)it did not and will not lay off a registered nurse in the period between 90 days before and 90 days after the filing of any H-1C petition,

(3)it will not employ a number of H-1C nurses that exceeds 33 percent of the total number of registered nurses employed at the facility, and

(4)it will not authorize the H-1C nurse to perform nursing services at any worksite other than a worksite controlled by the facility or transfer the H-1C nurse's place of employment from one work place to another. The NRDAA expired on June 13, 2005. However, on December 20, 2006, with the enactment of Public Law 109-423, Congress reauthorized the H-1C program for an additional three

(3)years. The key provisions of the program remain unaffected and take effect immediately. The mechanism for employers or facilities to make attestations to the Secretary of Labor is the ETA Form 9081, and to expedite implementation of the reauthorized statute, the ETA is requesting a reinstatement, without modifications, to this information collection. Darrin A. King, Acting Departmental Clearance Officer. [FR Doc. E7-18051 Filed 9-12-07; 8:45 am] BILLING CODE 4510-FP-P DEPARTMENT OF LABOR Office of the Secretary Submission for OMB Review: Comment Request September 10, 2007. The Department of Labor

(DOL)hereby announces the submission the following public information collection request

(ICR)to the Office of Management and Budget

(OMB)for review and approval in accordance with the Paperwork Reduction Act of 1995 (Pub. L. 104-13, 44 U.S.C. chapter 35). A copy of the ICR, with applicable supporting documentation; including among other things a description of the likely respondents, proposed frequency of response, and estimated total burden may be obtained from the *RegInfo.gov* Web site at *http://www.reginfo.gov/public/do/PRAMain* or by contacting Darrin King on 202-693-4129 (this is not a toll-free number) / e-mail: *king.darrin@dol.gov* . Interested parties are encouraged to send comments to the Office of Information and Regulatory Affairs, Attn: John Kraemer, OMB Desk Officer for the Occupational Safety and Health Administration (OSHA), Office of Management and Budget, Room 10235, Washington, DC 20503, Telephone: 202-395-7316 / Fax: 202-395-6974 (these are not a toll-free numbers), E-mail: *OIRA_submission@omb.eop.gov* within 30 days from the date of this publication in the **Federal Register** . In order to ensure the appropriate consideration, comments should reference the OMB Control Number (see below). The OMB is particularly interested in comments which: • Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; • Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; • Enhance the quality, utility, and clarity of the information to be collected; and • Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses. *Agency:* Occupational Safety and Health Administration. *Type of Review:* Extension without change of a previously approved collection. *Title:* The Hydrostatic Testing Provision of the Standard on Portable Fire Extinguishers (29 CFR 1910.157(f)(16)). *OMB Number:* 1218-0218. *Affected Public:* Private Sector: Business or other for-profit. *Estimated Number of Respondents:* 9,202,500. *Estimated Total Burden Hours:* 125,952. *Estimated Total Annual Costs Burden:* $16,687,200. *Description:* This is a request for an extension of approval for the information collection requirement associated with the hydrostatic testing of portable fire extinguishers. Persons performing the test are required to record their name, the date of the test, and the identifier of the extinguisher tested as evidence of completing the test. Darrin A. King, Acting Departmental Clearance Officer. [FR Doc. E7-18066 Filed 9-12-07; 8:45 am] BILLING CODE 4510-26-P DEPARTMENT OF LABOR Office of the Secretary Submission for OMB Review: Comment Request September 10, 2007. The Department of Labor

(DOL)hereby announces the submission the following public information collection requests

(ICR)to the Office of Management and Budget

(OMB)for review and approval in accordance with the Paperwork Reduction Act of 1995 (Pub. L. 104-13, 44 U.S.C. chapter 35). A copy of each ICR, with applicable supporting documentation; including among other things a description of the likely respondents, proposed frequency of response, and estimated total burden may be obtained from the *RegInfo.gov* Web site at *http://www.reginfo.gov/public/do/PRAMain* or by contacting Darrin King on 202-693-4129 (this is not a toll-free number) / e-mail: *king.darrin@dol.gov* . Comments should be sent to Office of Information and Regulatory Affairs, Attn: Carolyn Lovett, OMB Desk Officer for the Employment Standards Administration (ESA), Office of Management and Budget, Room 10235, Washington, DC 20503, Telephone: 202-395-7316 / Fax: 202-395-6974 (these are not a toll-free numbers), E-mail: *OIRA_submission@omb.eop.gov* within 30 days from the date of this publication in the **Federal Register** . In order to ensure the appropriate consideration, comments should reference the OMB Control Number (see below). The OMB is particularly interested in comments which: • Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; • Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; • Enhance the quality, utility, and clarity of the information to be collected; and • Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses. *Agency:* Employment Standards Administration. *Type of Review:* Extension without change of currently approved collection. *Title:* Application for Approval of a Representative's Fee in Black Lung Claim Proceedings Conducted by the U.S. Department of Labor. *OMB Control Number:* 1215-0171. *Estimated Number of Respondents:* 285. *Estimated Total Burden Hours:* 200. *Affected Public:* Private Sector: Business or other for-profits. *Description:* The purpose of the CM-972 is to collect pertinent data to determine if the representative's services and the amounts charged can be paid under the Black Lung Benefits Act. *Agency:* Employment Standards Administration. *Type of Review:* Extension without change of currently approved collection. *Title:* EO 13201—Notice of Employee Rights Concerning Payment of Union Dues or Fees. *OMB Control Number:* 1215-0203. *Estimated Number of Respondents:* 30. *Estimated Total Burden Hours:* 182. *Affected Public:* Private Sector: Business or other for-profits and Not-for-profit institutions. *Description:* Pursuant to EO 13201, the purpose of the regulation is to mandate that government contractors and subcontractors post a notice informing their employees that they cannot be required to be members of a union to keep their jobs; that the law permits a union and an employer to enter into a union-security agreement that requires employees to pay dues or fees to the union; and that, even where such agreements exist, employees who are not union members can be required to pay only their share of union costs relating to activities that are germane to the union's representational purposes. The notice also provides a general description of the remedies to which employees may be entitled if these rights have been violated, and provides contact information for further information about those rights and remedies. The information collection encompasses two aspects of the regulations. The first provision is section 470.11 which provides that an employee of a covered contractor may file a written complaint alleging that the contractor has failed to post the employee notice as required by the Executive Order and/or has failed to include the employee notice clause in nonexempt subcontracts or purchase orders. The second provision is section 470.4(d) which provides that contractors may make a written request to the Deputy Assistant Secretary for Labor- Management Programs for a waiver to the posting requirements with respect to any of the contractor's facilities that are in all respects separate and distinct from activities of the contractor related to the performance of a contract. Darrin A. King, Acting Departmental Clearance Officer. [FR Doc. E7-18070 Filed 9-12-07; 8:45 am] BILLING CODE 4510-CN-P DEPARTMENT OF LABOR Office of the Secretary Submission for OMB Review: Comment Request September 10, 2007. The Department of Labor

(DOL)hereby announces the submission of the following public information collection request

(ICR)to the Office of Management and Budget

(OMB)for review and approval in accordance with the Paperwork Reduction Act of 1995 (Pub. L. 104-13, 44 U.S.C. chapter 35). A copy of the ICR, with applicable supporting documentation; including among other things a description of the likely respondents, proposed frequency of response, and estimated total burden may be obtained from the RegInfo.gov Web site at *http://www.reginfo.gov/public/do/PRAMain* or by contacting Darrin King on 202-693-4129 (this is not a toll-free number)/e-mail: *king.darrin@dol.gov.* Interested parties are encouraged to send comments to the Office of Information and Regulatory Affairs, Attn: Brian A. Harris-Kojetin, OMB Desk Officer for the Bureau of Labor Statistics (BLS), Office of Management and Budget, Room 10235, Washington, DC 20503, Telephone: 202-395-7316/Fax: 202-395-6974 (these are not toll-free numbers), E-mail: *OIRA_submission@omb.eop.gov* within 30 days from the date of this publication in the **Federal Register** . In order to ensure the appropriate consideration, comments should reference the OMB Control Number (see below). The OMB is particularly interested in comments which: • Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; • Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; • Enhance the quality, utility, and clarity of the information to be collected; and • Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses. *Agency:* Bureau of Labor Statistics. *Type of Review:* Reinstatement without change of a previously approved collection. *Title:* Displaced Worker, Job Tenure, and Occupational Mobility Supplement to CPS. OMB Number: 1220-0104. *Affected Public:* Individuals or households. *Estimated Number of Respondents:* 55,000. *Estimated Total Burden Hours:* 7,333. *Estimated Total Annual Costs Burden:* $0. *Description:* The Displaced Worker, Job Tenure, and Occupational Mobility Supplement provides information on people who have lost or left jobs because their plant or company closed or moved, there was insufficient work for them to do, or their position or shift was abolished. It also gathers the number of years workers have been with their current employer and the economic impact of tenure. The information can be used to assess employment stability, displacement levels, occupational change over the year, and the need for, and scope of, programs serving adult displaced workers. Darrin A. King, Acting Departmental Clearance Officer. [FR Doc. E7-18072 Filed 9-12-07; 8:45 am] BILLING CODE 4510-24-P NATIONAL AERONAUTICS AND SPACE ADMINISTRATION [Notice (07-065)] Notice of Intent To Grant Exclusive License AGENCY: National Aeronautics and Space Administration. ACTION: Notice of Intent to Grant Exclusive License SUMMARY: This notice is issued in accordance with 35 U.S.C. 209(c)(1) and 37 CFR 404.7(a)(1)(i). NASA hereby gives notice of its intent to grant an exclusive license worldwide to practice the inventions described and claimed in U.S. Patent No. 6,046,398, entitled “Micromachined Thermoelectric Sensors and Arrays and Process for Producing” to Ithaco Space Systems, a wholly owned subsidiary of Goodrich Corporation, having its principal place of business in Ithaca, New York. The fields of use may be limited to sensor applications for FTIR spectroscopy, aerospace, automotive, industrial process control, medical, and pharmaceutical fields. The patent rights in these inventions have been assigned to the United States of America as represented by the Administrator of the National Aeronautics and Space Administration. The prospective exclusive license will comply with the terms and conditions of 35 U.S.C. 209 and 37 CFR 404.7. DATES: The prospective exclusive license may be granted unless, within fifteen

(15)days from the date of this published notice, NASA receives written objections including evidence and argument that establish that the grant of the license would not be consistent with the requirements of 35 U.S.C. 209 and 37 CFR 404.7. Competing applications completed and received by NASA within fifteen

(15)days of the date of this published notice will also be treated as objections to the grant of the contemplated exclusive license. Objections submitted in response to this notice will not be made available to the public for inspection and, to the extent permitted by law, will not be released under the Freedom of Information Act, 5 U.S.C. 552. ADDRESSES: Objections relating to the prospective license may be submitted to Patent Counsel, Office of Chief Counsel, Mail Code 180-200, NASA Management Office, 4800 Oak Grove Drive, Pasadena, CA 91109,

(818)354-7770;

(818)393-3160 [Facsimile]. FOR FURTHER INFORMATION CONTACT: Mark Homer, Patent Counsel, NASA Management Office, Jet Propulsion Laboratory, Mail Code 180-200, 4800 Oak Grove Drive, Pasadena, CA 91109,

(818)354-7770;

(818)393-3160 [Facsimile]. Information about other NASA inventions available for licensing can be found online at *http://technology.nasa.gov/* . Dated: September 6, 2007. Keith T. Sefton, Deputy General Counsel, Administration and Management. [FR Doc. E7-18008 Filed 9-12-07; 8:45 am] BILLING CODE 7510-13-P NATIONAL FOUNDATION ON THE ARTS AND THE HUMANITIES Meetings of Humanities Panel AGENCY: The National Endowment for the Humanities. ACTION: Additional Notice of Meetings. SUMMARY: Pursuant to the provisions of the Federal Advisory Committee Act (Pub. L. 92-463, as amended), notice is hereby given that the following meetings of Humanities Panels will be held at the Old Post Office, 1100 Pennsylvania Avenue, NW., Washington, DC 20506. FOR FURTHER INFORMATION CONTACT: Heather C. Gottry, Acting Advisory Committee Management Officer, National Endowment for the Humanities, Washington, DC 20506; telephone

(202)606-8322. Hearing-impaired individuals are advised that information on this matter may be obtained by contacting the Endowment's TDD terminal on

(202)606-8282. SUPPLEMENTARY INFORMATION: The proposed meetings are for the purpose of panel review, discussion, evaluation and recommendation on applications for financial assistance under the National Foundation on the Arts and the Humanities Act of 1965, as amended, including discussion of information given in confidence to the agency by the grant applicants. Because the proposed meetings will consider information that is likely to disclose trade secrets and commercial or financial information obtained from a person and privileged or confidential and/or information of a personal nature the disclosure of which would constitute a clearly unwarranted invasion of personal privacy, pursuant to authority granted me by the Chairman's Delegation of Authority to Close Advisory Committee meetings, dated July 19, 1993, I have determined that these meetings will be closed to the public pursuant to subsections

(c)(4), and

(6)of section 552b of Title 5, United States Code. 1. *Date:* September 19, 2007. *Time:* 2 a.m. to 5 p.m. *Room:* 421. *Program:* This meeting, which will be by teleconference, will review applications for Media TV Production, submitted to the Division of Public Programs, at the September 5, 2007 deadline. 2. *Date:* September 20, 2007. *Time:* 10 a.m. to 1 p.m. *Room:* 415. *Program:* This meeting, which will be by teleconference, will review applications for Lincoln Bicentennial Exhibitions, submitted to the Division of Public Programs, at the August 31, 2007 deadline. Heather C. Gottry, Acting Advisory Committee Management Officer. [FR Doc. E7-18109 Filed 9-12-07; 8:45 am] BILLING CODE 7536-01-P NATIONAL SCIENCE FOUNDATION Notice of Permit Applications Received Under the Antarctic Conservation Act of 1978 (Pub. L. 95-541) AGENCY: National Science Foundation. ACTION: Notice of Permit Applications Received under the Antarctic Conservation Act of 1978, (Pub. L. 95-541). SUMMARY: The National Science Foundation

(NSF)is required to publish notice of permit applications received to conduct activities regulated under the Antarctic Conservation Act of 1978. NSF has published regulations under the Antarctic Conservation Act at Title 45 Part 670 of the Code of Federal Regulations. This is the required notice of permit applications received. DATES: Interested parties are invited to submit written data, comments, or views with respect to this permit application by October 15, 2007. This application may be inspected by interested parties at the Permit Office, address below. ADDRESSES: Comments should be addressed to Permit Office, Room 755, Office of Polar Programs, National Science Foundation, 4201 Wilson Boulevard, Arlington, Virginia 22230. FOR FURTHER INFORMATION CONTACT: Nadene G. Kennedy at the above address or

(703)292-7405. SUPPLEMENTARY INFORMATION: The National Science Foundation, as directed by the Antarctic Conservation Act of 1978 (Pub. L. 95-541), as amended by the Antarctic Science, Tourism and Conservation Act of 1996, has developed regulations for the establishment of a permit system for various activities in Antarctica and designation of certain animals and certain geographic areas a requiring special protection. The regulations establish such a permit system to designate Antarctic Specially Protected Areas. The applications received are as follows: 1. *Applicant:* William R. Fraser, Polar Oceans Research Group, P.O. Box 368, Sheridan, MT 59749. Permit Application No. 2008-020. Activity for Which Permit Is Requested Take and enter Antarctic Specially Protected Areas. The applicant plans to enter Litchfield Island (ASPA #113), Biscoe Point, Anvers Island (ASPA #139), Avian Island (ASPA #117), Dion Islands (ASPA #107), and Lagotellerie Island (ASPA 115) to study the variability of seabird ecology to changes in the physical and biological environment, especially sea ice, snow conditions and the availability of pretty. The applicant will census seabird populations and mark breeding territories; capture, mark, band and weigh select numbers of adults, chicks and eggs; obtain diet data through stomach lavage; place transmitters on individuals to develop foraging and dispersal profiles; place artificial eggs under incubating individuals to measure heart-rate and body temperatures; use GIS/GPS technologies to update existing breeding habitat maps; and, sample tissues, feathers, blood, preen gland oil for stable isotope levels. Location Litchfield Island (ASPA #113), Biscoe Point, Anvers Island (ASPA #139), Avian Island (ASPA #117), Dion Islands (ASPA #107), and Lagotellerie Island (ASPA 115). Dates October 1, 2007 to September 30, 2012. 2. *Applicant:* William R. Fraser, Polar Oceans Research Group, P.O. Box 368, Sheridan, MT 59749. Applicant Permit Application No. 2008-021. Activity for Which Permit Is Requested Take, and Import into the U.S.A. The applicant take and release up to 500 Adelie Penguins, Chinstrap Penguins, Gentoo Penguins, Brown Skuas South Polar Skuas Southern Giant Petrels, Blue-eyed Shags and Kelp Gulls. The applicant will: census seabird populations and mark breeding territories; capture, mark, band and weigh select numbers of adults, chicks and eggs; obtain diet data through stomach lavage; place transmitters on individuals to develop foraging and dispersal profiles; place artificial eggs under incubating individuals to measure heart-rate and body temperatures; use GIS/GPS technologies to update existing breeding habitat maps; and, sample tissues, feathers, blood, preen gland oil for stable isotope levels. Location Palmer Station, Marguerite Bay and vicinity. Dates October 1, 2007 to September 30, 2012. 3. *Applicant:* William R. Fraser, Polar Oceans Research Group, P.O. Box 368, Sheridan, MT 59749. Permit Application No. 2008-022. Activity for Which Permit Is Requested Take. The applicant plans to salvage seabird specimens that have died of natural causes. The specimens will be used for educational purposes at teaching and research institutions. Location Palmer Station, Marguerite Bay and vicinity. Dates October 1, 2007 to September 30, 2012. Nadene G. Kennedy, Permit Officer, Office of Polar Programs. [FR Doc. E7-18020 Filed 9-12-07; 8:45 am] BILLING CODE 7555-01-P OFFICE OF MANAGEMENT AND BUDGET Public Availability of Fiscal Year 2006 Agency Inventories Under the Federal Activities Inventory Reform Act AGENCY: Office of Management and Budget, Executive Office of the President. ACTION: Notice of Public Availability of Agency Inventory of Activities That Are Not Inherently Governmental and of Activities That Are Inherently Governmental. SUMMARY: The Federal Activities Inventory Reform

(FAIR)Act, Public Law 105-270, requires agencies to develop inventories each year of activities performed by their employees that are not inherently governmental—i.e., inventories of commercial activities. The FAIR Act further requires OMB to review the inventories in consultation with the agencies and publish a notice of public availability in the **Federal Register** after the consultation process is completed. In accordance with the FAIR Act, OMB is publishing this notice to announce the availability of inventories from the agencies listed below. These inventories identify both commercial activities and activities that are inherently governmental. This is the third and final release of the FAIR Act inventories for FY 2006. Interested parties who disagree with the agency's initial judgment may challenge the inclusion or the omission of an activity on the list of activities that are not inherently governmental within 30 working days and, if not satisfied with this review, may appeal to a higher level within the agency. The Office of Federal Procurement Policy has made available a FAIR Act User's Guide through its Internet site: *http://www.whitehouse.gov/omb/procurement/fair-index.html.* This User's Guide will help interested parties review FY 2006 FAIR Act inventories. Paul A. Denett, Administrator, Office of Federal Procurement Policy. Third Fair Act Release FY 2006 Arlington National Cemetery Mr. Rory Smith,

(703)607-8561 *http://www.arlingtoncemetery.org* . Armed Forces Retirement Home Mr. Steven G. McManus,

(202)730-3533 *http://www.afrh.gov.* Department of Housing and Urban Development

(IG)Mr. Michael Kirby,

(202)708-0614 x8190 *http://www.hudoig.gov.* Federal Communications Commission Ms. Bonita Tingley,

(202)418-0293 *http://www.fcc.gov/omd/reports.html.* Holocaust Museum Ms. Helen Shepherd,

(202)314-0396 *http://www.ushmm.org/notices/fair_act/2006.xls.* International Trade Commission Mr. Stephen McLaughlin,

(202)205-3131 *http://www.usitc.gov.* National Endowment for the Humanities Mr. Barry Maynes,

(202)606-8233 *http://www.neh.gov.* National Transportation Safety Board Ms. Carol Belovitch,

(202)314-6232 *http://www.ntsb.gov/info/fair_act_2006.htm.* Office of Management and Budget Ms. Lisa Ward,

(202)395-5670 *http://www.whitehouse.gov/omb/procurement/fair/notices_avail.html.* Office of National Drug Control Policy Mr. Daniel Petersen,

(202)395-6745 *http://www.whitehousedrugpolicy.gov.* Railroad Retirement Board

(IG)Mr. William Tebbe,

(312)751-4350 *http://www.rrb.gov/mep/oig.asp.* Small Business Administration

(IG)Mr. Robert Fisher,

(202)205-6583 *www.sba.gov/ig/OIG_Fair.html.* U.S. Patent and Trademark Office Mr. Jack Buie,

(571)272-6283 *http://www.uspto.gov.* [FR Doc. E7-18028 Filed 9-12-07; 8:45 am] BILLING CODE 3110-01-P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request *Upon Written Request, Copies Available From:* Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549-0213. *Extension:* Rule 6h-1, SEC File No. 270-497, OMB Control No. 3235-0555. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ), the Securities and Exchange Commission (“Commission”) has submitted to the Office of Management and Budget a request for extension of the previously approved collection of information discussed below. The Securities Exchange Act of 1934 (15 U.S.C. 78a) (“Act”) requires national securities exchanges and national securities associations that trade security futures products to establish listing standards that, among other things, require:

(1)Trading in such products not be readily susceptible to price manipulation; and

(2)the market trading a security futures product to have in place procedures to coordinate trading halts with the listing market for the security or securities underlying the security futures product. Rule 6h-1 under the Act (17 CFR 240.6h-1) implements these statutory requirements and requires national securities exchanges and national securities associations that trade security futures products:

(1)To use final settlement prices for cash-settled security futures that fairly reflect the opening price of the underlying security or securities; and

(2)to have rules providing that the trading of a security futures product based on a single security shall be halted at all times that a regulatory halt has been instituted for the underlying security, and that the trading of a security futures product based on a narrow-based security index shall be halted at all times that a regulatory halt has been instituted for one or more of the underlying securities that constitute 50 percent or more of the market capitalization of the narrow-based security index. It is estimated that approximately seventeen respondents will incur an average burden of ten hours per year to comply with this rule, for a total burden of 170 hours. At an average cost per hour of approximately $197, the resultant total cost of compliance for the respondents is $33,490 per year (seventeen entities × ten hours/entity × $197/hour = $33,490). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Comments should be directed to

(i)Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503 or by sending an e-mail to: *Alexander_T._Hunt@omb.eop.gov* ; and

(ii)R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, c/o Shirley Martinson, 6432 General Green Way, Alexandria, VA 22312 or send an e-mail to: *PRA_Mailbox@sec.gov* . Comments must be submitted within 30 days of this notice. Dated: September 6, 2007. Florence E. Harmon, Deputy Secretary. [FR Doc. E7-18081 Filed 9-12-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56376)] Order Granting a Conditional Exemption to Broker-Dealers From Requirements in Rules 15c3-1 And 15c3-3 Under the Securities Exchange Act of 1934 To Promptly Transmit Customer Checks for the Purchase of Deferred Variable Annuity Contracts September 7, 2007. I. Background The Securities and Exchange Commission (the “Commission”) today approved new National Association of Securities Dealers (“NASD”) 1 Rule 2821. 2 NASD Rule 2821 sets forth recommendation requirements (including a suitability obligation), principal review and approval requirements, and supervisory and training requirements with respect to transactions in deferred variable annuities. 1 On July 26, 2007, the Commission approved a proposed rule change filed by NASD to amend NASD's Certificate of Incorporation to reflect its name change to Financial Industry Regulatory Authority, Inc., or FINRA, in connection with the consolidation of the member firm regulatory functions of NASD and NYSE Regulation, Inc. See Exchange Act Release No. 56146 (July 26, 2007), 72 FR 42190 (Aug. 1, 2007). 2 *See* Exchange Act Release No. 56375 (Sep. 7, 2007). \ According to the NASD, it designed the rule to address significant and persistent sales-practice problems in sales of deferred variable annuities. One component of Rule 2821 is a requirement that registered principals perform a comprehensive and rigorous review of the transactions. Specifically, Rule 2821(c) states, in part, that: “Prior to transmitting a customer's application for a deferred variable annuity to the issuing insurance company for processing, but no later than seven business days after the customer signs the application, a registered principal shall review and determine whether he or she approves of the purchase or exchange of the deferred variable annuity.” Many broker-dealers are subject to lower net capital requirements under Securities Exchange Act of 1934 (“Exchange Act”) Rule 15c3-1 3 and are exempt from the requirement to establish and fund a customer reserve account under Rule 15c3-3 4 because they do not carry customer funds or securities. Some of these broker-dealers receive checks from customers that are made out to third parties. Pursuant to Rules 15c3-1 and 15c3-3, a broker-dealer is not deemed to be carrying customer funds if it “promptly transmits” the checks to the third parties. 5 For purposes of Rules 15c3-1 and 15c3-3, the term “promptly transmit” means when “such transmission or delivery is made no later than noon of the next business day after the receipt of such funds or securities.” 6 3 17 CFR 240.15c3-1. The purpose of Rule 15c3-1 is to ensure that a broker or dealer at all times has sufficient liquid assets to promptly satisfy the claims of customers if the broker or dealer goes out of business. 4 17 CFR 240.15c3-3. The purpose of Rule 15c3-3 is to protect customers by assuring that broker-dealers do not use customers' funds or securities to fund the broker-dealer's operations. Among other things, Rule 15c3-3 requires that a broker-dealer make a periodic computation of the amount of money it is holding that constitutes customer funds or funds obtained from the use of customer securities. If this amount exceeds the amount of money customers owe the firm, the broker-dealer must deposit the excess in a special reserve bank account for the exclusive benefit of the firm's customers. 5 When it amended the net capital rule in 1992, the Commission stated that a broker-dealer shall not be deemed to receive funds from customers if it receives checks made payable to certain entities other than itself (such as another broker-dealer or an escrow agent) and promptly transmits such funds. Exchange Act Release No. 31511 (Nov. 24, 1992), 57 FR 56973 (Dec. 2, 1992). 6 *See* Exchange Act Release No. 31511 (Nov. 24, 1992), note 11, and 17 CFR 240.15c3-1(c)(9). According to the NASD, a broker-dealer may need to hold customer checks for more than one business day in order to comply with Rule 2821. II. Discussion The Commission has decided to exempt broker-dealers from any additional requirements of Rules 15c3-1 or 15c3-3 due solely to a failure to promptly transmit a check made payable to an insurance company for the purchase of a deferred variable annuity product by noon of the business day following the date the broker-dealer receives the check from the customer, provided:

(i)The transaction is subject to the principal review requirements of NASD Rule 2821 and a registered principal has reviewed and determined whether he or she approves of the purchase or exchange of the deferred variable annuity within seven business days in accordance with that rule;

(ii)the broker-dealer promptly transmits the check no later than noon of the business day following the date a registered principal reviews and determines whether he or she approves of the purchase or exchange of the deferred variable annuity; and

(iii)the broker-dealer maintains a copy of each such check and creates a record of the date the check was received from the customer and the date the check was transmitted to the insurance company if approved, or returned to the customer if rejected. The purpose of Rule 15c3-1 is to ensure that a broker or dealer at all times has sufficient liquid assets to promptly satisfy the claims of customers and other creditors if the broker or dealer goes out of business. One purpose of Rule 15c3-3 is to protect customers by assuring that broker-dealers do not use customers' funds or securities to fund the broker-dealer's operations. The reasons these rules require that a broker-dealer promptly forward checks is to reduce the risk that a broker-dealer or an associated person of a broker-dealer will convert or misuse customer funds or securities and to assure that the price of the security the customer purchases has not moved substantially from the date the customer decided to purchase that security. In the Approval Order for Rule 2821 we stated, [Proposed Rule 2821] is designed to curb sales practice abuses in deferred variable annuities. Its recommendation requirements provide a specific framework for a broker-dealer's suitability analysis of these securities. By setting forth factors that a broker-dealer must specifically consider in recommending deferred variable annuities and requiring the registered representative to obtain certain information from his or her customers, the proposed rule should improve communications between registered representatives and customers regarding these securities. The supervisory review component should foster a thorough analytical review of every deferred variable annuity transaction in a timeframe that will limit the possibility of unsuitable recommendations and transactions. The proposed rule as a whole is geared to protecting investors by requiring firms to implement more robust compliance cultures, and to give clear consideration of the suitability of these complex products. Further, we found that Rule 2821 is 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. Consequently, we approved NASD's proposed Rule 2821. As we believe the NASD's Rule 2821 to be in the public interest but a broker-dealer would be burdened with additional requirements under Exchange Act Rules 15c3-1 and 15c3-3 were it to comply with Rule 2821, we must balance the investor protections provided by Rules 15c3-1 and 15c3-3 with those provided by Rule 2821. For this reason, we have specifically tailored the above-described exemption. First, the exemption is specifically limited to situations where a broker-dealer has failed to promptly transmit “a check made payable to an insurance company for the purchase of a deferred variable annuity product,” and “the transaction is subject to the principal review requirements of NASD Rule 2821 and a registered principal has reviewed and determined whether he or she approves of the purchase or exchange of the deferred variable annuity within seven business days in accordance with that rule.” In all other situations where a check is received by a broker-dealer and is not promptly forwarded, the full provisions of both Rule 15c3-1 and 15c3-3 still apply. Second, the exemption requires a broker-dealer to promptly transmit such checks no later than noon of the business day following the date a registered principal reviews and determines whether he or she approves of the purchase or exchange of the deferred variable annuity. This is designed to assure that the broker-dealer holds the customer's check no longer than is necessary to comply with Rule 2821. Third, a broker-dealer must maintain a copy of each such check and create a record of the date the check was received from the customer and the date the check was transmitted to the insurance company if approved, or returned to the customer if rejected. This requirement will allow the broker-dealer's compliance and internal audit departments, as well as Commission, self-regulatory organization, and other examiners to verify that a broker-dealer is complying with the provisions of this exemption. For the foregoing reasons, the Commission finds that granting the above-described exemption is necessary and appropriate in the public interest, and is consistent with the protection of investors. III. Conclusion Accordingly, *it is ordered* , pursuant to Section 36 of the Exchange Act 7 that, a broker-dealer shall be exempt from any additional requirements of Rules 15c3-1 or 15c3-3 due solely to a failure to promptly transmit a check made payable to an insurance company for the purchase of a deferred variable annuity product by noon of the business day following the date the broker-dealer receives the check from the customer, provided: 7 Section 36 of the Exchange Act authorizes the Commission, by rule, regulation, or order, to conditionally or unconditionally exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions from any provision or provisions of the Exchange Act or any rule or regulation thereunder, to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors.

(iii)the broker-dealer maintains a copy of each such check and creates a record of the date the check was received from the customer and the date the check was transmitted to the insurance company if approved, or returned to the customer if rejected. By the Commission. Nancy M. Morris, Secretary. [FR Doc. E7-18023 Filed 9-12-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56371; File No. SR-BSE-2007-43] Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change, as Modified by Amendment No. 1, Relating to Exchange Fees and Charges September 7, 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 August 31, 2007, the Boston Stock Exchange, Inc. (“BSE” 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 BSE. On September 6, 2007, the BSE submitted Amendment No. 1 to the proposed rule change. The BSE has designated this proposal as one establishing or changing a due, fee, or other charge imposed by the BSE under Section 19(b)(3)(A)(ii) of the Act, 3 and Rule 19b-4(f)(2) 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, 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)(ii). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The BSE proposes to amend the Boston Options Exchange (“BOX”) Fee Schedule in order to revise certain transaction fees for issues that trade as part of the Penny Pilot Program. 5 5 *See* Securities Exchange Act Release No. 55155 (January 23, 2007) 72 FR 4741 (February 1, 2007) (SR-BSE-2006-49) (“Original Penny Pilot Program Approval Order”). *See also* Securities Exchange Act Release No. 56149 (July 26, 2007), 72 FR 42450 (August 2, 2007) (SR-BSE-2007-38). 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 BSE 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 BSE 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 revise the existing BOX Fee Schedule in conjunction with the Penny Pilot Program. The Exchange plans to introduce the Make or Take pricing structure for all classes contained in the Penny Pilot Program. 6 The Exchange is proposing to amend the BOX Fee Schedule in order to make the following changes to certain fees and charges that are assessed to Participants in the issues referenced below, effective as of the first trading day of September 2007. 7 6 The Original Penny Pilot Program Approval Order, *supra* note 5, lists the initial thirteen options classes currently participating in the Penny Pilot Program. If the Penny Pilot Program is expanded to introduce more participating options classes, the Make or Take Pricing model will also apply to those options classes. Furthermore, if the Penny Pilot Program is extended, the Make or Take Pricing model will also be extended accordingly. 7 Participating classes are listed in Section 33 to Chapter V of the BOX Rules. Transaction Fees for Classes Contained in the Penny Pilot The Exchange is proposing to implement a Liquidity Make or Take pricing structure for executed transactions in issues participating in the Penny Pilot Program. Under the proposed Fee Schedule change, orders that add or “make” liquidity to the BOX Book will receive a transaction credit upon execution. BOX Market Makers will receive a credit of $0.30 per contract. All other Participants will receive a credit of $0.25 per contract. Any order, including an order with a Fill and Kill designation, which executes against an order which is being exposed before being placed on the BOX Book, will be deemed to be making liquidity and will receive a transaction credit upon execution. The Transaction Fee for all Participants that “take” liquidity from the BOX Book will be $0.45 per contract. This fee will be applied to all Participants, including Market Makers, Broker-Dealers and Executing Participants executing orders on behalf of Public Customers. Any order, including an order with a Fill and Kill designation, which takes liquidity by trading immediately upon entry to the BOX Book or following its exposure as part of NBBO filtering will be assessed the $0.45 per contract fee. Linkage Fees Linkage Orders executed at BOX are subject to the same billing treatment as other Broker-Dealer orders. Since Linkage Orders that are sent to and executed on BOX will be taking liquidity, these orders will be assessed a $0.45 per contract fee. Linkage Orders that are not executed upon receipt are rejected back to the sender and are never posted in the BOX Book. Therefore, a Linkage Order would never be eligible to receive a credit of the Transaction Fee. MAC and Mini MAC Exemption No MAC or MiniMAC fees will be charged for classes contained in the Liquidity Make or Take pricing structure. In addition, the trades in these classes will not count toward the calculation of Average Daily Volume rebates for BOX Market Makers. Transactions Exempted From the Liquidity Make or Take Model The following transactions will be exempt from the Liquidity Make or Take pricing structure as they are deemed to neither take nor make liquidity: Transactions which occur on the opening or re-opening of trading and transactions on both sides of a PIP, with the exception of unrelated orders that interact with an Improvement Auction, which will be charged a “take” fee. Transactions which are exempt from the Liquidity Make or Take pricing structure will be subject to standard transaction fees as stated in the Fee Schedule. 2. Statutory Basis BSE believes that the proposed rule change is consistent with Section 6(b) of the Act, 8 in general, and furthers the objectives of Section 6(b)(4) of the Act, 9 in particular, in that it is designed to provide for the equitable allocation of dues, fees and other charges among its members and issuers and other persons using its facilities. 8 15 U.S.C. 78f(b) 9 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. 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 comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and subparagraph (f)(2) of Rule 19b-4 11 thereunder because it establishes or changes a due, fee or other charge imposed by the Exchange. At any time within 60 days of the filing of such 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. 12 10 15 U.S.C. 78s(b)(3)(A) 11 17 CFR 240.19b-4(f)(2) 12 For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on September 6, 2007, the date on which the BSE filed Amendment No. 1. *See* 15 U.S.C. 78s(b)(3)(C). 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-BSE-2007-43 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-BSE-2007-43. 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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the BSE. 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-BSE-2007-43 and should be submitted on or before October 4, 2007. 13 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 13 Florence E. Harmon, Deputy Secretary. [FR Doc. E7-18076 Filed 9-12-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56375; File No. SR-NASD-2004-183] Self-Regulatory Organizations; National Association of Securities Dealers, Inc. (n/k/a Financial Industry Regulatory Authority, Inc.); Notice of Filing of Amendment Nos. 3 and 4 and Order Granting Accelerated Approval of the Proposed Rule, as Amended, Related to Sales Practice Standards and Supervisory Requirements for Transactions in Deferred Variable Annuities September 7, 2007. I. Introduction On December 14, 2004, the National Association of Securities Dealers, Inc. (“NASD”) filed with the Securities and Exchange Commission (“Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 1 (“Exchange Act” or “Act”) and Rule 19b-4 2 thereunder, proposed new Rule 2821 (“Proposed Rule 2821”) relating to the sales practice standards and supervisory and training requirements applicable to transactions in deferred variable annuities. 3 Proposed Rule 2821, as amended by Amendment No. 1, was published for comment in the **Federal Register** on July 21, 2005. 4 The Commission received approximately 1500 comments on the proposal. 5 NASD filed Amendment No. 2 on May 4, 2006, which addressed the comments and proposed responsive amendments. Amendment No. 2 was published for comment in the **Federal Register** on June 28, 2006. 6 The Commission received approximately 1950 comments on Amendment No. 2. 7 To further explain and modify certain provisions of Proposed Rule 2821 in response to comments, NASD filed Amendment No. 3 on November 15, 2006 and Amendment No. 4 on March 5, 2007. Amendment No. 4 supersedes all of the previous amendments in their entirety. All of the comments that the Commission has received are available on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). This order provides notice of Amendment Nos. 3 and 4 to the proposed rule and approves the proposed rule as amended on an accelerated basis. 8 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 On July 26, 2007, the Commission approved a proposed rule change filed by NASD to amend NASD's Certificate of Incorporation to reflect its name change to Financial Industry Regulatory Authority Inc., or FINRA, in connection with the consolidation of the member firm regulatory functions of NASD and NYSE Regulation, Inc. *See* Exchange Act Release No. 56146 (July 26, 2007); 72 FR 42190 (Aug. 1, 2007). 4 *See* Exchange Act Release No. 52046A (July 19, 2005); 70 FR 42126 (July 21, 2005) (SR-NASD-2004-183). 5 Approximately 1300 of these comments, primarily from licensed insurance professionals and variable product salespersons, are virtually identical. These letters are referred to herein, and on the list of comments on the Commission's Web site as “Letter Type A.” The Commission also received multiple copies of other letters, which we refer to as Letters Type B, C, D, E, F, G and H, below. 6 *See* Exchange Act Release No. 54023 (June 21, 2006); 71 FR 36840 (June 28, 2006) (SR-NASD-2004-183). 7 Approximately 1700 of these comments, primarily from licensed insurance professionals and variable product salespersons, are virtually identical. These letters are referred to herein as “Letter Type B.” 8 NASD granted consent for the Commission to approve the proposed rule beyond the timeframes set forth in section 19(b)(2) of the Act. II. Description of the Proposal Proposed Rule 2821 would create recommendation requirements (including a suitability obligation), principal review and approval requirements, and supervisory and training requirements tailored specifically to transactions in deferred variable annuities. It is intended to supplement, not replace, NASD's other rules relating to suitability, supervisory review, supervisory procedures, and training. Thus, to the extent Proposed Rule 2821 does not apply to a particular transaction, NASD's general rules on suitability, supervisory review, supervisory procedures, and training continue to govern when applicable. 9 The text of the proposed rule is available on FINRA's Web site ( *http://www.finra.org* ), at FINRA's principal office, and at the Commission's Public Reference Room. 9 The general suitability obligation requires a broker-dealer to consider its customer's ability to understand the security being recommended, including changes in the customer's ability to understand, monitor, and make further decisions regarding securities over time. Proposed Rule 2821 would apply to the purchase or exchange of a deferred variable annuity and to an investor's initial subaccount allocations. 10 It would not apply to reallocations of subaccounts or to subsequent premium payments made after the investor's initial purchase or exchange. 11 It also generally would not apply when an investor's purchase or exchange of a deferred variable annuity is made within a tax-qualified, employer-sponsored retirement or benefit plan. 12 If, however, a member recommends a deferred variable annuity to an individual plan participant, then Proposed Rule 2821 would apply to that purchase (or exchange) and to the initial subaccount allocations. 10 As NASD noted in Amendment No. 2, the proposed rule focuses on customer purchases and exchanges of deferred variable annuities, areas that, to date, have given rise to many of the sales practice abuses associated with variable annuity products. *See* Exchange Act Release No. 52046A, at 3-5 (discussing various questionable sales practices that NASD examinations and investigations have uncovered and the actions NASD has taken to address those practices). The proposed rule would thus cover a standalone purchase of a deferred variable annuity and an exchange of one deferred variable annuity for another deferred variable annuity. For purposes of the proposed rule, an “exchange” of a product other than a deferred variable annuity (such as a fixed annuity) for a deferred variable annuity would be covered by the proposed rule as a “purchase.” The proposed rule would not cover customer sales of deferred variable annuities, including the sale of a deferred variable annuity in connection with an “exchange” of a deferred variable annuity for another product (such as a fixed annuity). However, recommendations of customer sales of deferred variable annuities are covered by Rule 2310, NASD's general suitability rule. 11 NASD's general suitability rule, Rule 2310, would continue to apply to reallocations of subaccounts. 12 Proposed Rule 2821 defines such plans as either a “qualified plan” under section 3(a)(12)(C) of the Act or a plan that meets the requirements of Internal Revenue Code sections 403(b), 457(b), or 457(f). Proposed Rule 2821 has four main requirements. First, in order to recommend the purchase or exchange of a deferred variable annuity, a member would be required to have a reasonable basis to believe that the transaction is suitable in accordance with NASD's general suitability rule, Rule 2310. 13 In particular the member must have a reasonable basis to believe that: 13 *See* Proposed Rule 2821(b)(1)(A). • The customer has been informed, in general terms, of various features of deferred variable annuities; 14 14 *See* Proposed Rule 2821(b)(1)(A)(i). The proposed rule lists the following features as examples for purposes of this requirement:

(1)Potential surrender period and surrender charge;

(2)potential tax penalty if customers sell or redeem deferred variable annuities before reaching the age of 59 1/2 ;

(3)mortality and expense fees;

(4)investment advisory fees;

(5)potential charges for and features of riders;

(6)the insurance and investment components of deferred variable annuities; and

(7)market risk. • The customer would benefit from certain features of deferred variable annuities, such as tax deferred growth, annuitization, or a death or living benefit; 15 and 15 *See* Proposed Rule 2821(b)(1)(A)(ii). • The particular deferred variable annuity that the member is recommending, the underlying subaccounts to which funds are allocated at the time of the purchase or exchange of the deferred variable annuity, and the riders and similar product enhancements are suitable (and in the case of an exchange, the transaction as a whole also is suitable) for the customer based on the information the person associated with the member is required to make a reasonable effort to obtain pursuant to subparagraph (b)(2) of the proposed rule. 16 16 *See* Proposed Rule 2821(b)(1)(A)(iii). Prior to recommending that a customer exchange a deferred variable annuity, a registered representative must not only have a reasonable basis to believe that the exchange is consistent with the suitability determinations in subparagraph (b)(1)(A) of the proposed rule, but must also consider whether: • The customer would incur a surrender charge, be subject to the commencement of a new surrender period, lose existing benefits, or be subject to increased fees or charges; 17 17 *See* Proposed Rule 2821(b)(1)(B)(i). • The customer would benefit from product enhancements and improvements; 18 and 18 *See* Proposed Rule 2821(b)(1)(B)(ii). • The customer's account has had another deferred variable annuity exchange within the preceding 36 months. 19 19 *See* Proposed Rule 2821(b)(1)(B)(iii). The associated person recommending the transaction would be required to document these considerations and sign this documentation. He or she would also have to make reasonable efforts to obtain from the customer information regarding the customer's age, annual income, financial situation and needs, investment experience, investment objectives, intended use of the deferred variable annuity, investment time horizon, existing assets (including investment and life insurance holdings), liquidity needs, liquid net worth, risk tolerance, tax status, and such other information used or considered to be reasonable by the member or person associated with the member in making recommendations to customers. 20 20 *See* Proposed Rule 2821(b)(2). Second, a registered principal would have to review the transaction and determine whether he or she approves of it prior to transmitting the customer's application to the issuing insurance company for processing, but no later than seven business days after the customer signs the application. 21 The registered principal may approve the transaction only if he or she has determined that there is a reasonable basis to believe that the transaction would be suitable based on all of the factors contained in paragraph

(b)(“Recommendation Requirements”) of the proposed rule. 22 21 *See* Proposed Rule 2821(c). NASD has determined that relief is needed to allow certain broker-dealers to complete their review of deferred variable annuity transactions as required by proposed NASD Rule 2821 without becoming fully subject to Exchange Act Rule 15c3-3 and being required to maintain higher levels of net capital in accordance with Exchange Act Rule 15c3-1. Consequently, NASD has requested relief from Rules 15c3-3 and 15c3-1 for these broker-dealers. In conjunction with the Commission's approval or proposed rule 2821, it is also granting exemptions from Rules 15c3-1 and 15c3-3 of the Exchange Act to allow NASD members to comply with proposed Rule 2821 without becoming fully subject to Exchange Act Rule 15c3-3 and being required to maintain higher levels of net capital in accordance with Rule 15c3-1. NASD initially submitted a request for relief to the staff prior to the consolidation of its member firm regulatory functions with NYSE Regulation, Inc. This request was replaced by a subsequent request from the consolidated entity, FINRA. For readability, this second request is referred to as an NASD request throughout this order. 22 *See* Proposed Rule 2821(c). For purposes of reviewing deferred variable annuity purchases and exchanges, a registered principal must treat all transactions as if they have been recommended. 23 However, if a registered principal determines that a transaction, which is not suitable based on the factors contained in paragraph (b), was not recommended, he or she may nonetheless authorize the processing of it if the customer has been informed of the reason why the transaction has not been approved and the customer affirms that he or she wants to proceed with the transaction. 24 23 *Id* . 24 *Id* . The registered principal that reviews the transaction must document and sign the determinations that the proposed rule requires him to make. 25 He or she must complete this documentation regardless of whether he or she approves, rejects, or authorizes the transaction. 26 24 *Id* . 25 *Id* . Third, Proposed Rule 2821 would require members to develop and maintain supervisory procedures that are reasonably designed to achieve compliance with the proposed rule. 27 Members would be required to implement surveillance procedures to determine if associated persons “have rates of effecting deferred variable annuity exchanges that raise for review whether such rates of exchanges evidence conduct inconsistent with the applicable provisions of [the rule], other applicable NASD rules, or the federal securities laws (‘inappropriate exchanges’).” 28 Members would also be required to have policies and procedures reasonably designed to implement corrective measures to address inappropriate exchanges and the conduct of associated persons who engage in inappropriate exchanges. 29 27 *See* Proposed Rule 2821(d). 28 *Id* . 29 *Id* . Fourth, Proposed Rule 2821 would require members to develop and implement training programs that are tailored to educate registered representatives and registered principals on the material features of deferred variable annuities and the requirements of the proposed rule. 30 30 *See* Proposed Rule 2821(e). III. Summary of Comments on Amendment No. 2 In its solicitation of comments on Amendment No. 2, the Commission stated that it would consider the comments it previously received, 31 and that commenters could reiterate or cross-reference previously submitted comments. 32 The Commission has considered all of the comments it received, including commenters' reiterations of and cross-references to previously submitted comments. While the summary below refers to some comments previously submitted, it primarily discusses new comments on portions of the proposed rule that Amendment No. 2 did not change and comments on those provisions of the proposed rule that Amendment No. 2 modified. It also discusses comments received in response to Amendment No. 1 that are relevant to the timing of principal review provision in paragraph

(c)of the proposed rule. 31 *See* Exchange Act Release No. 54023 (June 21, 2006); 71 FR at 36846 n.84. 32 *Id* . A. General Comments A number of commenters reiterated their general opposition to the proposed rule, viewing it as unnecessary, arguing that NASD has not demonstrated a need for it, and stating that strong enforcement against broker-dealer sales practice abuses provides the best deterrent to negative market conduct. 33 Some commenters also stated that existing NASD rules and the prospectus adequately inform and protect investors. 34 33 *See* , *e.g.* , Letters from Stephen A. Batman, CEO, 1st Global Capital Corp. (July 19, 2006) (“1st Global Letter II”); Carl B. Wilkerson, Vice President and Chief Counsel, American Counsel of Life Insurers (July 19, 2006) (“ACLI Letter IV”); Gary A. Sanders, Senior Counsel, Law and Government Relations, National Association of Insurance and Financial Advisors and Thomas F. Korb, Vice President of Policy and Public Affairs, Association for Advanced Life Underwriting (July 19, 2006) (“NAIFA/AALU Letter II”); Letter Type B. *See also* Letter Type D. Unless otherwise noted, all letters are addressed to the Commission. 34 *See* , *e.g.* , Letters from Dale E. Brown, CAE, Executive Director and CEO, Financial Services Institute (July 19, 2006) (“FSI Letter II”); Ari Burstein, Associate Counsel, Investment Company Institute (July 19, 2006) (“ICI Letter II”); 1st Global Letter II; ACLI Letter IV; Letter Type B. Two commenters suggested that the Commission delay action on the proposed rule until there is some resolution to the Commission's point-of-sale proposal. *See* ACLI Letter IV; FSI Letter II. Another commenter stated that it is not clear how the proposed rule would work with the Commission's point-of-sale proposal, especially with regard to the disclosure of material features. *See* Letter from W. Thomas Conner and Eric A. Arnold, Sutherland Asbill and Brennan LLP on behalf of Committee of Annuity Insurers (July 19, 2006) (“CAI Letter II”). A few commenters suggested that the proposed rule must take into account an estimate of its competitive and economic impact and asserted that the proposed rule must be subject to a cost/benefit analysis. 35 One commenter took the position that the proposed rule would impose economic and competitive burdens upon broker-dealers. 36 The commenter stated that the rule would require expensive new systems and operation changes that could initially total more than $200,000 for broker-dealers to implement and monitor enterprise-wide. 37 It also maintained that the ongoing costs of complying with the proposed rule would be significant and immeasurable. 38 That commenter did not, however, provide any specific information about the system changes it foresaw, or how it arrived at its $200,000 estimate. 35 *See* Letter from Joan Hinchman, Executive Director, President and CEO, National Society of Compliance Professionals, Inc. (July 19, 2006) (“NSCP Letter”); ACLI Letter IV; NAIFA/AALU Letter II. 36 ACLI Letter IV. 37 *Id* . 38 *Id* . Some commenters stated that the proposed rule would impose a burden on competition. 39 One of these commenters stated that the proposed rule would disparately impact smaller companies without state-of-the-art technological resources. 40 In its view, small to mid-sized companies may be forced out of the annuity market, thereby reducing competition and eliminating consumer options. 41 One commenter posited three ways in which the proposed rule would burden competition, stating: 39 *See* *e.g.* , ACLI Letter IV; NAIFA/AALU Letter II; NSCP Letter. 40 NSCP Letter. 41 *Id* . • The proposed rule would disrupt enterprise-wide uniformity of compliance procedures. Compliance with the proposed rule would cost more than compliance procedures for other products, and thus would make variable annuities more expensive to sell than other products. • Conversion to the proposed rule would provide openings for inadvertent and transitional violations and may dampen distributors' enthusiasm for selling a product with suitability and supervision standards that are different from all other securities. • Other products have had greater incidences of disciplinary actions and do not have specific supervision and suitability standards “that would dampen distributors' sales enthusiasm for fear of regulatory reprisals or technical violations.” 42 42 ACLI Letter IV. Another commenter agreed that the proposed rule would place those that sell variable annuities at a competitive disadvantage in comparison with those who market other types of investments. *See* NAIFA/AALU Letter II. Two commenters also stated that adopting product specific suitability requirements and supervisory procedures would inhibit sales because registered representatives would be less inclined to sell the product. *See* Letter from Michael P. DeGeorge, General Counsel, National Association for Variable Annuities (July 19, 2006) (“NAVA Letter III”); FSI Letter II. This commenter also argued that the rule targets deferred variable annuities in a discriminatory and burdensome fashion without appropriate rationale. 43 43 ACLI Letter IV. Some commenters stated that implementation of the proposed rule would have unintended consequences. 44 For example, two commenters asserted that the proposed rule would raise barriers to access for investors who could benefit from owning a deferred variable annuity. 45 A few commenters also believed that the product-specific requirements of the proposed rule would signal to investors that something is wrong with the product. 46 One commenter stated that the proposed rule would cause expenses and fees to rise, which in turn would lead consumers to look to other, less expensive investment products that may not be as appropriate for their needs. 47 44 *See* , *e.g.* , Letter from Rick Dahl, CCO, Sorrento Pacific Financial LLC (July 19, 2006) (“Sorrento Letter”); FSI Letter II; NAVA Letter III; NAIFA/AALU Letter II. 45 *See* FSI Letter II; Sorrento Letter. 46 *See* Letter from W. Burk Rosenthal, President, Rosenthal Retirement Planning, LP (July 19, 2006); FSI Letter II; NAVA Letter III. 47 *See* NAIFA/AALU Letter II. NASD responded to concerns regarding the need for the proposed rule, the process by which it developed and revised the proposed rule, and the statutory requirements for its rulemaking in a letter to the Commission. 48 With respect to concerns that the proposed rule is not necessary, NASD reiterated that its examinations, investigations, and informal discussions with its members have uncovered numerous instances of questionable sales practices in connection with the purchase or exchange of deferred variable annuities, including unsuitable recommendations, and misrepresentations and omissions. 49 It also stated that member supervision and training procedures are inadequate. 50 NASD noted that these problems stem from the unique complexities of deferred variable annuities, which can cause confusion both for the individuals who sell them and for the customers who purchase or exchange them. 51 Despite issuing Notices to Members, Regulatory and Compliance Alerts, and Investor Alerts, NASD found that these problems continue to exist. 52 NASD stated that recent joint reviews with the Commission, as well as NASD examinations and enforcement actions, demonstrate that an informal approach has not been sufficiently effective at curbing the sales practice abuses in this area. 53 NASD also discussed its “measured approach” to the rulemaking process. 54 After NASD determined that a rule specific to deferred variable annuities was necessary and appropriate, it issued *Notice to Members* 04-45 (June 2004) to solicit comments from the public prior to submitting the proposed rule to the Commission. 55 In addition, NASD sought input on the proposal from five NASD standing committees, including two committees with subject matter expertise in variable annuities. 56 NASD Regulation, Inc.'s Board of Directors then approved the proposal and NASD's Board of Governors had an opportunity to review it. 57 NASD modified the proposed rule in light of comments it received from all of these sources prior to filing it with the Commission. 58 48 *See* Letter from James S. Wrona, Associate Vice President, NASD (Aug. 31, 2006) (“NASD Response Letter”). 49 *Id.* at 2. 50 *Id.* 51 *Id.* 52 *Id.* 53 *Id.* 54 *Id.* at 3. 55 *Id.* 56 *Id.* at 4. 57 *Id.* at 4. NASD noted that its Board of Governors is composed of both industry and non-industry members and that one member must be a representative of an insurance company. *Id.* at 4, nt. 6. Similarly, NASD Regulation, Inc.'s Board of Directors is composed of both industry and non-industry members, and one member must be a representative of an insurance company or an affiliated NASD Member. *Id.* at 4, nt. 6. 58 *Id.* at 4. In addition, NASD stated that nothing in section 15A, Section 19, or any other provision of the Act requires it to generate a competitive impact statement or otherwise engage in a cost/benefit analysis. 59 It also noted that, as required under section 19(b)(1) of the Act, 60 NASD submitted to the Commission a concise general statement of the basis and purpose of the proposed rule. 61 As discussed in Part IV below, in approving a proposed NASD rule, the Commission must find that the rule is consistent with the requirements of sections 15A(b)(6) and 15A(b)(9) of the Act. Section 15A(b)(6) requires, among other things, the rules of a national securities association to 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. 62 Section 15A(b)(9) provides that proposed rules may not create a “burden on competition not necessary or appropriate in furtherance of the purposes of [the Act].” 63 NASD addressed the consistency of the proposed rule with these requirements, stating: 59 *Id.* 60 15 U.S.C. 78s(b)(1). 61 NASD Response Letter at 4. 62 15 U.S.C. 78o-3(b)(6). *See also* 15 U.S.C. 78c(f) (the Commission must consider whether the action will promote efficiency, competition and capital formation when it is required to consider whether an action is necessary or appropriate in the public interest). 63 15 U.S.C. 78o-3(b)(9). NASD believes that the proposed rule will enhance firms' compliance and supervisory systems and provide more comprehensive and targeted protection to investors regarding fraud and manipulative acts, promote just and equitable principles of trade, and increase investor protection * * *. Like all regulation, NASD's rules often impose compliance obligations on the regulated entities. In every case, the compliance burdens associated with a new rule will vary from firm to firm depending on the firm's customer base, business model, and a variety of other factors. Section 15A(b)(9) of the Act does not, therefore, require that NASD rules impose no economic burden on NASD members or burden on competition, but rather that any such burdens are necessary and appropriate to further the purposes of the Act * * *. NASD believes that the proposed rule is consistent with, and promotes the goals of the Act. 64 64 NASD Response Letter at 4-5. B. Comments on Proposed Rule 2821(b)—Recommendation Requirements 1. Comments on Proposed Rule 2821(b)(1)(A)—Renumbered Proposed Rule 2821(b)(1)(A)(i) As proposed in Amendment No. 2, Proposed Rule 2821(b)(1)(A) would have required registered representatives to have a reasonable belief that the customer has been informed of the material features of deferred variable annuities in general prior to recommending a particular variable annuity to a customer. 65 One commenter stated that the rule should clarify what constitutes the material features of a deferred variable annuity, and should have a safe harbor to protect good faith attempts to disclose the required information. 66 Some commenters reiterated their support for a plain-English disclosure document to be provided to investors in addition to the prospectus. 67 65 In response to Amendment No. 1, commenters stated this provision would amount to a *de facto* requirement to provide written disclosure to customers. *See* , *e.g.* , Letters from Beth L. Climo, Executive Director, American Bankers Insurance Association/ABA Securities Association (Sept. 20, 2005); Carl B. Wilkerson, Vice President and Chief Counsel, America Council of Life Insurers (Sept. 19, 2005) (“ACLI Letter II”), Thomas M. Yacovino, Vice President, A.G. Edwards & Sons, Inc. (Sept. 20, 2005); Roger C. Ochs, President, HD Vest Financial Services (Sept. 20, 2005); Michael P. DeGeorge, General Counsel, National Association for Variable Annuities (Sept. 19, 2005) (“NAVA Letter II”); Thomas R. Moriarty, President, Intersecurities, Inc. (Sept. 16, 2005) (“Intersecurities Letter”); Ira D. Hammerman, Senior Vice President and General Counsel, Securities Industry Association (Sept. 19, 2005) (“SIA Letter I”); Ronald C. Long, Senior Vice President, Wachovia Securities, LLC (Sept. 19, 2005) (“Wachovia Letter”). Commenters also asserted that this disclosure, along with the other disclosures already provided to investors who purchase or exchange deferred variable annuities, would be redundant and would overwhelm investors. *See* *e.g.* , Letter from Leesa M. Easley, Chief Legal Officer, World Group Securities, Inc. (Sept.8, 2005); ACLI Letter II; Intersecurities Letter; NAIFA/AALU Letter II; NAVA Letter II; SIA Letter I. 66 FSI Letter II. 67 *See, e.g.* , Letters from Patricia Struck, President, North American Securities Administrators Association (July 21, 2006) (“NASAA Letter II”); Jill I. Gross, Director of Advocacy, Pace Investor Rights Project (July 19, 2006) (“Pace Letter II”); Robert S. Banks, Jr., President, Public Investors Arbitration Bar Association (July 20, 2006). The substance of this provision remained the same in Amendment No. 3, but in response to comments NASD explicitly stated that the type of disclosure required is generic and not specific to the particular deferred variable annuity being recommended. The provision now provides that the member or person associated with the member must have a reasonable basis to believe that “the customer has been informed, in general terms, of various features of deferred variable annuities * * *. 2. Comments on Proposed Rule 2821(b)(1)(B)—Renumbered Proposed Rule 2821(b)(1)(A)(ii) As proposed in Amendment No. 2, Proposed Rule 2821(b)(1)(B) would have required a registered representative to have a reasonable basis to believe that a customer would benefit from the unique features of a deferred variable annuity prior to recommending the purchase or exchange of one. Amendment No. 2 included tax-deferred growth, annuitization and death benefits as a non-exhaustive list of unique features. Some commenters stated that the standard should be that the customer “could” benefit from the features because stating that the customer would benefit implies a level of certainty and guarantee that cannot be known at the time of the purchase or exchange. 68 Other commenters also suggested deleting the modifier “unique,” stating that the features NASD lists as examples are not unique to deferred variable annuities. 69 In the alternative, one of these commenters suggested that NASD expand the list of features it gives as examples to include features such as living benefits. 70 68 *See* , *e.g.* , Letter from Ira D. Hammerman, General Counsel, Securities Industry Association (July 19, 2006) (“SIA Letter II”); ACLI Letter IV; NAVA Letter III. These commenters noted that this comment is also applicable to Proposed Rule 2821(c)(1)(A). *See* supra note 120. 69 *See* , *e.g.* , ACLI Letter IV; CAI Letter II; FSI Letter II; NAVA Letter III. These commenters noted that this comment is also applicable to Proposed Rule 2821(c)(1)(A). *See* supra note 120. 70 CAI Letter II. NASD agreed that some other products have features similar to those of a deferred variable annuity, and in Amendment No. 2 deleted the reference to “unique.” NASD also adopted commenters’ suggestion to include “living benefits” in the list of features and modified the proposed rule accordingly in Amendment No. 3. 3. Comments on Proposed Rule 2821(b)(2) The proposed rule would require registered representatives to make reasonable efforts to obtain a variety of information about a customer, including age, financial situation and needs, liquid net worth and intended use of the deferred variable annuity, prior to recommending a purchase or exchange of a deferred variable annuity to that customer. 71 A number of commenters raised interpretive issues about or questioned the relevance of particular information. 72 NASD declined to amend this provision in response to these comments. 71 In response to Amendment No. 1, some commenters urged NASD to eliminate this provision, stating that NASD Rules 2310 and 3110, as well as Rule 17a-3(a)(17)(i)(A) under the Act, should govern the information that members are required to gather in making recommendations to purchase or exchange deferred variable annuities. *See* *e.g.* , Letters from Daniel A. Riedl, Senior Vice President and Chief Operating Officer, Northwestern Mutual Investment Services (Sept. 16, 2005) (“NMIS Letter”); M. Shawn Dreffein, President and Chief Executive Officer, National Planning Holdings, Inc. (Sept. 9, 2005); John L. Dixon, President, Pacific Select Distributors, Inc. (Sept. 16, 2005); NAVA Letter II. 72 Three commenters stated that the proposed rule should not require a registered representative to obtain information if the customer declines to provide it upon request. Letter from Kerry Cunningham, Head of Risk Management, ING Advisors Network (July 20, 2006) (“ING Advisors Letter II”); ACLI Letter IV; FSI Letter II. One commenter stated that the information should be obtained during the sales process and not necessarily before any recommendation is made. ING Advisors Letter II. One commenter stated that the registered representative should make a reasonable effort to determine overall investment objectives but not intended use. *Id.* A number of commenters questioned the difference between the intended use of a deferred variable annuity and the customer's investment objective. *See* , *e.g.* , Letters from Timothy J. Lyle, Senior Vice President and Chief Compliance Officer, Contemporary Financial Solutions (July 19, 2006) (“Contemporary Financial Letter”); Timothy J. Lyle, Senior Vice President and Chief Compliance Officer, Mutual Service Corporation (July 19, 2006) (“Mutual Service Letter II”); FSI Letter II; ING Advisors Letter II. Some commenters suggested that a customer's life insurance holdings are not relevant to a deferred variable annuity suitability analysis. *See* , *e.g.* , CAI Letter II; Contemporary Financial Letter; FSI Letter II; Mutual Service Letter II; NAVA Letter III; Sorrento Letter; SIA Letter II. 4. Comments on Proposed Rule 2821(c)—Principal Review and Approval a. General Comments As proposed in Amendment No. 2, the principal review and approval requirements of paragraph

(c)would have applied to both recommended and non-recommended transactions. 73 Commenters stated that the factors a registered principal considers should adequately reflect the differences between recommended and non-recommended transactions. 74 These commenters noted that if a transaction is not recommended, a principal may not have information regarding a customer's overall investment portfolio and would need to request that information from the customer. 75 73 In response to Amendment No. 1, some commenters objected to requiring principal review of transactions that are not recommended. *See* , *e.g.* , Letters from Frances M. Stadler, Deputy Senior Counsel, Investment Company Institute (Sept. 19, 2005) (“ICI Letter”); Henry H. Hopkins, Darrell N. Braman and Sara McCafferty, T. Rowe Price Investment Securities, Inc. (Sept. 19, 2005) (“T. Rowe Price Letter”); NMIS Letter. One commenter noted that the information that would be needed for a principal review is not currently required to be collected for non-recommended annuity transactions. *See* T. Rowe Price Letter. Some commenters also stated that requiring review for non-recommended transactions would allow principals to second guess investors' decisions. *See* , *e.g.* , ICI Letter; NMIS Letter. 74 *See* Letter from Darrell N. Braman, Vice President and Associate Legal Counsel and Sarah McCafferty, Vice President and Associate Legal Counsel, T. Rowe Price Associates, Inc. (July 19, 2006) (“T. Rowe Price Letter II”); ICI Letter II. 75 ICI Letter II; T. Rowe Price Letter II. In Amendment No. 3, NASD noted some commenters stated that customers should be free to decide whether they want to purchase a deferred variable annuity, and thus the proposed rule's principal review requirements should not apply to non-recommended transactions. 76 NASD agreed that a fully informed customer should be able to make his or her own investment decision and modified this portion of the proposed rule. As amended, a registered principal “may authorize the processing [of a non-recommended transaction] if the registered principal determines that the transaction was not recommended and that the customer, after being informed of the reason why the registered principal has not approved the transaction, affirms that he or she wants to proceed with the purchase or exchange of the deferred variable annuity.” 77 76 Amendment No. 3 is available on NASD's Web site at *http://www.finra.org/web/groups/rules_regs/documents/rule_filing/p017909.pdf.* 77 *See* Proposed Rule 2821(c). Two commenters took the position that the supervisory requirements of the proposed rule would run counter to established legal principles and the rules, systems, and divisions of responsibility already in place. 78 One of these commenters stated that the proposed rule would impose affirmative duties upon supervisory and compliance personnel to make individualized suitability determinations, in contravention of the letter and spirit of section 15(b)(4)(E) of the Act. 79 78 *See* NAIFA/AALU Letter II; NSCP Letter. In response to Amendment No. 1, several commenters stated that the proposed principal review requirement was unduly duplicative of NASD Rule 3110. *See* Letters from Deirdre B. Koerick, Vice President, Lincoln Investment Planning, Inc. (Sept. 19, 2005); Jennifer B. Sheehan, Assistant Vice President and Counsel, Massachusetts Mutual Life Insurance Comp. (Sept. 19, 2005); ACLI Letter IV; NAVA Letter II; SIA Letter II. 79 NSCP Letter. Another commenter stated that the proposed rule should provide specific standards for principal review of age, liquidity needs, and the dollar amount involved. 80 In that commenter's view, permitting firms to set their own standards would invite abuse. 81 NASD's initial filing 82 with the Commission and Amendment No. 1 83 would have required members to establish standards with respect to a variety of factors, including the customer's age and the extent to which the amount of money invested in the deferred variable annuity exceeds a stated percentage of the customer's net worth. NASD stated in Amendment No. 2 that “while conceptually appealing, the establishment of specific thresholds would unnecessarily limit a firm's discretion in establishing procedures that adequately address its overall operations. NASD did not intend to require a firm to reject all deferred variable annuity transactions involving person over a particular age or dollar amounts over a particular level. Rather, NASD intended only that principals consider the highlighted factors as part of their review, which is a facts and circumstances inquiry.” 84 80 Pace Letter II. 81 *Id.* 82 NASD's initial filing is available at *http://www.finra.org/web/groups/rules_regs/documents/rule_filing/p012780.pdf.* 83 *See* supra note 4. 84 Amendment No. 2 is available on NASD's Web site at *http://www.finra.org/web/groups/rules_regs/documents/rule_filing/p016480.pdf.* b. Comments on the Timing of Principal Review Amendment No. 2 would have required registered principals to review all purchases and exchanges of deferred variable annuities no later than two business days following the date when the customer's application is transmitted to the issuing insurance company. 85 Two commenters stated that the basis for the two-day timeframe is arbitrary and has not been explained or justified. 86 A few commenters viewed the proposed rule as prioritizing speed over diligence without adequate justification. 87 One commenter stated that the timeframe was intended to allow principals to catch unsuitable sales before a contract has been issued, but contracts may be issued before the principal's review is completed even under the revised timeframe. 88 One commenter stated that “free look” provisions that are available under some states” insurance laws offer a greater opportunity to redress unsuitable sales. 89 85 Pursuant to Amendment No. 1, registered principals would have been required to review all purchases and exchanges prior to transmitting a customer's application to the issuing insurance company for processing. 86 *See* ACLI Letter IV; FSI Letter II. 87 *See, e.g.* , FSI Letter II; NAIFA/AALU Letter II; NSCP Letter. Another commenter stated that difficulty complying with the timeframe would force some broker-dealers to cancel contracts once the insurance company has already issued them. *See* CAI Letter II. 88 CAI Letter II. 89 ACLI Letter IV. In NASD's initial filing with the Commission, it disagreed with commenters who suggested that state-required “free look” periods make early principal review unnecessary. NASD explained that a “free look” period allows the customer to terminate the contract without paying any surrender charges and receive a refund of the purchase payments or the contract value, as required by applicable state law. Free-look periods, which vary by state law, typically range from ten to thirty days. NASD went on to state that allowing a suitability analysis to be reviewed by a principal long after an insurance company issues a deferred variable annuity contract would be inconsistent with an adequate supervisory system and would make it difficult for a member to quickly identify problematic trends. NASD's initial filing is available on its Web site at *http://www.finra.org/web/groups/rules_regs/documents/rule_filing/p012780.pdf.* Numerous commenters stated that it would be difficult to comply with the revised timeframe. 90 Two commenters remarked that the supervisory review timeframe does not take into account the varied business models of member firms. 91 These commenters stated that in some instances, the registered principal who reviews transactions is stationed at the issuing insurance company. 92 In those instances, the commenters stated that those individuals might not be able to serve as the reviewing principal because the triggering event is the transmission to the insurance company. 93 One commenter also noted that the proposed rule would not accommodate instances in which the application is transmitted to the issuing insurance company and the member firm simultaneously. 94 90 *See, e.g.* , CAI Letter II; Contemporary Financial Letter; FSI Letter II; ING Advisors Letter II; Mutual Service Letter II; NAVA Letter III; NSCP Letter; Sorrento Letter. 91 *See* NSCP Letter; T. Rowe Price Letter II. 92 *Id.* 93 *Id.* 94 NSCP Letter. This commenter noted that when this occurs, the application is reviewed by the insurance company and the member firm simultaneously. Commenters stated that it would be especially difficult to comply with the proposed timeframe when the principal needs to get additional information from the customer, registered representative, or Office of Supervisory Jurisdiction (“OSJ”) manager. 95 One commenter stated that fear of missing the deadline may discourage principals from seeking this additional information. 96 Another commenter suggested that a review should be required to take place no later than two business days following the date the member transmits the application or no later than two business days after receipt by the insurance company to accommodate instances in which the customer sends the application directly to the insurance company. 97 95 *See, e.g.* , CAI Letter II; Contemporary Financial Letter; FSI Letter II; ING Advisors Letter II; Mutual Service Letter II; NAVA Letter III; NSCP Letter; Sorrento Letter. 96 CAI Letter II. 97 T. Rowe Price Letter II. In Amendment No. 4, NASD modified the proposed rule to further address these comments. 98 As amended, the proposed rule would require a principal to review the transaction prior to transmitting a customer's application to the issuing insurance company for processing, but no later than seven business days after the customer signs the application. 99 98 NASD also amended the timing or principal review requirement in Amendment No. 3. That amendment would have required principals to review the transaction no later than two business days after the application was sent to the issuing insurance company if no additional contact was necessary with the customer or the registered representative. If additional contact was needed with either the customer or the registered representative, then review would have had to be completed within five business days of the application being sent to the issuing insurance company. The Commission received several comments on this timing provision, all of which are available on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml.* ) Commenters stated that the limited review period in Amendment No. 3 was problematic and arbitrary. These commenters also suggested requiring principal review to be completed within a reasonable time period, not to exceed the expiration of the free look period, following the date the broker-dealer transmits the application to the issuing insurance company. *See e.g.* , Letter from Dale E. Brown, Executive Director and CEO, Financial Services Institute (Mar. 5, 2007) (“FSI Letter III”); Letters Type E and F. Comments addressing subparagraph (b)(1)(A) of Amendment No. 3 stated that requiring registered representatives to “determine” whether a transaction was suitable, rather than having a “reasonable basis to believe” it, raised the bar for suitability determinations. *See e.g.* , FSI Letter III and Letters Type E and F. In Amendment No. 4, NASD revised this language to require registered representatives to have “a reasonable basis to believe” that the deferred variably annuity is suitable. Commenters also stated the reference in subparagraph (b)(1)(A)(i) to the “various” features of deferred variable annuities created an “unacceptable level of ambiguity” and that the prior proposal's use of “material” features was preferable. *See e.g.* , FSI Letter III and Letters Type E and F. 99 In response to Amendment No. 4, commenters requested that the Commission seek additional comment on the proposed rule. Letter from Clifford Kirsch, Sutherland Asbill and Brennan LLP on behalf of Committee of Annuity Insurers (April 9, 2007) (“CAI Letter III”); Letters Type G and H. One commenter stated that commenters have not had an opportunity to address whether Amendment No. 4 causes any unintended consequences regarding the safeguarding of customer funds at the broker-dealer for as many as seven days and to provide feedback regarding the contours of the proposed no-action relief from Exchange Act Rules 15c3-1 and 15c3-3. CAI Letter III. *See also* infra notes 101-112 and accompanying text. One commenter addressed the safeguarding of customer funds during the principal review and stated that “clarification is needed regarding the degree of flexibility afforded to firms with respect to the safekeeping of customer funds during the review period. Rather than dictating specific procedures, firms should be permitted to design procedures tailored to their business model.” 100 Exchange Act Rule 15c3-3 requires broker-dealers to safeguard customer funds and securities. While Rule 15c3-3 requires that a broker-dealer promptly forward checks and include as a credit in the reserve formula all customer free credit balances, it does not specify any specific procedures that a broker-dealer must use to be in compliance with the rule. Rather, it allows a broker-dealer to tailor its procedures to its particular business model. NASD Rule 2821 will not affect the applicability of Exchange Act Rule 15c3-3 with respect to the safeguarding of customer funds. 100 CAI Letter III. The Commission also received comments on the timeframe for principal review proposed in Amendment No. 4. 101 Some commenters addressed NASD's requested no-action relief 102 and highlighted related implementation issues. 103 101 Letter from Eric A. Arnold and Clifford E. Kirsch, Sutherland Asbill and Brennan LLP on behalf of Committee of Annuity Insurers (May 24, 2007) (“CAI Letter IV”); Letters Type G and H. 102 *See* supra note 21. 103 *See* CAI Letter IV. One commenter addressed situations in which an insurer's contract issuance unit is physically resident at the same location as one of the insurer's captive broker-dealer offices, and both areas share personnel with one another. 104 It asked for clarification of whether receipt of customer applications by broker-dealer personnel for principal review in these co-located situations would be considered a transmittal to the issuing insurance company for processing under proposed Rule 2821(c). 105 NASD responded by stating that in these situations “[it] would consider the application “transmitted” to the insurance company only when the broker-dealer's principal, acting as such, has approved the transaction, provided that the affiliated broker-dealer ensures that arrangements and safeguards exist to prevent the insurance company from issuing the contract prior to principal approval by the broker-dealer. 106 104 *Id.* 105 *Id.* 106 *See* Letter from James S. Wrona, Associate Vice President, FINRA (Aug. 10, 2007). The Commission believes that NASD can address implementation issues, to the extent they arise, during the proposed six month implementation period. Notably, the revised timeframe in Amendment No. 4 is substantially similar to the timeframe that NASD proposed and that the Commission published for comment in Amendment No. 1, which would have required a principal to review a transaction prior to sending the application to the insurance company for processing. The Commission received numerous comments on the timing of principal review provision as it was proposed in Amendment No. 1. 107 While some commenters supported it because they believed it would give principals sufficient time for a thorough review and provide greater assurances that unsuitable transactions would not be consummated, 108 others objected to it. 109 Some commenters were concerned that members would be subject to liability for market changes affecting the value of the deferred variable annuity during the delay for supervisory review. 110 Some commenters stated that a delay in pricing the contract would be unfair to customers. 111 Others stated that the timing deadline would require costly reprogramming of broker-dealers' electronic processing systems that forward contracts to the insurance company and the registered representative's home office at the same time. 112 107 A summary of these comments addressing Amendment No. 1 was published in the **Federal Register** along with the Commission's notice of Amendment No. 2. *See* supra notes 4 and 6. 108 Letters from Patricia Struck, President, North American Securities Administrators Association (September 20, 2005) and Rosemary J. Shockman, President, Public Investors Arbitration Bar Association (Sept. 9, 2005). 109 *See* , *e.g.* , Letters from W. Thomas Conner and Eric A. Arnold, Sutherland Asbill & Brennan on behalf of The Committee of Annuity Insurers (Sept. 19, 2005) (“CAI Letter I”); John S. Simmers, CEO, ING Advisors (Sept. 19, 2005) (“ING Letter I”); ACLI Letter II; NAVA Letter II. 110 Letters from Denise M. Evans, General Counsel, Associated Securities Corp. (Sept. 19, 2005) (“Associated Securities Letter”); John L. Dixon, President, Pacific Select Distributors (Sept. 16, 2005) (“Pacific Select Letter”); and Julie Gerbert, Vice President, United Planners’ Financial Services of America (Sept. 19, 2005) (“United Planners Letter”). 111 ACLI Letter II; Pacific Select Letter; and United Planners Letter. 112 CAI Letter I; NMIS Letter. One commenter stated that the interaction of this provision with other Commission and NASD rules could limit a firm's ability to review applications thoroughly. 113 Another stated that time-linking the application process with supervisory review would impair the goal under the Investment Company Act of 1940 of timely processing. 114 A few commenters stated that the time deadline would not work in the context of direct sales because in those sales an insurance company may not know of an applicant's interest in a deferred variable annuity until it receives the application. 115 Another stated that the timing deadline would not take into account situations in which the registered principal is housed in the insurance company. 116 113 ING Letter I. 114 ACLI Letter II. 115 CAI Letter I; NAVA Letter II; T. Rowe Price Letter I. In direct sales, customers may apply for an annuity contract by calling the insurance company or by completing an application on the Internet. NAVA Letter II. Receipt of the application is frequently the first time the insurance company even knows that the customer has filled out an application. *Id.* 116 NMIS Letter. A few commenters also stated that their current supervisory structure as an Office of Supervisory Jurisdiction would be incapable of dealing with the prior approval requirement and they would be forced to eliminate this form of supervisory structure. 117 One commenter stated the requirement could overwhelm principals, 118 and another stated that it would require members to allocate two to three times the supervisory staff for deferred variable annuities than for any other product. 119 117 Letter from Shawn M. Mihal, Chief Compliance Officer, Great American Advisors (Sept. 19, 2005) and ING Letter I. These comments were submitted in response to Amendment No. 1, which would have required principals to review customers' applications prior to transmitting them to the issuing insurance company for processing. The commenters assumed that there would be no relief from Rules 15c3-1 and 15c3-3, and thus broker-dealers would have to forward checks (along with applications) to the insurance company by noon of the next business day after receiving those checks. Based on this assumption, the commenters indicated that there would not be sufficient time for representatives to forward the paperwork to the OSJ manager and the OSJ manager to review the application within the time parameters required by Rules 15c3-1 and 15c3-3. These timing concerns have been addressed by the Commission's exemptions from Rules 15c3-1 and 15c3-3 to allow NASD members to comply with the proposed rule without becoming fully subject to Exchange Act Rule 15c3-3 and being required to maintain higher levels of net capital in accordance with Rule 15c3-1. *See* Exchange Act Release No. 56376 (Sept. 7, 2007). 118 Wachovia Letter. 119 Associated Securities Letter. c. Proposed Rule 2821(c)—Principal Review and Approval In Amendment No. 2, NASD listed a variety of factors that a registered principal would be required to consider in reviewing the purchase or exchange of a deferred variable annuity. In Amendment No. 3, NASD modified this provision to require registered principals to consider all of the factors that a registered representative must consider in Proposed Rule 2821(b) (“Recommendation Requirements”) and eliminated the references to the considerations in subparagraph (c)(1) (“Principal Review and Approval”) of the proposed rule. NASD also moved the considerations relating to exchanges that were in subparagraph (c)(1)(D) of Amendment No. 2 to paragraph

(b)in Amendments Nos. 3 and 4. By doing this, NASD added these determinations to those factors a registered representative must consider and retained them as considerations for principal review. i. Comments on Proposed Rule 2821(c)(1)(A) as Amended by Amendment No. 2—Principal Review and Approval The rule, as amended by Amendment No. 2, would have required principals to consider the extent to which the customer would benefit from the unique features of a deferred variable annuity. A number of commenters remarked that their comments on proposed Rule 2821(b)(1)(B) are equally applicable to this provision and that “would” should be changed to “could” and that the modifier “unique” should be deleted. 120 In response to comments, NASD changed “unique” to “various.” As amended by Amendment No. 3, the rule would require registered principals to have a reasonable basis to believe that the customer has been informed, in general terms, of the various features of deferred variable annuities. 121 120 See, *e.g.* , ACLI Letter IV; FSI Letter II; NAVA Letter III; SIA Letter II. *See also* supra notes 68 and 69. 121 *See* Proposed Rule 2821(b)(1)(A)(i). ii. Comments on Proposed Rule 2821(c)(1)(C) as Amended by Amendment No. 2—Principal Review and Approval The rule, as amended by Amendment No. 2, would have required principals to consider the extent to which the amount of money invested would result in an undue concentration in a deferred variable annuity or deferred variable annuities in the context of the customer's overall investment portfolio. Two commenters stated the term “undue concentration” is imprecise and capable of multiple interpretations. 122 Some commenters also viewed the proposed requirement to consider the customer's liquidity needs as subsuming the apparent intent of this provision. 123 In Amendment No. 3, NASD deleted this provision. 122 *See, e.g.* , NAVA Letter III; ACLI Letter IV. Two other commenters noted that NASD should provide more guidance on what would amount to an “undue concentration” because deferred variable annuities often take significant portions of a customer's assets. See FSI Letter II; Sorrento Letter. 123 *See, e.g.* , ACLI Letter IV; CAI Letter II; NAVA Letter III. iii. Comments on Proposed Rule 2821(c)(1)(D)(ii) as Amended by Amendment No. 2—Principal Review and Approval The rule, as modified by Amendment No. 2 would have required registered principals to consider the extent to which the customer would benefit from any potential product enhancements and improvements in the case of an exchange of a deferred variable annuity. One commenter stated that “would” should be changed to “could” because whether a customer benefits is determined years after the contract is purchased and depends on market performance. 124 In Amendment No. 3, NASD deleted this specific paragraph, but, provided in paragraph

(b)(“Recommendation Requirements”) that principals must consider, in the case of an exchange, whether the customer would benefit from any potential product enhancements and improvements in their review. 125 124 *See* NAVA Letter III. 125 *See* Proposed Rule 2821(c) and Proposed Rule 2821(b)(1)(B)(ii). iv. Comments on Proposed Rule 2821(c)(1)(D)(iii) as Amended by Amendment No. 2—Principal Review and Approval The rule, as modified in Amendment No. 2, would have required principals, in the case of an exchange of a deferred variable annuity, to consider the extent to which the customer's account has had another deferred variable annuity exchange within the preceding thirty-six months. One commenter, while supporting this provision, believed that the registered principal should also review the total sales production of variable annuities of associated persons to detect unsuitable sales and other potential abuses. 126 A number of commenters stated that it would be difficult to comply with this requirement. 127 In their view, principals may have a difficult time obtaining this information, especially if the exchange occurred at another broker-dealer. 128 These commenters also stated that customers may not want to share this kind of information, citing privacy concerns or policy concerns with the other broker-dealers. 129 One commenter stated that the proposed rule should specify whether principals have to collect information on exchanges that occurred at the reviewing firm only or also on exchanges that occurred at other broker-dealers. 130 Two commenters argued that the proposed rule should clarify whether a registered principal is only obligated to consider prior exchange information if it is available to him or her at the time of his or her review. 131 126 *See* NASAA Letter II. 127 *See* , *e.g.* , CAI Letter II; Contemporary Financial Letter; FSI Letter II; Mutual Service Letter II; Sorrento Letter; T. Rowe Price Letter II. 128 *Id.* 129 *Id.* 130 *See* CAI Letter II. 131 *See* Contemporary Financial Letter; Mutual Service Letter II. One commenter stated that the provision would impose substantial administrative and supervisory costs on broker-dealers, which would have to implement cumbersome and expensive additional surveillance tools. 132 Another commenter stated the proposed rule should clarify the level of inquiry and documentation necessary to comply with this provision. 133 In Amendment No. 3, NASD eliminated this specific provision, but provided in paragraph

(b)(“Recommendation Requirements”) that principals must consider, in the case of exchange, the extent to which the customer account has had another deferred variably annuity exchange within the preceding thirty-six months. 134 NASD has stated that it will announce the effective date of the proposed rule change in a *Notice to Members* to be published no later than 60 days following Commission approval and that the effective date will be 120 days following publication of the Notice to Members announcing Commission approval. NASD has indicated that it may address the type of implementation issues commenters raised with respect to determining whether a customer's account has had a deferred variable annuity exchange within the preceding 36 months in connection with that *Notice to Members.* 132 *See* NSCP Letter. 133 *See* CAI Letter II. 134 *See* Proposed Rule 2821(c) and Proposed Rule 2821(b)(1)(B)(iii). d. Comments on Proposed Rule 2821(c)(2)—Principal Review and Approval The proposed rule would require the registered principal who reviewed and approved, rejected, or authorized the transaction to document and sign the determinations that he or she is required to make pursuant to subparagraph

(c)of the proposed rule. As proposed in Amendment No. 2, the principal who approves a transaction would have been required to sign the registered representative's suitability determination. One commenter stated that this provision should be eliminated because “it would establish an unprecedented standard of requiring principals to fully endorse all of the considerations leading to the salespersons' recommendations.” 135 In this commenter's view, the principal's role should be to affirm the fact that the salesperson elicited information for completion of the suitability documents. 136 In Amendment No. 3, NASD eliminated the requirement that registered principals sign the registered representative's suitability determinations. 135 *See* ACLI Letter IV. 136 *Id.* 5. Comments on Proposed Rule 2821(d)—Supervisory Procedures The rule, as modified by Amendment No. 2, would have required members to implement procedures and require principals to consider whether the associated person effecting the transaction has a particularly high rate of effecting deferred variable annuity exchanges. Two commenters argued that the phrase “particularly high rate” is vague and unworkable. 137 A number of commenters noted that the proposed rule implies that principals would have to implement a transaction-by-transaction review and stated that members should be able to rely on exception reports as an effective solution to unsuitable exchanges. 138 One commenter also requested clarification regarding what should happen if a registered representative does have a particular high rate of exchanges. 139 NASD modified this provision in Amendment No. 3, eliminating the reference to a “particularly high rate” of exchanges. 137 *See* ACLI Letter IV; FSI Letter II. 138 *See* ACLI Letter IV; CAI Letter II; FSI Letter II; NAVA Letter III. 139 *See* CAI Letter II. The commenter questioned whether the principal has to reject the transaction or just give it closer scrutiny. 6. Comments on Proposed Rule 2821(e)—Training As provided in Amendment No. 2, members would be required to develop and document specific training policies or programs reasonably designed to ensure that associated persons who effect and registered principals who review transactions in deferred variable annuities comply with the requirements of the proposed rule and that they understand the material features of deferred variable annuities. Several commenters questioned the need for this specific requirement, as well as the standards applicable to the training. 140 NASD declined to amend this provision in response to comments. 140 One commenter stated there is no need for additional training requirements because NASD Rule 2310 requires registered representatives to understand the material features of the products they sell. *See* FSI Letter II; Letter Type C. Other commenters believed this provision is duplicative of the Firm Element portion of NASD's continuing education requirements. *See, e.g.* , 1st Global Letter II; FSI Letter II. One commenter believed the training requirements would interfere with members' efficient and effective allocation of training resources. *See* FSI Letter II. A number of commenters also suggested members' programs be held to the standard of being “reasonably designed to achieve compliance” with the proposed rule. *See, e.g.* , Contemporary Financial Letter; ING Advisors Letter II; Mutual Service Letter II. 7. NASD's Response to Comments As discussed above, in response to the comments received on Amendment No. 1 NASD amended portions of the proposed rule and responded to comments. NASD also filed a response to the comments received on Amendment No. 2 with the Commission addressing concerns regarding the need for the proposed rule, the regulatory process that NASD undertook in developing the proposed rule, and the statutory requirements for SRO rulemaking. 141 In Amendment Nos. 3 and 4, NASD further responded to comments and modified the proposed rule. 141 *See* NASD Response Letter. IV. Discussion and Commission Findings The Commission has reviewed carefully Proposed Rule 2821, the comments, and NASD's responses to the comments, and believes that NASD has responded appropriately to the concerns raised by the commenters. The Commission finds that Proposed Rule 2821, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association, and, in particular, with section 15A(b)(6) of the Act, which requires, among other things, that the rules of a national securities association 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. 142 142 15 U.S.C. 78o-3(b)(6). Over approximately the past three years, the majority of informal actions brought against broker-dealers as a result of NASD examinations of variable annuity sales have involved the failure to establish or follow written supervisory procedures. 143 During this time period, NASD also brought numerous enforcement actions charging broker-dealers with failing to supervise sales of variable annuities. 144 In addition, NASD's examinations found a substantial number of unsuitable recommendations and instances of failing to obtain customer account information. 145 It also brought numerous enforcement actions for making unsuitable recommendations. 146 143 *See* infra note 148. 144 *See* infra note 150. 145 *See* infra note 148. 146 *See* infra note 150. The proposed rule is designed to curb sales practice abuses in deferred variable annuities. Its recommendation requirements provide a specific framework for a broker-dealer's suitability analysis of these securities. By setting forth factors that a broker-dealer must specifically consider in recommending deferred variable annuities and requiring the registered representative to obtain certain information from his or her customers, the proposed rule should improve communications between registered representatives and customers regarding these securities. The supervisory review component should foster a thorough analytical review of every deferred variable annuity transaction in a timeframe that will limit the possibility of unsuitable recommendations and transactions. The proposed rule as a whole is geared to protecting investors by requiring firms to implement more robust compliance cultures, and to give clear consideration of the suitability of these complex products. Commenters asserted that the proposed rule, because it is product specific, would result in significant burdens on competition. Pursuant to the Act's requirement, the Commission has considered the impact of Proposed Rule 2821 on efficiency, competition and capital formation, 147 as well as whether the rule would impose any burden on competition not necessary or appropriate in furtherance of the Act. 148 We note that other products, including options and penny stocks, are subject to product-specific regulations, due to their complexity or their history of sales practice abuses. NASD has demonstrated through its history of examinations, enforcement actions, and guidance to members that regulating variable annuities like other products has not been sufficient to curb sales practice abuses. Moreover, we note that the Act allows the Commission to approve a self-regulatory organization rule that imposes burdens on competition so long as those burdens are necessary or appropriate in furtherance of the purposes of the Act. 149 We believe that to the extent the proposed rule imposes burdens on competition, these burdens are necessary or appropriate in furtherance of the purposes of the Act, and particularly the purpose of protecting investors. 147 15 U.S.C. 78c(f). 148 15 U.S.C. 78o-3(b)(9). 149 *Id.* Commenters also expressed the view that Proposed Rule 2821 may impose compliance costs on broker-dealers that exceed their costs of complying with rules applicable to other products. The complexity of deferred variable annuities warrant more targeted regulation. NASD has attempted over the past few years to address problematic and unsuitable sales through non-rulemaking means, but has not found that approach to be successful. We agree with NASD that Proposed Rule 2821 will lead firms to enhance their compliance and supervisory systems, which in turn will provide more comprehensive and targeted protection to investors. 150 150 *See* NASD Response Letter. While NASD has issued a number of *Notices to Members* and *Regulatory and Compliance Alerts* regarding the suitability of deferred variable annuities, 151 it continues to encounter numerous questionable sales practices through its examinations, 152 as well as through its investigations and informal discussions with its members. 153 Just within the last few years, NASD has brought a number of cases involving failures to supervise, suitability violations, and misrepresentation in connection with purchases and exchanges of deferred variable annuities. 154 151 *See Notice to Members* 96-86 and *Notice to Members* 99-35. In 2002, NASD issued a *Regulatory & Compliance Alert,* entitled “NASD Regulation Cautions Firms for Deficient Variable Annuity Communications,” that, among other things, discussed NASD's discovery of unacceptable sales practices regarding variable annuities. In another *Regulatory & Compliance Alert* in 2002, entitled “Reminder—Suitability of Variable Annuity Sales,” NASD emphasized, in part, that an associated person must be knowledgeable about a variable annuity before he or she can determine whether a recommendation to purchase, sell or exchange the variable annuity is appropriate. NASD has also issued a number of *Investor Alerts* regarding variable annuities. In 2001, NASD issued an *Investor Alert* entitled “Should You Exchange Your Variable Annuity?” highlighting important issues that investors should consider before agreeing to exchange a variable annuity. In 2003, NASD issued an *Investor Alert* entitled “Variable Annuities: Beyond the Hard Sell,” which cautioned investors about certain inappropriate sales tactics and highlighted the unique features of these products. 152 From July 2004 to April 2007, NASD completed a total of 807 routine examinations involving the review of variable annuities. *See* Letter from James S. Wrona, Associate Vice President, NASD (May 15, 2007) (“NASD Examination/Enforcement Update Letter”). These examinations resulted in 92 Letters of Caution, 45 Compliance Conferences, and 4 Acceptance, Waiver and Consent letters, in which a respondent accepts a finding of a violation, consents to the imposition of sanctions, and agrees to waive the right to a hearing. *Id.* While the majority of these actions involved the failure to establish or follow written supervisory procedures, a number of actions related to the failure to obtain and maintain customer account information, unsuitable recommendations, and the failure to comply with standards relating to communications with the public. *Id.* These findings do not include cause examinations, many of which result in formal action that is captured by enforcement actions, discussed in note 150 below. *Id.* Nor do the findings include information from special examination initiatives. *Id.* 153 *See* NASD Response Letter. 154 *See, e.g., Phillip Nelson,* NASD Case No. 2006004829701 (April 3, 2007) (providing misleading communication to customer regarding a variable annuity); *Victoria C. Smotherman,* NASD Case No. 2006003897501 (March 21, 2007) (fraudulently inducing purchases of variable annuities); *Donna Vogt,* NASD Case No. EAF0400730002 (Feb. 21, 2007) (making unsuitable variable annuity recommendations); *Raymond James Financial Services, Inc.,* NASD Case No. EAF0400730001 (Jan. 31, 2007) (failing to properly supervise by permitting producing branch managers to supervise themselves and by not properly reviewing variable annuity sales and exchanges); *Peter F. Esposito,* NASD Case No. 2005002689601 (Dec. 8, 2006) (submitting falsified account information to his firm concerning the liquidation of a variable annuity); *Quick & Reilly, Inc.,* NASD Case No. E102003158301 (Dec. 1, 2006) (failing to supervise variable annuity sales); *Waddell & Reed, Inc.,* NASD Case No. E062004029603 (Nov. 24, 2006) (failing to supervise sales of variable annuities where unregistered persons were selling such products); *David L. McFadden,* NASD Case No. E2005000226001 (Nov. 15, 2006) (fraudulent and unsuitable sales of variable annuities, mutual funds, and exchange traded fund shares); *CCO Investment Services, Corp.,* NASD Case No. E112005014002 (Oct. 16, 2006) (failing to, among other things, supervise variable annuity sales); *Daniel Carlos Lacey,* NASD Case No. E062004000201 (Aug. 11, 2006) (making unsuitable recommendations regarding variable annuities exchanges); *Michael K. Maunsell,* NASD Case No. 2005001939501 (Aug. 2, 2006) (making unsuitable variable annuity recommendations); *Carole G. Ferraro,* NASD Case No. E0520030291 (July 21, 2006) (making unsuitable recommendations regarding variable annuities); *Jerry Swicegood,* NASD Case No. 2005002683001 (July 13, 2006) (falsifying documents related to variable annuity exchanges); *Eric J. Brown,* NASD Case No. E112003006903 (June 27, 2006) (making unsuitable recommendations and false statements regarding variable annuities); *Joseph Vitetta,* NASD Case No. E10200412250 (June 8, 2006) (making unsuitable recommendation regarding a variable annuity, among other violations); *AmSouth Investment Services, Inc.,* NASD Case No. E052004025802 (May 24, 2006) (failing to establish and maintain reasonable supervisory system in connection with sales of variable annuities and mutual funds); *Charles Snyder,* NASD Case No. E112004042001 (May 2, 2006) (making unsuitable variable annuity recommendations); *Frank P. Grasse,* No. EL120030533 (April 17, 2006) (falsifying customer information on variable annuity applications); *Tyler M. Kerrigan,* NASD Case No. E0520030355 (March 10, 2006) (recommending unsuitable variable annuity transactions); *Angelisa Savage-Bryant,* NASD Case No. E072004064201 (March 6, 2006) (misrepresentation in connection with a variable annuity exchange); *Brian Carr,* NASD Case No. E9B2003043802 (Feb. 22, 2006) (making unsuitable variable annuity recommendations); *John Babiarz,* NASD Case No. 2005002047301 (Feb. 10, 2006) (making unsuitable variable annuity recommendations); *Michael Lancaster,* NASD Case No. E8A20040995-01 (Nov. 30, 2005) (making unsuitable recommendations regarding variable annuity subaccounts); *Lawrence LaBine,* NASD Case No. C3A20040045 (Nov. 22, 2005) (unsuitable recommendations to five customers involving variable annuity subaccounts and mutual funds); *Mansell R. Spedding,* NASD Case No. E0220030907 (Sept. 21, 2005) (unsuitable subaccount allocation recommendation for variable annuity); *Rita N. Raymer,* NASD Case No. E0520030131 (Aug. 16, 2005) (unsuitable recommendations of variable annuities); *NY Life Sec., Inc.,* NASD Case No. E0520040104 (July 22, 2005) (failing to adequately supervise sales of variable annuities and mutual funds); *Paul Olsen,* NASD Case No. E3A20030539 (June 23, 2005) (negligently failing to tell customers about fees associated with variable annuity exchanges); *Bambi Holzer,* NASD Case No. E0220020787 (June 17, 2005) (negligently misrepresenting certain aspects of variable annuities); *Ilene L. Sonnenberg,* NASD Case No. C0520050024 (May 11, 2005) (recommending unsuitable variable annuity); *Raymond James & Assocs., Inc.,* NASD Case No. C0520050020 (May 10, 2005) (finding that registered representative made unsuitable recommendations and firm failed to maintain and enforce written supervisory procedures regarding sales of variable annuities); *Issetten Hanif,* NASD Case No. C9B20040086 (Apr. 6, 2005) (unsuitable recommendations regarding variable annuity and mutual fund exchanges); *Lawrence Labine,* NASD Case No. E02020513 (Nov. 19, 2004) (unsuitable variable annuity recommendation); *Edward Sadowski,* NASD Case No. C9B040102 (Nov. 17, 2004) (unsuitable variable annuity recommendation); *James B. Moorehead,* NASD Case No. C05040073 (Nov. 11, 2004) (failing to gather suitability information for variable annuity sales); *Juan Ly,* NASD Case No. C07040094 (Nov. 9, 2004) (unsuitable variable annuity switches and misrepresentations); *Jenny Chin,* NASD Case No. E04030619 (Oct. 29, 2004) (misrepresentation and omissions regarding variable annuities); *Glenn W. Ward,* NASD Case No. C05040075 (Oct. 14, 2004) (recommending unsuitable variable annuity); *Bernard E. Nugent,* NASD Case No. C11040031 (Sept. 1, 2004) (unsuitable recommendation involving the liquidation of mutual fund shares to purchase a variable annuity); *Samuel D. Hughes,* NASD Case No. C07040067 (Aug. 19, 2004) (unsuitable variable annuity switches, unauthorized sub-account allocations, and misrepresentations); *SunAmerica Sec., Inc.,* NASD Case No. C05040051 (July 12, 2004) (lacking adequate written supervisory procedures concerning review of variable annuity and variable universal life contracts); *Jamie Engelking,* NASD Case No. E3A020441 (July 2, 2004) (unsuitable variable annuity recommendation); *Pan-American Fin. Advisers,* NASD Case No. C05040034 (June 15, 2004) (failing to have adequate supervisory procedures for variable annuity sales); *Scott Weier,* NASD Case No. E04010714 (May 27, 2004) (unsuitable variable annuity recommendations); *Gregory Jurkiewicz,* NASD Case No. E3A030436 (May 4, 2004) (unsuitable variable annuity recommendation); *Michael H. Tew,* NASD Case No.C05040010 (Apr. 7, 2004) (unsuitable recommendations regarding variable annuities); *Steve Morgan,* NASD Case No. E3A020410 (Mar. 12, 2004) (unsuitable variable annuity recommendation); *Donald Lacavazzi,* NASD Case No. C11040009 (Feb. 24, 2004) (recommending unsuitable variable annuity switching); *Michael Blandchard,* NASD Case No. C11040005 (Feb. 16, 2004) (unsuitable variable annuity recommendations); *Prudential Inv. Mgmt. and Prudential Equity Group, Inc.,* NASD Case No. C05040008 (Jan. 29, 2004) (failing to supervise and maintain accurate records relating to variable annuity replacement sales); *Waddell & Reed, Inc.,* NASD Case No. CAF040002 (Jan. 14, 2004) (failing to ascertain suitability of recommended variable annuity exchanges and failure to supervise). NASD Enforcement actions are available at * http:// www.nasd.com/RegulatoryEnforcement/MonthlyDisciplinaryActions/index.htm. * Some commenters expressed the view that NASD must wait before instituting rulemaking and show that a “demonstrable problem” exists. 155 While we believe NASD's examinations and enforcement actions over the years clearly demonstrate an entrenched problem in the sales culture for these products, nothing in the Act requires NASD to make such a showing. Rather, the Act requires the Commission to determine that a proposed rule is consistent with the Act and consider whether the proposed rule would promote efficiency, competition and capital formation. 156 So long as its proposed rules meet the requirements of the Act, NASD can—and indeed should—be proactive in addressing problems in the sale of securities. 155 *See* *supra* note 33 and accompanying text. 156 15 U.S.C. 78c(f). Some commenters also took the position that the proposed rule should be subject to a cost/benefit analysis. 157 The Act sets forth what the Commission must consider in determining whether to approve a proposed self-regulatory organization rule. It also sets forth requirements that the self-regulatory organizations must meet. The Act does not require a cost/benefit analysis with respect to proposed self-regulatory organization rules that are filed with, and approved by, the Commission. 157 *See supra* notes 35-38 and accompanying text. As a practical matter, however, NASD considered the costs and benefits of the rule as the rule was developed and modified, and NASD's members were actively involved in shaping the proposed rule. As NASD stated in its response to comments on Amendment No. 2 “[i]ndustry members are keenly aware of the potential costs and burdens that can result from rulemaking and, as is often the case, they raised and NASD considered such issues at multiple stages of the rulemaking process.” 158 158 As discussed in detail above, in its response to comments to Amendment No. 2, NASD noted the steps it went through as it developed the proposed rule prior to filing it with the Commission. It published the proposed rule in a Notice to Members and solicited comment. The proposal also went to five NASD standing committees (including two committees with subject matter expertise regarding variable annuities) for consultation and comment. NASD considered the public's and the committees' comments and modified the proposed rule in response. The NASD Regulation, Inc. Board of Directors then approved the proposed rule and the NASD Board of Governors had an opportunity to review it. These NASD boards include members of the broker-dealer and insurance industries. For detail on the composition of the boards, *see* NASD's Response Letter. Accelerated Approval of Amendment Nos. 3 and 4 As set forth below, the Commission finds good cause to approve Amendment Nos. 3 and 4 to the proposed rule, as amended, prior the thirtieth day after the date of publication of the notice of Amendment Nos. 3 and 4 in the **Federal Register** . The revisions and clarifications in Amendment Nos. 3 and 4 were made in response to comments. In Amendment No. 3, NASD modified the Recommendation Requirements in paragraph

(b)of the proposed rule. Amendment No. 2 required members to have a reasonable basis to believe the customer has been informed of the material features of a deferred variable annuity. NASD revised the proposed rule to specify that a member must have a reasonable basis to believe that a customer has been informed “in general terms of the various features” of deferred variable annuities. NASD made this change in response to comments to clarify that the customer need only be informed about the features of deferred variable annuities in general terms, rather than be informed about the specific features of the deferred variable annuity the member might recommend. In addition, in Amendment No. 3, NASD incorporated the factors that a firm must consider when exchanging deferred variable annuities in the recommendation requirements rather than in the principal review and approval requirements, while maintaining a requirement that principals consider these factors. NASD also eliminated two of the considerations relating to exchanges in response to comments: the extent to which the customer would benefit from the unique features of a deferred variable annuity and the extent to which the customer's age or liquidity needs make the investment inappropriate. Moreover, in Amendment No. 3, NASD revised the proposed rule in response to comments relating to the applicability of the proposed rule to non-recommended transactions. NASD clarified that while principals are to treat all transactions as recommended, a principal may authorize the processing of a transaction if it determines that the transaction was not recommended and that the customer affirms that he or she wants to proceed after being informed of the reason why the registered principal has not approved the transaction. In Amendment No. 3, NASD also modified the supervisory procedures provisions of the rule in response to comments that the term “particularly high rates of effecting deferred variable annuity exchanges” was vague. NASD revised the proposed rule to require implementation of surveillance procedures to review associated persons' rates of effecting deferred variable annuity exchanges for consistency with the proposed rule, other NASD rules and the federal securities laws. NASD also clarified that members must have policies and procedures reasonably designed to implement corrective measures to address inappropriate exchanges. In addition, in Amendment No. 3, NASD revised the required timeframe for principal review, which it further revised in Amendment No. 4. As amended by Amendment No. 4, the principal must review the application prior to transmitting it to the issuing insurance company for processing, but no later than seven business days after the customer signs the application. This “prior to transmittal” standard was also incorporated in Amendment No. 1, and the Commission received a substantial number of comments on this standard. Although Amendment No. 1 did not explicitly limit the timeframe for principal review to no more than seven days, provisions of Exchange Act Rule 15c3-3 would have operated to limit the time in which broker-dealers could hold customer funds. In light of NASD's requested exemption from Rule 15c3-3, the seven-day limit on principal review in Amendment No. 4 would replace that rule's time limitation for transactions subject to that exemption with a more workable limit. Thus, the Commission finds good cause to approve Amendment Nos. 3 and 4 to the proposed rule, as amended, prior to the thirtieth day after the date of publication of the notice of Amendment Nos. 3 and 4 in the **Federal Register** . V. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning Amendment Nos. 3 and 4, including whether the proposed rule is consistent with the Act. 159 Comments may be submitted by any of the following methods: 159 The Commission will consider the comments we previously received. Commenters may reiterate or cross-reference previously submitted comments. 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-2004-183 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-2004-183. 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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. 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-2004-183 and should be submitted on or before October 4, 2007. VI. Conclusion *It is therefore ordered* , pursuant to section 19(b)(2) of the Act, 160 that the proposed rule, as amended (SR-NASD-2004-183), be, and it hereby is, approved. 160 15 U.S.C. 78s(b)(2). By the Commission. Nancy M. Morris, Secretary. [FR Doc. E7-18022 Filed 9-12-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56373; File No. SR-FINRA-2007-005] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to NASD Rule 11870 (Customer Account Transfer Contracts) and NYSE Rule 412 (Customer Account Transfer Contracts) To Make the Time Frames in the Rules for Validating or Taking Exception to an Instruction To Transfer a Customer's Securities Account Consistent With the Time Frames in the Automated Customer Account Transfer Service September 7, 2007. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 notice is hereby given that on August 8, 2007, Financial Industry Regulatory Authority, Inc. (“FINRA”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change described in Items I, II, and III below, which items have been prepared by FINRA. The Commission is publishing this notice to solicit comments from interested persons. 1 15 U.S.C. 78s(b)(1). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to amend National Association of Securities Dealers, Inc. (“NASD”) Rule 11870 (“Customer Account Transfer Contracts”) and New York Stock Exchange (“NYSE”) Rule 412 (“Customer Account Transfer Contracts”) to make the time frames in the rules for validating or taking exception to an instruction to transfer a customer's securities account assets and for completing the transfer of the assets consistent with the time frames in the National Securities Clearing Corporation's (“NSCC”) Automated Customer Account Transfer Service (“ACATS”) transfer cycle. Below is the text of the proposed rule change. Proposed new language is *italicized* ; proposed deletions are in [brackets]. 11000. UNIFORM PRACTICE CODE 11870. Customer Account Transfer Contracts

(a)No Change.

(b)Transfer Procedures

(1)Upon receipt from the customer of an authorized broker-to-broker transfer instruction form (“TIF”) to receive such customer's securities account assets in whole or in specifically designated part, from the carrying member, the receiving member must immediately submit such instruction to the carrying member. The carrying member must, within [three] *one* business day[s] following receipt of such instruction, or receipt of a TIF received directly from the customer authorizing the transfer of assets in specifically designated part:

(A)Validate the transfer instruction to the receiving member (with an attachment reflecting all positions and money balances to be transferred as shown on its books); or

(B)take exception to the transfer instruction for reasons other than securities positions or money balance discrepancies and advise the receiving member of the exception taken. *The time frame(s) set forth in this paragraph will change, as determined from time-to-time in any publication, relating to the ACATS facility, by the National Securities Clearing Corporation (NSCC).*

(2)No Change.

(c)and

(d)No Change.

(e)Completion of the Transfer Within three business days following the validation of a transfer instruction, the carrying member must complete the transfer of the customer's security account assets to the receiving member. The receiving member and the carrying member must immediately establish fail-to-receive and fail-to-deliver contracts at then-current market values upon their respective books of account against the long/short positions that have not been delivered/received and the receiving/carrying member must debit/credit the related money amount. The customer's security account assets shall thereupon be deemed transferred. *The time frame(s) set forth in this paragraph will change, as determined from time-to-time in any publication, relating to the ACATS facility, by the NSCC.*

(f)through

(n)No Change. Rule 412. Customer Account Transfer Contracts

(a)No Change.

(1)Upon receipt from the customer of an authorized broker-to-broker transfer instruction form (“TIF”) to receive such customer's securities account assets in whole or in specifically designated part, the receiving organization will immediately submit such instruction to the carrying organization. The carrying organization must, within [three (3)] *one* business day[s] following receipt of such instruction, or receipt of a TIF received directly from the customer authorizing the transfer of assets in specifically designated part:

(i)Validate the transfer instruction (with an attachment reflecting all positions and money balances to be transferred as shown on its books) to the receiving organization or

(ii)take exception to the transfer instruction for reasons other than securities positions or money balance discrepancies and advise the receiving organization of the exception taken. *The time frame(s) set forth in this paragraph will change, as determined from time-to-time in any publication, relating to the ACATS facility, by the National Securities Clearing Corporation (NSCC).*

(2)No Change.

(3)Within three [(3)] business days following the validation of a transfer instruction, the carrying organization must complete the transfer of the customer's securities account assets to the receiving organization. The carrying organization and the receiving organization must establish fail to receive and fail to deliver contracts at then current market values upon their respective books of account against the long/short positions (including options) that have not been delivered/received and the receiving/carrying organization must debit/credit the related money amount. The customer's securities account assets shall thereupon be deemed transferred. *The time frame(s) set forth in this paragraph will change, as determined from time-to-time in any publication, relating to the ACATS facility, by the NSCC.*

(c)through

(f)No Change. Supplementary Material .10 through .30 No Change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA 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. FINRA has prepared summaries, set forth in sections (A), (B), and

(C)below, of the most significant aspects of these statements.

(A)Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose NASD Rule 11870 and NYSE Rule 412 regulate the transfer of customer accounts from one member (the “carrying firm”) to another (the “receiving firm”). Such transfers generally occur through ACATS, an electronic transfer system developed by NSCC to automate and standardize the transfer of accounts. Currently, based on the time frames established in ACATS, NASD Rule 11870(b) and NYSE Rule 412(b)(1) require carrying members to validate or take exception to an instruction to transfer securities account assets within three business days following receipt of a Transfer Initiation Form (“TIF”) or transfer instruction, and NASD Rule 11870(e) and NYSE Rule 412(b)(3) require carrying members to complete the transfer within three business days following the validation of a transfer instruction. FINRA is proposing to amend NASD Rule 11870(b) and

(e)and NYSE Rule 412(b)(1) and (b)(3) to make the time frames in those rules consistent with the time frames established in ACATS by the NSCC for these processes. The effect of this rule change will be that the time frames in NASD Rule 11870(b) and

(e)and NYSE Rule 412(b)(1) and (b)(3) will change if and when NSCC modifies those requirements. FINRA will announce any such changes in those time frames to its members in a Regulatory Notice and other appropriate communications. FINRA is filing this rule change in anticipation of a reduction in these time frames in approximately October 2007 as recently announced by NSCC. 2 FINRA understands that NSCC is planning to seek regulatory approval from the Commission to eliminate two business days from the validation period for both full and partial transfers. 2 *See* NSCC “Important Notice” A#6317, P&S#5887 dated October 19, 2006, “Important Notice” A#6367, P&S#5937 dated December 22, 2006, “Important Notice” A#6425, P&S#5995 dated March 27, 2007, and NSCC “Important Notice” A#6457, P&S#6027 dated May 23, 2007. FINRA members recognize the benefit to customers of shortening the time it takes to transfer account assets. However, introducing brokers have expressed serious concerns about the effect on their business relationships with their customers of shortening the time permitted for validating or taking exception to a transfer instruction. They have noted that a representative who decides to move to another firm may have all of his or her customers sign a TIF well in advance of the anticipated move, thereby effectuating a mass movement of customers to the new firm. Under the current ACATS time frames, if the carrying firm timely notifies the introducing firm of the transfer requests, the introducing firm has up to three business days to contact its customers regarding the reasons for their transfer requests, thereby giving the introducing firm an opportunity to contact its customers to discuss why its customers have chosen to move their accounts. Some FINRA member firms also were concerned that shortening the time permitted for validating or taking exception to a transfer instruction could provide a competitive advantage to self-clearing firms because they would have more immediate notice of transfer requests and would be in a better position to employ efforts to retain the accounts. Although FINRA believes that shortening the customer account transfer process is in the best interest of public customers, who have often expressed dissatisfaction with the transfer process, FINRA requests that the Commission seek comment on the effect of the proposed rule change, particularly on introducing firms' business relationships. As noted in Item 2 of this filing, FINRA is coordinating implementation of the shortened time frames to the ACATS transfer cycle with NSCC. NSCC has announced that it plans to implement changes to the ACATS transfer cycle in October 2007 (contingent upon the Commission's approval of the proposed changes). Members will be advised of the implementation date for any such modification of the ACATS transfer cycle time frames through a Regulatory Notice and other communications, as appropriate. A specific, coordinated effective date would be communicated to members through a Regulatory Notice and other communications, as appropriate, and would take into consideration the need for members to make internal systems changes to accommodate the revised time frames. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of section 15A(b)(6) of the Act, 3 which requires, among other things, that FINRA 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 is designed to accomplish these ends by making the time frames in NASD Rule 11870(b) and

(e)and NYSE Rule 412(b)(1) and (b)(3) consistent with the time frames established by NSCC for validating or taking exception to an account transfer instruction and for completing the transfer, respectively, thereby creating greater efficiency in the account transfer process and improving customers' experience with the account transfer process. 3 15 U.S.C. 78o-3(b)(6).

(B)Self-Regulatory Organization's Statement on Burden on Competition FINRA 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 Within thirty-five 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 ninety 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 such proposed rule change or

(C)below, of the most significant aspects of these statements. 2 2 The Commission has modified the text of the summaries prepared by NSCC. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The purpose of the proposed rule change is to modify NSCC's Rules as necessary to shorten the account transfer time frame with respect to certain types of ACATS and ACATS Fund/SERV transfers. 3 3 Rule 50 (Automated Customer Account Transfer Service) is generally nonspecific with respect to account transfer time frames. Rule 52 (Mutual Fund Services), Section 16 (ACAT/Transfers) is nonspecific with respect to account transfer time frames and does not require modification. 1. Background ACATS enables members of NSCC to effect automated transfers of customer accounts among themselves. In operation since 1985, ACATS was designed to facilitate compliance with New York Stock Exchange (“NYSE”) Rule 412 and National Association of Securities Dealers (“NASD”) 4 Uniform Practice Code Section 11870 that require NYSE and NASD members to use automated clearing agency customer account transfer services and to effect customer account transfers within specified time frames. ACATS has been modified over time, with its most significant redesign in 1999, to provide NSCC members with a more seamless and timely customer account transfer process. 5 4 Rule 50 (Automated Customer Account Transfer Service) is generally nonspecific with respect to account transfer time frames. Rule 52 (Mutual Fund Services), Section 16 (ACAT/Transfers) is nonspecific with respect to account transfer time frames and does not require modification. 5 The NASD is now known as The Financial Industry Regulatory Authority, Inc. (“FINRA”). 2. Proposed Modifications NSCC, its members, the Customer Account Division of the Securities Industry and Financial Markets Association (“SIFMA”), NYSE, and NASD believe that because technology and processing has improved since the 1999 redesign additional modifications to ACATS processing can be made that will further enhance the timeliness and efficiency of customer account transfers. FINRA has submitted a comparable rule filing on behalf of the NYSE and NASD with the Commission. 6 6 Securities Exchange Act Release No. 56373 (September 7, 2007) (notice of filing of proposed rule change) [File No. SR-FINRA-2007-005].

(a)Standard ACATS Transfers Standard ACATS transfers currently include a three business day “Request” period. The proposed change will reduce the “Request” time frame from three business days to one business day. The time frame within which an account transfer may be responded to ( *i.e.* , accepted or rejected) will accordingly be shortened. 7 7 In addition to changes to the “Request” period, NSCC proposes to modify the ACATS “status” time frames for Request-Adjust, Request-Adjust Past, Request-Past, and Review-Error, from a maximum of three business days to a maximum of one business day. Rule 50 is nonspecific with respect to these time frames.

(b)Nonstandard ACATS Transfers—Partial Transfer Receiver Partial Transfers may be generated by either the Receiving Member (Partial Transfer Receiver or “PTR”) or the Delivering Member (Partial Transfer Deliverer or “PTD”). PTRs currently have a two business day “Request” period. The proposed change will reduce the “Request” time frame from two business days to one business day. The time frame within which an account transfer may be responded to ( *i.e.* , accepted or rejected) will accordingly be shortened. 8 8 Other non-standard transfers are: fail reversals, reclaims, and residual credits (see Rule 50, Sec. 12). PTD's do not have a “Request” status.

(c)ACAT Fund/SERV In an ACAT transfer that includes mutual fund assets, during the “Review” period the Receiving Member (or if applicable its ACATS-Fund/SERV Agent) requests the reregistration of mutual fund assets by submitting a Fund Registration input record through ACATS to the Fund Member/Mutual Fund Processor. The Fund Member/Mutual Fund Processor then has four business days to either reject or acknowledge the request. NSCC has found that the majority of Fund Member/Mutual Fund Processors act upon such requests during the first day of receipt. Therefore, NSCC is proposing to reduce the time frame from four business days to one business day. 3. Technical Correction to Rule 50 NSCC is also making a technical correction to Rule 50, Section 13. Section 13 (which addresses Receiving Member initiated Partial Transfers) states that a Delivering Member may respond to a request at any time by following the procedure set forth in Section 12. However, Section 12 addresses actions taken with respect to Delivering Member initiated transactions. NSCC is correcting this text accordingly. 4. Implementation of the Proposed Changes: NSCC is coordinating implementation of the proposed changes with FINRA and SIFMA. Contingent upon the Commission's approval of the NSCC and FINRA proposed changes, NSCC anticipates that implementation of the changes set forth in this rule filing will take place in October of 2007. Members will be advised of the implementation through an NSCC Important Notice. Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of a clearing agency be designed to remove impediments to and perfect the mechanism of a national system for prompt and accurate clearance and settlement of securities transactions. 9 By reducing the time frame for the transfer of customer accounts between NSCC members, the proposed amendments will bring enhanced efficiency to members and benefit their customers. As such, the proposed rule change is consistent with NSCC's statutory obligation to remove impediments to and perfect the mechanism of a national system for prompt and accurate clearance and settlement of securities transactions. 9 15 U.S.C. 78q-1(b)(3)(F). B. Self-Regulatory Organization's Statement on Burden on Competition NSCC does not believe that the proposed rule change will have any impact or impose any burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments relating to the proposed rule change have not yet been solicited or received. NSCC will notify the Commission of any written comments received by NSCC. 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 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 Number SR-NSCC-2007-13 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-NSCC-2007-13. 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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of NSCC and on NSCC's Web site at *http://www.dtcc.com/downloads/legal/rule_filings/2007/nscc/2007-13.pdf* . 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-NSCC-2007-13 and should be submitted on or before October 4, 2007. For the Commission by the Division of Market Regulation, pursuant to delegated authority. 10 10 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-18077 Filed 9-12-07; 8:45 am] BILLING CODE 8010-01-P DEPARTMENT OF STATE [Public Notice 5934] Culturally Significant Objects Imported for Exhibition Determinations: “The Arts of Kashmir” 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 to be included in the exhibition “The Arts of Kashmir,” 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 the exhibit objects at the Asia Society, New York, New York, from on or about October 1, 2007, until on or about January 6, 2008, and at the Cincinnati Art Museum, Cincinnati, Ohio, from on or about June 28, 2008 to on or about September 21, 2008, 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: September 6, 2007. C. Miller Crouch, Principal Deputy Assistant Secretary for Educational and Cultural Affairs, Department of State. [FR Doc. E7-18082 Filed 9-12-07; 8:45 am] BILLING CODE 4710-05-P DEPARTMENT OF STATE [Public Notice 5933] Culturally Significant Objects Imported for Exhibition Determinations: “Fragile Diplomacy: Meissen Porcelain for European Courts” 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 to be included in the exhibition “Fragile Diplomacy: Meissen Porcelain for European Courts,” 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 the exhibit objects at the Bard Graduate Center, from on or about November 15, 2007, until on or about February 11, 2008, 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 Carol B. Epstein, Attorney-Adviser, Office of the Legal Adviser, U.S. Department of State (telephone: 202/453-8048). The address is U.S. Department of State, SA-44, 301 4th Street, SW., Room 700, Washington, DC 20547-0001. Dated: August 31, 2007. C. Miller Crouch, Principal Deputy Assistant Secretary for Educational and Cultural Affairs, Department of State. [FR Doc. E7-18093 Filed 9-12-07; 8:45 am] BILLING CODE 4710-05-P DEPARTMENT OF STATE [Delegation of Authority No. 122-7] Delegation by the Deputy Secretary of State to the Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs of Authorities Related to Appointment of Yukon River Salmon Panel Members By virtue of the authority vested in the Secretary of State, including section 1 of the State Department Basic Authorities Act, as amended (22 U.S.C. 2651a), and delegated to the Deputy Secretary of State pursuant to Delegation of Authority 245 of April 23, 2001, I hereby delegate to the Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs the functions vested in the Secretary of State by section 202 of the Yukon River Salmon Act of 2000 (16 U.S.C. 5721), regarding the appointment of panel members and alternate panel members. Any function covered by this delegation may also be exercised by the Secretary of State or the Deputy Secretary of State. This delegation shall be published in the **Federal Register** . Dated: August 6, 2007. John D. Negroponte, Deputy Secretary of State, Department of State. [FR Doc. E7-18094 Filed 9-12-07; 8:45 am] BILLING CODE 4710-10-P DEPARTMENT OF TRANSPORTATION Federal Motor Carrier Safety Administration [Docket No. FMCSA-2007-27897] Qualification of Drivers; Exemption Applications; Vision AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT. ACTION: Notice of final disposition. SUMMARY: FMCSA announces its decision to exempt 63 individuals from the vision requirement in the Federal Motor Carrier Safety Regulations (FMCSRs). The exemptions will enable these individuals to operate commercial motor vehicles

(CMVs)in interstate commerce without meeting the prescribed vision standard. The Agency has concluded that granting these exemptions will provide a level of safety that is equivalent to, or greater than, the level of safety maintained without the exemptions for these CMV drivers. DATES: The exemptions are effective September 13, 2007. The exemptions expire on September 14, 2009. FOR FURTHER INFORMATION CONTACT: Dr. Mary D. Gunnels, Chief, Physical Qualifications Division,

(202)366-4001, *fmcsamedical@dot.gov* , FMCSA, Department of Transportation, 1200 New Jersey Avenue, SE., Room W64-224, Washington, DC 20590-0001. Office hours are from 8:30 a.m. to 5 p.m., Monday through Friday, except Federal holidays. SUPPLEMENTARY INFORMATION: Electronic Access You may see all the comments online through the Document Management System

(DMS)at *http://dmses.dot.gov* . *Docket:* For access to the docket to read background documents or comments, go to *http://dms.dot.gov* at any time or Room W12-140 on the ground level of the West Building, 1200 New Jersey Avenue, SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The DMS is available 24 hours each day, 365 days each year. If you want acknowledgment that we received your comments, please include a self-addressed, stamped envelope or postcard or print the acknowledgement page that appears after submitting comments on-line. *Privacy Act:* Anyone may search the electronic form of all comments received into any of DOT's dockets by the name of the individual submitting the comment (or of the person signing the comment, if submitted on behalf of an association, business, labor union, or other entity). You may review DOT's complete Privacy Act Statement in the **Federal Register** (65 FR 19477, Apr. 11, 2000). This statement is also available at *http://dms.dot.gov* . Background On July 20, 2007, FMCSA published a notice of receipt of exemption applications from certain individuals, and requested comments from the public (72 FR 39879). That notice listed 64 applicants' case histories. The 64 individuals applied for exemptions from the vision requirement in 49 CFR 391.41(b)(10), for drivers who operate CMVs in interstate commerce. Under 49 U.S.C. 31136(e) and 31315, FMCSA may grant an exemption for a 2-year period if it finds “such exemption would likely achieve a level of safety that is equivalent to, or greater than, the level that would be achieved absent such exemption.” The statute also allows the Agency to renew exemptions at the end of the 2-year period. Accordingly, FMCSA has evaluated the 64 applications on their merits and made a determination to grant exemptions to 63 of them. The comment period closed on August 20, 2007. The Agency received a public comment challenging the validity of Mr. Raymond Ochse's reported CMV driving experience and other information submitted in his application. Therefore, FMCSA is unable to render a final decision related to granting him an exemption until our investigation is concluded. The Agency would like to publish a correction to Mr. Moreland's case history published in the July 20, 2007 notice (72 FR 39883). Mr. Moreland was published with a first name of Arnold when his first name is Arthur. Vision and Driving Experience of the Applicants The vision requirement in the FMCSRs provides: A person is physically qualified to drive a commercial motor vehicle if that person has distant visual acuity of at least 20/40 (Snellen) in each eye without corrective lenses or visual acuity separately corrected to 20/40 (Snellen) or better with corrective lenses, distant binocular acuity of a least 20/40 (Snellen) in both eyes with or without corrective lenses, field of vision of at least 70° in the horizontal meridian in each eye, and the ability to recognize the colors of traffic signals and devices showing standard red, green, and amber (49 CFR 391.41(b)(10)). FMCSA recognizes that some drivers do not meet the vision standard, but have adapted their driving to accommodate their vision limitation and demonstrated their ability to drive safely. The 63 exemption applicants listed in this notice are in this category. They are unable to meet the vision standard in one eye for various reasons, including amblyopia, macular hole, retinal detachment, corneal/retinal scarring, optic nerve injury, macular degeneration, histoplasmosis, choroidal neovascularization, phthisis bulbi, retinal vein occlusion, cataract, exotropia, papillitis, and acute multifocal plaquoid pigment epitheliopathy. In most cases, their eye conditions were not recently developed. All but twenty of the applicants were either born with their vision impairments or have had them since childhood. The twenty individuals who sustained their vision conditions as adults have had them for periods ranging from 4 to 34 years. Although each applicant has one eye which does not meet the vision standard in 49 CFR 391.41(b)(10), each has at least 20/40 corrected vision in the other eye, and in a doctor's opinion, has sufficient vision to perform all the tasks necessary to operate a CMV. Doctors' opinions are supported by the applicants' possession of valid commercial driver's licenses

(CDLs)or non-CDLs to operate CMVs. Before issuing CDLs, States subject drivers to knowledge and skills tests designed to evaluate their qualifications to operate a CMV. All these applicants satisfied the testing standards for their State of residence. By meeting State licensing requirements, the applicants demonstrated their ability to operate a commercial vehicle, with their limited vision, to the satisfaction of the State. While possessing a valid CDL or non-CDL, these 63 drivers have been authorized to drive a CMV in intrastate commerce, even though their vision disqualified them from driving in interstate commerce. They have driven CMVs with their limited vision for careers ranging from 4 to 34 years. In the past 3 years, eleven of the drivers have had convictions for traffic violations and five of them were involved in crashes. The qualifications, experience, and medical condition of each applicant were stated and discussed in detail in the July 20, 2007 notice (72 FR 39879). Basis for Exemption Determination Under 49 U.S.C. 31136(e) and 31315, FMCSA may grant an exemption from the vision standard in 49 CFR 391.41(b)(10) if the exemption is likely to achieve an equivalent or greater level of safety than would be achieved without the exemption. Without the exemption, applicants will continue to be restricted to intrastate driving. With the exemption, applicants can drive in interstate commerce. Thus, our analysis focuses on whether an equal or greater level of safety is likely to be achieved by permitting each of these drivers to drive in interstate commerce as opposed to restricting him or her to driving in intrastate commerce. To evaluate the effect of these exemptions on safety, FMCSA considered not only the medical reports about the applicants' vision, but also their driving records and experience with the vision deficiency. To qualify for an exemption from the vision standard, FMCSA requires a person to present verifiable evidence that he/she has driven a commercial vehicle safely with the vision deficiency for the past 3 years. Recent driving performance is especially important in evaluating future safety, according to several research studies designed to correlate past and future driving performance. Results of these studies support the principle that the best predictor of future performance by a driver is his/her past record of crashes and traffic violations. Copies of the studies may be found at docket number FMCSA-98-3637. We believe we can properly apply the principle to monocular drivers, because data from the Federal Highway Administration's

(FHWA)former waiver study program clearly demonstrate the driving performance of experienced monocular drivers in the program is better than that of all CMV drivers collectively. (See 61 FR 13338, 13345, March 26, 1996). The fact that experienced monocular drivers demonstrated safe driving records in the waiver program supports a conclusion that other monocular drivers, meeting the same qualifying conditions as those required by the waiver program, are also likely to have adapted to their vision deficiency and will continue to operate safely. The first major research correlating past and future performance was done in England by Greenwood and Yule in 1920. Subsequent studies, building on that model, concluded that crash rates for the same individual exposed to certain risks for two different time periods vary only slightly. (See Bates and Neyman, University of California Publications in Statistics, April 1952.) Other studies demonstrated theories of predicting crash proneness from crash history coupled with other factors. These factors—such as age, sex, geographic location, mileage driven and conviction history—are used every day by insurance companies and motor vehicle bureaus to predict the probability of an individual experiencing future crashes. (See Weber, Donald C., “Accident Rate Potential: An Application of Multiple Regression Analysis of a Poisson Process,” Journal of American Statistical Association, June 1971). A 1964 California Driver Record Study prepared by the California Department of Motor Vehicles concluded that the best overall crash predictor for both concurrent and nonconcurrent events is the number of single convictions. This study used 3 consecutive years of data, comparing the experiences of drivers in the first 2 years with their experiences in the final year. Applying principles from these studies to the past 3-year record of the 63 applicants, eight of the applicants had traffic violations for speeding, two applicants failed to obey a traffic sign, and one applicant followed too closely. The applicants achieved this record of safety while driving with their vision impairment, demonstrating the likelihood that they have adapted their driving skills to accommodate their condition. As the applicants' ample driving histories with their vision deficiencies are good predictors of future performance, FMCSA concludes their ability to drive safely can be projected into the future. We believe the applicants' intrastate driving experience and history provide an adequate basis for predicting their ability to drive safely in interstate commerce. Intrastate driving, like interstate operations, involves substantial driving on highways on the interstate system and on other roads built to interstate standards. Moreover, driving in congested urban areas exposes the driver to more pedestrian and vehicular traffic than exists on interstate highways. Faster reaction to traffic and traffic signals is generally required because distances between them are more compact. These conditions tax visual capacity and driver response just as intensely as interstate driving conditions. The veteran drivers in this proceeding have operated CMVs safely under those conditions for at least 3 years, most for much longer. Their experience and driving records lead us to believe that each applicant is capable of operating in interstate commerce as safely as he/she has been performing in intrastate commerce. Consequently, FMCSA finds that exempting these applicants from the vision standard in 49 CFR 391.41(b)(10) is likely to achieve a level of safety equal to that existing without the exemption. For this reason, the Agency is granting the exemptions for the 2-year period allowed by 49 U.S.C. 31136(e) and 31315 to 63 of the 64 applicants listed in the notice of July 20, 2007 (72 FR 39879). We recognize that the vision of an applicant may change and affect his/her ability to operate a CMV as safely as in the past. As a condition of the exemption, therefore, FMCSA will impose requirements on the 63 individuals consistent with the grandfathering provisions applied to drivers who participated in the Agency's vision waiver program. Those requirements are found at 49 CFR 391.64(b) and include the following:

(1)That each individual be physically examined every year

(a)by an ophthalmologist or optometrist who attests that the vision in the better eye continues to meet the standard in 49 CFR 391.41(b)(10), and

(b)by a medical examiner who attests that the individual is otherwise physically qualified under 49 CFR 391.41;

(2)that each individual provide a copy of the ophthalmologist's or optometrist's report to the medical examiner at the time of the annual medical examination; and

(3)that each individual provide a copy of the annual medical certification to the employer for retention in the driver's qualification file, or keep a copy in his/her driver's qualification file if he/she is self-employed. The driver must also have a copy of the certification when driving, for presentation to a duly authorized Federal, State, or local enforcement official. Discussion of Comments FMCSA received three comments in this proceeding. The comments were considered and discussed below. Advocates for Highway and Auto Safety (Advocates) expressed opposition to FMCSA's policy to grant exemptions from the FMCSRs, including the driver qualification standards. Specifically, Advocates:

(1)Objects to the manner in which FMCSA presents driver information to the public and makes safety determinations;

(2)objects to the Agency's reliance on conclusions drawn from the vision waiver program;

(3)claims the Agency has misinterpreted statutory language on the granting of exemptions (49 U.S.C. 31136(e) and 31315); and finally

(4)suggests that a 1999 Supreme Court decision affects the legal validity of vision exemptions. The issues raised by Advocates were addressed at length in 64 FR 51568 (September 23, 1999), 64 FR 66962 (November 30, 1999), 64 FR 69586 (December 13, 1999), 65 FR 159 (January 3, 2000), 65 FR 57230 (September 21, 2000), and 66 FR 13825 (March 7, 2001). We will not address these points again here, but refer interested parties to those earlier discussions. T. Reyes challenged the validity of Raymond K. Ochse's reported CMV driving experience. He alleged that Mr. Ochse gave false information concerning his recent employment history and the amount of miles he has driven a commercial vehicle. The Agency is currently investigating the commenter's claims and will wait to render a final decision in this case until the investigation is complete. The Right Way Inc. recommended that Terry W. Moore receive the exemption due to his safe operation of vehicles with his visual deficiency. Conclusion Based upon its evaluation of the 64 exemption applications, FMCSA exempts John W. Black, Ronald D. Boeve, Paul T. Breitigan, John A. Bridges, Edward G. Brown, Edwin L. Bupp, Charles E. Castle, Joel C. Conrad, Duane C. Conway, David L. Cummings, Brian W. Curtis, Roger D. Davidson, Sr., Richard A. Davis, Sr., Thomas E. Dixon, Robin C. Duckett, Steven C. Durst, Marco A. Esquivel, Charles D. Grady, Paul L. Graunstadt, Danny R. Gray, Louis E. Henry, Jr., Raymond L. Herman, Jesse R. Hillhouse, Jr., Billy R. Holdman, Marshall L. Jackson, Ray C. Johnson, Terry R. Jones, Randall H. Keil, Gregory K. Lilly, Paul G. Mathes, John T. McWilliams, Robert A. Miller, Rodney R. Miller, Stuart T. Miller, James J. Mitchell, Terry W. Moore, Arthur R. Moreland, Andrew M. Nurnberg, Charles D. Oestreich, Robert G. Owens, Kenneth R. Pedersen, Joshua R. Perkins, Donald F. Plouf, Willie L. Ponders, Eligio M. Ramirez, Victor C. Richert, Elvis E. Rogers, Jr., Garry L. Rogers, Craig R. Saari, Jerry L. Schroder, Gerald J. Shamla, Willie C. Smith, Lanny R. Spears, Lawrence E. Stabeno, Larry D. Steiner, Robert S. Swaen, Robert L. Thies, David R. Thomas, Anthony T. Truiolo, Gregory A. VanLue, Karl A. Weinert, Ricky L. Wiginton, and Kevin W. Wunderlin from the vision requirement in 49 CFR 391.41(b)(10), subject to the requirements cited above (49 CFR 391.64(b)). In accordance with 49 U.S.C. 31136(e) and 31315, each exemption will be valid for 2 years unless revoked earlier by FMCSA. The exemption will be revoked if:

(1)The person fails to comply with the terms and conditions of the exemption;

(2)the exemption has resulted in a lower level of safety than was maintained before it was granted; or

(3)continuation of the exemption would not be consistent with the goals and objectives of 49 U.S.C. 31136 and 31315. If the exemption is still effective at the end of the 2-year period, the person may apply to FMCSA for a renewal under procedures in effect at that time. Issued on: September 7, 2007. Larry W. Minor, Associate Administrator for Policy and Program Development. [FR Doc. E7-18079 Filed 9-12-07; 8:45 am] BILLING CODE 4910-EX-P DEPARTMENT OF TRANSPORTATION Federal Motor Carrier Safety Administration [Docket Nos. FMCSA-98-4334, FMCSA-00-7918, FMCSA-01-9258, FMCSA-01-9561, FMCSA-02-12844, FMCSA-02-13411, FMCSA-05-20027, FMCSA-05-20560] Qualification of Drivers; Exemption Renewals; Vision AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT. ACTION: Notice of final disposition. SUMMARY: FMCSA previously announced its decision to renew the exemptions from the vision requirement in the Federal Motor Carrier Safety Regulations for 23 individuals. FMCSA has statutory authority to exempt individuals from the vision requirement if the exemptions granted will not compromise safety. The Agency has reviewed the comments submitted in response to the previous announcement and concluded that granting these exemptions will provide a level of safety that will be equivalent to, or greater than, the level of safety maintained without the exemptions for these commercial motor vehicle

(CMV)drivers. FOR FURTHER INFORMATION CONTACT: Dr. Mary D. Gunnels, Chief, Physical Qualifications Division,

(DMS)at *http://dmses.dot.gov* . Background Under 49 U.S.C. 31136(e) and 31315, FMCSA may grant an exemption for a 2-year period if it finds “such exemption would likely achieve a level of safety that is equivalent to, or greater than, the level that would be achieved absent such exemption.” The statutes also allow the Agency to renew exemptions at the end of the 2-year period. The Notice was published on July 24, 2007. The comment period ended on August 23, 2007. Discussion of Comments FMCSA received one comment in this proceeding. The comment was considered and discussed below. Advocates for Highway and Auto Safety (Advocates) expressed opposition to FMCSA's policy to grant exemptions from the FMCSR, including the driver qualification standards. Specifically, Advocates:

(1)Objects to the manner in which FMCSA presents driver information to the public and makes safety determinations;

(2)objects to the Agency's reliance on conclusions drawn from the vision waiver program;

(3)claims the Agency has misinterpreted statutory language on the granting of exemptions (49 U.S.C. 31136(e) and 31315); and finally

(1)The person fails to comply with the terms and conditions of the exemption;

(2)the exemption has resulted in a lower level of safety than was maintained before it was granted; or

(3)continuation of the exemption would not be consistent with the goals and objectives of 49 U.S.C. 31136 and 31315. Issued on: September 7, 2007. Larry W. Minor, Associate Administrator for Policy and Program Development. [FR Doc. E7-18074 Filed 9-12-07; 8:45 am] BILLING CODE 4910-EX-P DEPARTMENT OF TRANSPORTATION Federal Motor Carrier Safety Administration [Docket No. FMCSA-05-21254] Qualification of Drivers; Exemption Renewals; Vision AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT. ACTION: Notice of final disposition. SUMMARY: FMCSA previously announced its decision to renew the exemptions from the vision requirement in the Federal Motor Carrier Safety Regulations for 13 individuals. FMCSA has statutory authority to exempt individuals from the vision requirement if the exemptions granted will not compromise safety. The Agency has reviewed the comments submitted in response to the previous announcement and concluded that granting these exemptions will provide a level of safety that will be equivalent to, or greater than, the level of safety maintained without the exemptions for these commercial motor vehicle

(CMV)drivers. FOR FURTHER INFORMATION CONTACT: Dr. Mary D. Gunnels, Chief, Physical Qualifications Division,

(DMS)at *http://dmses.dot.gov.* Background Under 49 U.S.C. 31136(e) and 31315, FMCSA may grant an exemption for a 2-year period if it finds “such exemption would likely achieve a level of safety that is equivalent to, or greater than, the level that would be achieved absent such exemption.” The statutes also allow the Agency to renew exemptions at the end of the 2-year period. The Notice was published on July 24, 2007. The comment period ended on August 23, 2007. Discussion of Comments FMCSA received one comment in this proceeding. The comment was considered and discussed below. Advocates for Highway and Auto Safety (Advocates) expressed opposition to FMCSA's policy to grant exemptions from the FMCSR, including the driver qualification standards. Specifically, Advocates:

(1)Objects to the manner in which FMCSA presents driver information to the public and makes safety determinations;

(2)objects to the Agency's reliance on conclusions drawn from the vision waiver program;

(3)claims the Agency has misinterpreted statutory language on the granting of exemptions (49 U.S.C. 31136(e) and 31315); and finally

(1)The person fails to comply with the terms and conditions of the exemption;

(2)the exemption has resulted in a lower level of safety than was maintained before it was granted; or

(3)continuation of the exemption would not be consistent with the goals and objectives of 49 U.S.C. 31136 and 31315. Issued on: September 7, 2007. Larry W. Minor, Associate Administrator for Policy and Program Development. [FR Doc. E7-18078 Filed 9-12-07; 8:45 am] BILLING CODE 4910-EX-P DEPARTMENT OF TRANSPORTATION Federal Motor Carrier Safety Administration [Docket No. FMCSA-98-4334, FMCSA-99-5578, FMCSA-00-7363, FMCSA-00-7918, FMCSA-01-9258, FMCSA-01-9561, FMCSA-03-14504, FMCSA-03-15268, FMCSA-05-20027, FMCSA-05-21254] Qualification of Drivers; Exemption Applications; Vision AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT. ACTION: Notice of renewal of exemptions; request for comments. SUMMARY: FMCSA announces its decision to renew the exemptions from the vision requirement in the Federal Motor Carrier Safety Regulations for 25 individuals. FMCSA has statutory authority to exempt individuals from the vision requirement if the exemptions granted will not compromise safety. The Agency has concluded that granting these exemption renewals will provide a level of safety that is equivalent to, or greater than, the level of safety maintained without the exemptions for these commercial motor vehicle

(CMV)drivers. DATES: This decision is effective September 23, 2007. Comments must be received on or before October 15, 2007. ADDRESSES: You may submit comments bearing the Department of Transportation

(DOT)Docket Management System

(DMS)Docket Numbers FMCSA-98-4334, FMCSA-99-5578, FMCSA-00-7363, FMCSA-00-7918, FMCSA-01-9258, FMCSA-01-9561, FMCSA-03-14504, FMCSA-03-15268, FMCSA-05-20027, FMCSA-05-21254, using any of the following methods. • *DOT Web site: http://dmses.dot.gov.* Follow the on-line instructions for submitting comments. • *Fax:* 1-202-493-2251. • *Mail:* Docket Management Facility; U.S. Department of Transportation, 1200 New Jersey Avenue, SE., West Building, Ground Floor, Room W12-140, Washington, DC 20590-0001. • *Hand Delivery:* Room W12-140 on the ground level of the West Building, 1200 New Jersey Avenue, SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. • *Federal eRulemaking Portal:* Go to *http://www.regulations.gov.* Follow the online instructions for submitting comments. Each submission must include the Agency name and docket numbers for this Notice. Note that DOT posts all comments received without change to *http://dms.dot.gov* , including any personal information included. Please see the Privacy Act heading below. *Docket:* For access to the docket to read background documents or comments, go to *http://dms.dot.gov* at any time or Room W12-140 on the ground level of the West Building, 1200 New Jersey Avenue, SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The DMS is available 24 hours each day, 365 days each year. If you want acknowledgment that we received your comments, please include a self-addressed, stamped envelope or postcard or print the acknowledgement page that appears after submitting comments on-line. *Privacy Act:* Anyone may search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or of the person signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review the Department of Transportation's complete Privacy Act Statement in the **Federal Register** published on April 11, 2000 (65 FR 19477; Apr. 11, 2000). This information is also available at *http://dms.dot.gov.* FOR FURTHER INFORMATION CONTACT: Dr. Mary D. Gunnels, Chief, Physical Qualifications Division, (202)-366-4001, *fmcsamedical@dot.gov* , FMCSA, Department of Transportation, 1200 New Jersey Avenue, SE., Room W64-224, Washington, DC 20590-0001. Office hours are from 8:30 a.m. to 5 p.m. Monday through Friday, except Federal holidays. SUPPLEMENTARY INFORMATION: Background Under 49 U.S.C. 31136(e) and 31315, FMCSA may renew an exemption from the vision requirements in 49 CFR 391.41(b)(10), which applies to drivers of CMVs in interstate commerce, for a two-year period if it finds “such exemption would likely achieve a level of safety that is equivalent to, or greater than, the level that would be achieved absent such exemption.” The procedures for requesting an exemption (including renewals) are set out in 49 CFR part 381. Exemption Decision This notice addresses 25 individuals who have requested a renewal of their exemption in accordance with FMCSA procedures. FMCSA has evaluated these 25 applications for renewal on their merits and decided to extend each exemption for a renewable two-year period. They are: Linda L. Billings John A. Chizmar Ronald D. Danberry Weldon R. Evans Richard L. Gagnebin Orasio Garcia Leslie W. Good Chester L. Gray James P. Guth Rayford R. Harper Britt D. Hazelwood Joseph V. Johns Robert C. Leathers Michael S. Maki Mark D. Page Kenneth A. Reddick Leonard Rice, Jr. Juan M. Rosas Richard C. Simms James T. Sullivan Thomas J. Sweeny, Jr. Steven C. Thomas Edward A. Vanderhei Larry J. Waldner Kevin L. Wickard These exemptions are extended subject to the following conditions:

(1)That each individual have a physical examination every year:

(a)By an ophthalmologist or optometrist who attests that the vision in the better eye continues to meet the standard in 49 CFR 391.41(b)(10), and

(b)by a medical examiner who attests that the individual is otherwise physically qualified under 49 CFR 391.41;

(2)that each individual provide a copy of the ophthalmologist's or optometrist's report to the medical examiner at the time of the annual medical examination; and

(3)that each individual provide a copy of the annual medical certification to the employer for retention in the driver's qualification file and retain a copy of the certification on his/her person while driving for presentation to a duly authorized Federal, State, or local enforcement official. Each exemption will be valid for two years unless rescinded earlier by FMCSA. The exemption will be rescinded if:

(1)The person fails to comply with the terms and conditions of the exemption;

(2)the exemption has resulted in a lower level of safety than was maintained before it was granted; or

(3)continuation of the exemption would not be consistent with the goals and objectives of 49 U.S.C. 31136(e) and 31315. Basis for Renewing Exemptions Under 49 U.S.C. 31315(b)(1), an exemption may be granted for no longer than two years from its approval date and may be renewed upon application for additional two-year periods. In accordance with 49 U.S.C. 31136(e) and 31315, each of the 25 applicants has satisfied the entry conditions for obtaining an exemption from the vision requirements (63 FR 66226; 64 FR 16517; 66 FR 41656; 68 FR 44837; 70 FR 41811; 68 FR 54775; 70 FR 53412; 64 FR 27027; 64 FR 51568; 66 FR 48504; 65 FR 45817; 65 FR 77066; 68 FR 10300; 70 FR 42615; 65 FR 66286; 66 FR 13825; 66 FR 17743; 66 FR 33990; 68 FR 35772; 66 FR 30502; 66 FR 41654; 68 FR 19598; 68 FR 33570; 68 FR 37197; 68 FR 48989; 70 FR 2701; 70 FR 16887; 70 FR 30999; 70 FR 46567). Each of these 25 applicants has requested renewal of the exemption and has submitted evidence showing that the vision in the better eye continues to meet the standard specified at 49 CFR 391.41(b)(10) and that the vision impairment is stable. In addition, a review of each record of safety while driving with the respective vision deficiencies over the past two years indicates each applicant continues to meet the vision exemption standards. These factors provide an adequate basis for predicting each driver's ability to continue to drive safely in interstate commerce. Therefore, FMCSA concludes that extending the exemption for each renewal applicant for a period of two years is likely to achieve a level of safety equal to that existing without the exemption. Request for Comments FMCSA will review comments received at any time concerning a particular driver's safety record and determine if the continuation of the exemption is consistent with the requirements at 49 U.S.C. 31136(e) and 31315. However, FMCSA requests that interested parties with specific data concerning the safety records of these drivers submit comments by October 15, 2007. FMCSA believes that the requirements for a renewal of an exemption under 49 U.S.C. 31136(e) and 31315 can be satisfied by initially granting the renewal and then requesting and evaluating, if needed, subsequent comments submitted by interested parties. As indicated above, the Agency previously published notices of final disposition announcing its decision to exempt these 25 individuals from the vision requirement in 49 CFR 391.41(b)(10). The final decision to grant an exemption to each of these individuals was based on the merits of each case and only after careful consideration of the comments received to its notices of applications. The notices of applications stated in detail the qualifications, experience, and medical condition of each applicant for an exemption from the vision requirements. That information is available by consulting the above cited **Federal Register** publications. Interested parties or organizations possessing information that would otherwise show that any, or all of these drivers, are not currently achieving the statutory level of safety should immediately notify FMCSA. The Agency will evaluate any adverse evidence submitted and, if safety is being compromised or if continuation of the exemption would not be consistent with the goals and objectives of 49 U.S.C. 31136(e) and 31315, FMCSA will take immediate steps to revoke the exemption of a driver. Issued on: September 7, 2007. Larry W. Minor, Associate Administrator for Policy and Program Development. [FR Doc. E7-18083 Filed 9-12-07; 8:45 am] BILLING CODE 4910-EX-P DEPARTMENT OF TRANSPORTATION Federal Motor Carrier Safety Administration [Docket Nos. FMCSA-01-9258, FMCSA-01-9561, FMCSA-03-14504, FMCSA-03-15268] Qualification of Drivers; Exemption Renewals; Vision AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT. ACTION: Notice of final disposition. SUMMARY: FMCSA previously announced its decision to renew the exemptions from the vision requirement in the Federal Motor Carrier Safety Regulations for 22 individuals. FMCSA has statutory authority to exempt individuals from the vision requirement if the exemptions granted will not compromise safety. The Agency has reviewed the comments submitted in response to the previous announcement and concluded that granting these exemptions will provide a level of safety that will be equivalent to, or greater than, the level of safety maintained without the exemptions for these commercial motor vehicle

(CMV)drivers. FOR FURTHER INFORMATION CONTACT: Dr. Mary D. Gunnels, Chief, Physical Qualifications Division,

(202)366-4001, *fmcsamedical@dot.gov,* FMCSA, Department of Transportation, 1200 New Jersey Avenue, SE., Room W64-224, Washington, DC 20590-0001. Office hours are from 8:30 a.m. to 5 p.m., Monday through Friday, except Federal holidays. SUPPLEMENTARY INFORMATION: Electronic Access You may see all the comments online through the Document Management System

(DMS)at *http://dmses.dot.gov.* Background Under 49 U.S.C. 31136(e) and 31315, FMCSA may grant an exemption for a 2-year period if it finds “such exemption would likely achieve a level of safety that is equivalent to, or greater than, the level that would be achieved absent such exemption.” The statutes also allow the Agency to renew exemptions at the end of the 2-year period. The Notice was published on July 24, 2007. The comment period ended on August 23, 2007. Discussion of Comments FMCSA received one comment in these proceedings. The comment was considered and discussed below. Advocates for Highway and Auto Safety (Advocates) expressed opposition to FMCSA's policy to grant exemptions from the FMCSR, including the driver qualification standards. Specifically, Advocates:

(1)Objects to the manner in which FMCSA presents driver information to the public and makes safety determinations;

(2)objects to the Agency's reliance on conclusions drawn from the vision waiver program;

(3)claims the Agency has misinterpreted statutory language on the granting of exemptions (49 U.S.C. 31136(e) and 31315); and finally

(1)The person fails to comply with the terms and conditions of the exemption;

(2)the exemption has resulted in a lower level of safety than was maintained before it was granted; or

(NTSB)recommendations for providing pre-trip safety information to motorcoach passengers. The NTSB recommended that the Agency require and develop minimum guidelines for pre-trip safety information to be provided by motorcoach companies to passengers. The FMCSA, in conjunction with stakeholders, developed a basic plan for motorcoach companies to implement a safety-awareness program for passengers. The goals of this initiative are to develop passenger safety-awareness guidelines suited for diverse motorcoach operational types and to encourage their adoption. FOR FURTHER INFORMATION CONTACT: Mr. Peter Chandler, Commercial Passenger Carrier Safety Division (MC-ECP), 202-366-5763. Office hours are from 8 a.m. to 5 p.m., e.t., Monday through Friday, except Federal holidays. SUPPLEMENTARY INFORMATION: Docket For access to the docket to read background documents or the comments received, go to *http://dms.dot.gov* at any time or to the Docket Management Facility, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC, between 9 a.m. and 5 p.m., e.t., Monday through Friday, except Federal holidays. Privacy Act Anyone is able to search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the **Federal Register** published on April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit *http://dms.dot.gov.* Background On February 26, 1999, NTSB issued recommendations to the Secretary of Transportation concerning safety briefing materials for motorcoach operators, and pre-trip safety information for passengers. The recommendations are provided below. H-99-7 Provide guidance on the minimum information to be included in safety briefing materials for motorcoach operators. H-99-8 Require motorcoach operators to provide passengers with pre-trip safety information. The NTSB made similar recommendations to the American Bus Association

(ABA)and the United Motorcoach Association (UMA). The two recommendations were primarily in response to a motorcoach crash on I-95 near Stony Creek, Virginia. On July 29, 1997, a motorcoach carrying 34 passengers and a driver drifted off the side of I-95 and down an embankment into the Nottoway River, where it came to rest on its left side. One passenger was fatally injured. The driver and 3 passengers sustained serious injuries; 28 passengers sustained minor injuries. The NTSB concluded this fatal crash highlighted the need for motorcoach passengers to receive pre-trip safety information. This information would be similar to the emergency evacuation information given during pre-flight safety briefings for commercial airline passengers. The NTSB had investigated several motorcoach crashes where passengers had described a general sense of panic because they did not know what to do or how to get out of the motorcoach. The FMCSA formed a working group to address the NTSB recommendations that included individuals from the motorcoach industry, motorcoach manufacturers, insurance industry, safety consulting industry, trade associations, State agencies, and other Federal regulatory agencies. The working group concluded it would be best to initially encourage the motorcoach industry to take voluntary action to improve pre-trip safety awareness for passengers. The industry could do this by implementing one of various effective practices. Because of the large operational variances within the motorcoach industry, industry officials asserted that it would be impossible to develop a uniform safety-awareness regulation flexible enough for industry-wide application. As an alternative, the working group decided that the development and promotion of a list of best practices would be an effective and realistic way to ensure that motorcoach passengers are informed about important safety practices. The group discussed distribution of informational pamphlets as one of many acceptable alternatives. In an April 1, 2005, letter to FMCSA, NTSB stated that the activities described above would provide motorcoach passengers with increased information about safety and are responsive to recommendation H-99-7. In addition, NTSB stated such activities would also provide an acceptable alternate approach to recommendation H-99-8. Based upon FMCSA's actions taken and plans made, NTSB classified recommendation H-99-7 as “Open—Acceptable Response” and recommendation H-99-8 as “Open—Acceptable Alternate Response.” The FMCSA published a notice in the **Federal Register** [71 FR 50971, August 28, 2006] to request comments on the Agency's proposed plan to implement NTSB recommendations H-99-7 and H-99-8. The FMCSA proposed a flexible plan to implement a safety-awareness program for passengers, for voluntary adoption by motorcoach companies. Discussion of Comments The FMCSA received seven comments to the **Federal Register** notice. All commenters concurred with or generally applauded the proposal. The UMA recommended the published guidelines be adopted as proposed. The Daecher Consulting Group, Inc. concurred with the proposed guidelines. Due to the operational variances within the motorcoach industry, the American Bus Association's Bus Industry Safety Council (ABA-BISC) agreed with FMCSA on a flexible approach to delivering safety information to passengers. The ABA-BISC stated that it is sufficient to provide a baseline list of emergency instruction topics to be covered. The ABA-BISC would allow individual operators to develop the best means of how and when to deliver the information. Greyhound Lines Inc. (Greyhound) recommended eliminating the topic of “Avoiding Slips and Falls” from pre-trip safety briefings for motorcoach passengers, because it has little to do with emergency evacuation procedures. The ABA-BISC expressed a similar view that the passenger safety briefing should be kept to a simple “what to do in an emergency situation” and instructions on how to avoid personal injury should take a secondary place to emergency instructions. The ABA-BISC stated further that personal injury avoidance instructions are best left to the discretion of the operator. Since standees are specifically allowed and are, in fact, common in certain motorcoach service applications, the ABA-BISC was also concerned that any emergency instruction should simply direct passengers to keep aisle ways clear by stowing their personal belongings in overhead parcel racks or under seats. Greyhound believed that the proposed guidelines should contain more flexibility. Specifically, Greyhound recommended that the remaining five safety topics (driver direction, emergency contact, emergency exits, restroom emergency button, and fire extinguisher) be covered, but that the guidance should not provide detail on exactly what to cover under each topic. Greyhound asserted that it should be left to the operators to determine what should be said about each of the safety topics, given the wide variety of vehicles and operations covered by the proposed guidance. Both Greyhound and ABA-BISC expressed their view that passenger safety briefings should be succinct, in order to be better understood and accepted. Greyhound asserted that each carrier should have the flexibility to include the appropriate level of detail for its passengers. Greyhound cited the example that a carrier catering to senior citizen charter groups would have a safety message with a different level of detail than line haul carriers. In addition, Greyhound recommended that more flexibility be built into the alternative methods of presenting the safety information. Greyhound asserted that the guidance should be clarified to indicate that the listed presentation methods are not exhaustive and other methods are permissible. Both Greyhound and ABA-BISC expressed the view that combinations of different presentation methods should be specifically permitted to allow a carrier to mix presentation methods. The ABA- BISC stated that limitations of presentation methods should be avoided. The Commercial Vehicle Safety Alliance

(CVSA)commented that the initiative should be expanded to cover school buses and vehicles designed to transport 15 or less passengers, including the driver. The CVSA also recommended that four additional topics be covered during pre-trip safety briefings for passengers. Specifically, CVSA advocated covering vehicle evacuation procedures/safe distance from vehicle, assistance of disabled and mobility impaired passengers, procedures when the driver is incapacitated, and procedures for crashes and fires. In addition, CVSA recommended that FMCSA develop training and educational materials to assist passenger motor carriers with training their drivers on the relevant pre-trip safety topics. Further, CVSA stated that FMCSA should require such training as a part of the Commercial Driver's License

(CDL)and driver qualification requirements of the Federal Motor Carrier Safety Regulations (FMCSRs). FMCSA Response to the Comments Safety Topics To Be Covered The FMCSA used the topic heading “Minimum Safety Topics to be Covered” in the “Proposed Basic Plan for Motorcoach Passenger Safety Awareness (Basic Plan).” The FMCSA is revising this heading to read “Recommended Safety Topics to be Covered” to clarify that the list of safety topics is a suggestion, and motorcoach companies can modify the list by omitting a topic that is not directly related to actions to be taken during an emergency. For example, motorcoach companies can exercise their discretion regarding whether to provide motorcoach passengers with guidance on how to avoid slips and falls. Nonetheless, FMCSA is still recommending that guidance be provided to motorcoach passengers to avoid slips and falls. The FMCSA continues to hold that it is appropriate to provide preventive guidance to motorcoach passengers on how to avoid bodily injury, prior to movement of the vehicle. In addition, FMCSA continues to maintain that content guidance regarding the safety topics should be given to motorcoach companies. It would be inappropriate to provide motorcoach companies with no content guidance whatsoever, when it is clearly evident that certain issues, such as the location and operation of emergency exits, should be covered. The content guidance should be succinct and address appropriate information to be communicated to motorcoach passengers. The FMCSA agrees that motorcoach companies should have the flexibility to keep the length of the entire pre-trip safety briefing sufficiently short to achieve maximum audience attention and understanding. The FMCSA believes that the final Basic Plan for Motorcoach Passenger Safety Awareness achieves this objective. Also, motorcoach companies have the flexibility to add or omit information and guidance during pre-trip passenger briefings as they see fit. The FMCSA is removing the issue of an emergency door release located on the dash or in a stairwell. The FMCSA has learned that only recently-built motorcoaches from one manufacturer have this feature and that it is well-labeled. Greyhound also mentioned that motorcoach companies may not want to mention this feature due to security concerns. In consideration of this information, FMCSA is no longer recommending that the emergency door release be covered during pre-trip safety briefings. Motorcoach companies may mention this feature at their discretion. In the 2006 Proposed Plan, the guideline “Keep the aisle free of property and debris” was mentioned under the heading of “Avoiding Slips and Falls.” The ABA-BISC stated that passengers are permitted to stand in the aisles, and the pre-trip safety information for passengers should contain directions to keep aisle ways clear by stowing personal belongings in overhead parcel racks or under seats. These topics are addressed by 49 CFR 392.62. This section prohibits a person from driving a motorcoach or bus unless

(1)all standees are rearward of the standee line,

(2)baggage or freight on the bus is stowed and secured in a manner that assures unrestricted freedom of movement to the driver and his/her proper operation of the bus,

(3)unobstructed access to all exits by any occupant of the bus is assured; and

(4)protection of occupants of the motorcoach or bus against injury resulting from the falling or displacement of articles transported in the motorcoach or bus is assured. A motorcoach company can cover any or all of these topics in its safety presentations to passengers. Originally, FMCSA proposed to include the topic of “an unobstructed and unrestricted aisle” under the heading of “Avoiding Slips and Falls.” However, the Agency has instead decided to move this topic to the heading of “Emergency Exits” to convey a broader meaning. The primary objective of keeping the aisle free of property and debris is to ensure unobstructed and unrestricted access to exits during an emergency. It is widely accepted that the motorcoach door should be the primary exit choice when feasible. An aisle that is somehow obstructed or cluttered with passenger belongings could hinder rapid evacuation through the motorcoach door in the event of an emergency. Moving this topic to “Emergency Exits” helps ensure compliance with 49 CFR 392.62. As previously mentioned, CVSA recommended that four additional topics be covered during pre-trip safety-awareness briefings for passengers, specifically vehicle evacuation procedures/safe distance from vehicle, assistance of disabled and mobility impaired passengers, procedures when the driver is incapacitated, and procedures for crashes and fires. The FMCSA maintains that motorcoach companies should establish emergency evacuation procedures for motorcoach passengers, including passengers with disabilities. The ABA-BISC has already developed suggested evacuation procedures for bus/motorcoach companies in case of fire or other emergency. These suggested procedures are posted on the ABA's Web site at *http://www.buses.org.* Motorcoach companies should incorporate these procedures into their pre-trip safety briefings and emergency evacuation procedures as they see fit. The FMCSA believes the proposed topics under the heading of “Emergency Exits” contain appropriate information about emergency passenger egress. The FMCSA believes that the topic of motorcoach passengers keeping a safe distance from the vehicle after emergency evacuation is already covered under the heading of “Driver Direction.” The guidance states that passengers should look to the driver for direction and instruction regarding issues such as staying a safe distance from the vehicle after evacuation. The question of how to assist the disabled, passengers with physical or mental impairments, or the elderly during an emergency evacuation of a motorcoach is complex. Adequately covering this topic during a succinct pre-trip safety briefing would be a challenge. The FMCSA believes that emergency evacuation procedures developed by motorcoach companies should specifically address the needs of passengers with disabilities. During the pre-trip safety-awareness briefing, it is appropriate to encourage able-bodied passengers to assist injured or mobility- impaired passengers during an emergency evacuation. Motorcoach companies may cover additional topics and issues as they see fit. The CVSA recommended the topic of driver incapacitation be specifically covered. The FMCSA agrees that the pre-trip safety information should include specific guidance about emergency passenger egress in the event that the driver becomes incapacitated and is unable to direct or show passengers how to vacate the vehicle. Although FMCSA has decided not to specifically include driver incapacitation in the Basic Plan, motorcoach companies may, at their discretion, provide general guidance to passengers regarding what to do if a driver becomes incapacitated or suddenly sick. As for crashes and fires, FMCSA believes the existing headings and topics provide adequate guidance on what to do in the event of motorcoach crash or fire. Various Methods of Presenting the Safety Information The FMCSA agrees with Greyhound and ABA-BISC that the methods of presenting the safety information need to be flexible. The Basic Plan for Motorcoach Passenger Safety Awareness has been clarified to indicate that the various presentation methods listed are not exclusive, other methods are permissible, and it is acceptable for a motorcoach company to combine different presentation methods. Limitations on effective presentation methods should be avoided. Timing and Frequency of Presentation The ABA-BISC asserted that how and when the safety information is delivered should be left to the discretion of the motorcoach operator. While FMCSA generally agrees with this comment, the Agency believes that the proposed guidance regarding the timing and frequency of safety information presentation is appropriate. In exceptional cases, motorcoach companies can exercise discretion in deviating from the general guidance when warranted. No commenter expressed a specific, strong objection to the proposed guidelines for timing and frequency of safety information presentation. The FMCSA is making no substantial revision to these guidelines. Other Miscellaneous Comments The FMCSA believes that CVSA's recommendation that the initiative be expanded to cover school buses and vehicles designed to transport 15 or less passengers goes beyond the original scope of NTSB's recommendations. The proposed safety-awareness plan was intended for implementation by motorcoach companies for their passengers. Because school buses and vehicles designed to transport 15 or fewer passengers are significantly different from motorcoaches, FMCSA believes that each of these vehicle operations would need a customized safety-awareness plan for passengers. It is important to note that FMCSA does not have safety regulatory jurisdiction over most school bus operations. The FMCSA only has jurisdiction over those school bus operations involving contractors (non-governmental entities) providing transportation that is other than home-to-school and is interstate in nature. On August 12, 2003, FMCSA published a final rule entitled *“Safety Requirements for Operators of Small Passenger-Carrying Commercial Motor Vehicles Used in Interstate Commerce.”* It required motor carriers operating CMVs designed or used to transport between 9 and 15 passengers (including the driver) in interstate commerce to comply with parts 391 through 396 of the Federal Motor Carrier Safety Regulations (FMCSRs) when they are directly compensated for such services, and the vehicle is operated beyond a 75 air-mile radius from the driver's normal, work-reporting location [68 FR 47860, August 12, 2003]. As a result of the 2003 rule, these motor carriers are now subject to the same safety requirements as motorcoach operators, except for the commercial driver's license

(CDL)and controlled substances and alcohol testing regulations. Affected motor carriers were required to be in compliance with such regulations by December 10, 2003 [68 FR 61246, October 27, 2003]. Section 4136 of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy For Users (SAFETEA-LU) [Pub. L. 109-59, 119 Stat. 1144, 1745 (Aug. 10, 2005)] extended the applicability of the FMCSRs to interstate operations of CMVs designed or used to transport between 9 and 15 passengers (including the driver), regardless of the distance traveled. This congressional mandate has subjected a greater number of motor carriers that operate small passenger-carrying CMVs to the FMCSRs. The FMCSA is in the process of obtaining information collection approval from the Office of Management and Budget to conduct a study about the safety and/or regulatory compliance challenges of these small, passenger-carrying, commercial motor vehicle operations [71 FR 71236, December 8, 2006]. Because these passenger carriers are a newly regulated industry segment, FMCSA does not currently possess the necessary knowledge to propose a basic safety-awareness plan for them. After FMCSA completes its study, the Agency will decide whether it would be appropriate to seek comments about a proposed passenger safety-awareness plan for small passenger-carrying commercial motor vehicle operations. CVSA also recommended that FMCSA develop educational materials to assist passenger carriers in training their drivers on the relevant pre-trip safety topics. CVSA suggested that FMCSA require such training as a part of the CDL and driver qualification requirements of the FMCSRs. The Basic Plan was designed to allow each motorcoach company to create and implement a passenger safety-awareness program that is practical and effective for the company's operational style and system. Keeping with the flexible nature of the Basic Plan, FMCSA believes that it would be infeasible to develop a model training guide for drivers on how and when to conduct pre-trip safety-awareness briefings for passengers. Motorcoach companies should design their own training materials to educate their drivers about pre-trip safety awareness for passengers, based upon each company's individual approach. As mentioned in the August 28, 2006, **Federal Register** notice, the working group that was convened by FMCSA concluded that it would be best to initially encourage the motorcoach industry to take voluntary action to improve safety awareness for passengers, due to the wide-ranging operational variances within the industry. The group held that the development and promotion of best practices is an effective and realistic alternative to regulation to ensure motorcoach passengers receive safety information. If this initial approach is found to be ineffective and an unacceptable portion of the motorcoach industry does not voluntarily implement a safety-awareness program for passengers, FMCSA will consider whether regulatory action is needed to correct the problem. The FMCSA and its safety partners intend to monitor crashes and complaints to ensure that motorcoach companies are presenting pre-trip safety information to their passengers. To assist motorcoach companies with implementing a safety-awareness program for passengers, FMCSA plans to develop and distribute a model safety pamphlet for motorcoach passengers. The FMCSA intends to place an electronic version of the pamphlet on the Agency's Web site that can be downloaded and printed. This could be used by motorcoach companies that choose to distribute safety pamphlets to passengers during boarding or elect to place safety pamphlets in the pouches or sleeves on the backs of seats. The FMCSA believes that developing and distributing a model safety pamphlet for motorcoach passengers is the best single way to assist motorcoach companies in implementing a safety-awareness program for passengers. Motorcoach companies with modest financial resources could make effective use of the pamphlet as part of a safety-awareness program for passengers. Basic Plan for Motorcoach Passenger Safety Awareness The following Basic Plan reflects the ways FMCSA has responded to the recommendations made in the comments to the docket. The order of the recommended safety topics to be covered has been changed to rank the topics in order of importance. Basic Plan for Motorcoach Passenger Safety Awareness Recommended Safety Topics To Be Covered 1. *Emergency exits* —Point out the location of all emergency exits (push-out windows, roof vent, and side door) and explain how to operate them. Emphasize that, whenever feasible, the motorcoach door should be the primary exit choice. Encourage able-bodied passengers to assist any injured or mobility-impaired passengers during an emergency evacuation. Provide passengers with sufficient guidance to ensure compliance with 49 CFR 392.62, “Safe operation, buses.” 2. *Emergency Contact* —Advise passengers to call 911 by cellular telephone in the event of an emergency. 3. *Driver Direction* —Advise passengers to look to the driver for direction and follow his/her instructions. 4. *Fire Extinguisher* —Point out the location of the fire extinguisher. 5. *Restroom Emergency Push Button or Switch* —Inform motorcoach passengers of the emergency signal device in the restroom. 6. *Avoiding Slips and Falls* —Warn passengers to exercise care when boarding and exiting the motorcoach and to use the handrail when ascending or descending steps. Encourage passengers to remain seated as much as possible while the motorcoach is in motion. If it is necessary to walk while the motorcoach is moving, passengers should always use handrails and supports. Various Methods of Presenting the Safety Information The following presentation methods are not an exhaustive list of ways to present safety information to motorcoach passengers. The list below should not be construed to restrict combinations of the following methods or additional presentation methods. 1. *During passenger boarding* —Informational pamphlets could be distributed to motorcoach passengers during boarding. 2. *After passenger boarding and immediately prior to moving the motorcoach* — a. The driver requests the passengers to review informational pamphlets located in the pouches or sleeves on the back of seats. b. The driver provides an oral presentation (similar to the presentations by airline flight attendants prior to take-off) with or without informational pamphlets as visual aids. c. An automated audio presentation broadcasts a cassette tape or compact disk over the motorcoach audio system. d. An automated video presentation plays a videotape or DVD on the motorcoach video system. Timing and Frequency of the Presentation Demand-responsive motorcoach operations, such as charters and tour services, should present the safety information to motorcoach passengers after boarding and prior to movement of the motorcoach. Fixed route motorcoach service operations should present the safety information at all major stops or terminals, after passenger boarding and prior to movement of the motorcoach. Policy Review by the Office of Management and Budget *E.O. 12866, as amended* . The FMCSA has determined that this guidance is not significant under the standards established by the Office of Management and Budget

(OMB)on April 25, 2007, under E.O. 12866, as amended. This publication was not reviewed by the OMB. The FMCSA expects the voluntary implementation of this guidance by the motorcoach industry will have annual costs that are substantially less than $100 million. Significant stakeholders that have been active in the development of this guidance, including the ABA-BISC and UMA, concur with this cost assessment. Issued on: September 7, 2007. John H. Hill, Administrator. [FR Doc. E7-18088 Filed 9-12-07; 8:45 am] BILLING CODE 4910-EX-P DEPARTMENT OF TRANSPORTATION National Highway Traffic Safety Administration Petition for Exemption From the Vehicle Theft Prevention Standard; BMW AGENCY: National Highway Traffic Safety Administration (NHTSA) Department of Transportation (DOT). ACTION: Grant of petition for exemption. SUMMARY: This document grants in full the BMW of North America, LLC

(BMW)petition for exemption of the Carline 1 vehicle line in accordance with 49 CFR part 543, *Exemption from the Theft Prevention Standard* . This petition is granted because the agency has determined that the antitheft device to be placed on the line as standard equipment is likely to be as effective in reducing and deterring motor vehicle theft as compliance with the parts-marking requirements of the Theft Prevention Standard (49 CFR Part 541). DATES: The exemption granted by this notice is effective beginning with the 2008 model year (MY). FOR FURTHER INFORMATION CONTACT: Ms. Deborah Mazyck, Office of International Policy, Fuel Economy and Consumer Programs, National Highway Traffic Safety Administration, 1200 New Jersey Avenue, SE., West Building, Room W43-443, Washington, DC 20590. Ms. Mazyck's telephone number is

(202)366-4139. Her fax number is

(202)493-2290. SUPPLEMENTARY INFORMATION: In a petition dated June 22, 2007, BMW requested exemption from the parts-making requirements of the theft prevention standard (49 CFR part 541) for the MY 2008 BMW Carline 1 vehicle line. The petition requested exemption from parts-making pursuant to 49 CFR part 543, *Exemption from Vehicle Theft Prevention Standard* , based on the installation of an antitheft device as standard equipment for an entire vehicle line. Under § 543.5(a), a manufacturer may petition NHTSA to grant exemptions for one line of its vehicle lines per year. BMW has petitioned the agency to grant an exemption for its Carline 1 vehicle line beginning with MY 2008. In its petition, BMW provided a detailed description and diagram of the identity, design, and location of the components of the antitheft device for its Carline 1 vehicle line. BMW will install its passive antitheft device as standard equipment on the line. Features of the antitheft device will include a key with a transponder, loop antenna

(coil)around the steering lock cylinder, an electronically-coded vehicle immobilizer

(EWS)control unit and passive immobilizer. BMW's submission is considered a complete petition as required by 49 CFR 543.7, in that it meets the general requirements contained in § 543.5 and the specific content requirements of § 543.6. BMW stated that the EWS immobilizer device prevents the vehicle from being driven away under its own engine power. The EWS control unit provides the interface to the loop antenna (coil), engine control unit and starter. It queries key data from the transponder and provides the coded release of the engine management for a valid key. The ignition and fuel supply are only released when a correct coded release signal has been sent by the EWS control unit, to allow the vehicle to start. The immobilizer device is automatically activated when the engine is shut off and the vehicle key is removed from the ignition lock cylinder. The antitheft device can be further secured by locking the vehicle doors and hood using either the key lock cylinder on the driver's door or the remote frequency remote control. The frequency for the remote control constantly changes to prevent an unauthorized person from opening the vehicle by intercepting the signals of its remote control. The vehicle is also equipped with a central-locking system that can be operated to lock and unlock all doors or to unlock only the driver's door, preventing forced entry into the vehicle through the passenger doors. BMW stated that the proposed antitheft device does not provide any visible or audible indication of unauthorized entry. Theft data have indicated a decline in theft rates for vehicle lines that have been equipped with antitheft devices similar to that which BMW proposes to install on the Carline 1 line. The agency has concluded that the lack of a visual or audio alarm has not prevented these devices from being effective protection against theft. The effectiveness of BMW's EWS is compared with devices which NHTSA has previously determined to be as effective in reducing and deterring motor vehicle theft as would compliance with the parts-marking requirements of Part 541. The antitheft device that VMW intends to install on its Carline 1 vehicle line for MY 2008 is the same system that BMW installed on its BMW X3 vehicle line, X5, Carline 4, Carline 5, Carline 6, Carline 7, Carline Z4, and the MINI vehicle line. To further substantiate its device's effectiveness, BMW also submitted the April 1997 Highway Loss Data Institute's

(HLDI)Bulletin on the preliminary results of antitheft devices in 1995 BMW models. BMW stated that the data demonstrates the performance of the BMW antitheft device when it was introduced in the 5 series vehicle line and is indicative of the performance it expects from any BMW antitheft device. The report compared BMWs equipped with an advanced passive antitheft devices installed in 1995 BMW models (i.e., passive activation with an electronic chip in the ignition key that must match the vehicle electronics) beginning with the January 1, 1995 production to the vehicle produced earlier in the model year that were equipped with less advanced antitheft technology (i.e., required arming the device by a special locking routine and had no electronic-key feature). According to BMW, HLDI reported significant decreases were found in both claim frequencies and average loss payment per claim for the BMW cars equipped with the new antitheft device. Specifically, HLDI's Bulletin showed a 73% decrease in relative claim frequency for BMW vehicle lines equipped with the new antitheft device as compared to the older device and a 78% decrease in relative average loss payment per claim when the vehicle line became equipped with the new device. Additionally, the agency notes that the most currently available theft data for BMW vehicle lines for which the agency has granted parts marking exemptions show that theft rates for these lines are all below the median (3.5826) and have remained so for the past three years. BMW has concluded that the antitheft device proposed for the Carline 1 vehicle line is no less effective than those devices and similar for which NHTSA has already been granted exemptions from the parts-marking requirements. In addressing the specific content requirements of 543.6, BMW provided information on the reliability and durability of its device. To ensure reliability and durability of the device BMW conducted tests based on its own specified standards and believes that the device is reliable and durable since the device complied with its specified requirements for each test. BMW provided a detailed list of the tests conducted. BMW also stated that because the EWS immobilizer device is incorporated into the ignition, fuel injection, and starter circuit of the vehicle and is activated passively, reliability and durability of the system have to be ensured because the vehicle will not start if the EWS system malfunctions. BMW further stated that, if a malfunction should occur, the EWS device incorporates a microprocessor that can be accessed by using BMW diagnostic equipment to diagnose and correct the cause of the problem. Additionally, the mechanical keys are unique. A special key blank, a special key cutting machine and the car's unique code are needed to duplicate a key. BMW stated that new keys will only be issued to authorized persons. Based on the evidence submitted by BMW, the agency believes that the antitheft device for the BMW Carline 1 vehicle line is likely to be as effective in reducing and deterring motor vehicle theft as compliance with the parts-marking requirements of the Theft Prevention Standard (49 CFR part 541). Based on the information BMW has provided about its device, the agency concludes that the device will provide four of the five types of performance listed in § 543.6(a)(3): Promoting activation; preventing defeat or circumvention of the device by unauthorized persons; preventing operation of the vehicle by unauthorized entrants; and ensuring the reliability and durability of the device. As required by 49 U.S.C. 33106 and 49 CFR part 543.6(a)(4) and (5), the agency finds that BMW has provided adequate reasons for its belief that the antitheft device will reduce and deter theft. For the foregoing reasons, the agency hereby grants in full BMW's petition for exemption for the Carline 1 vehicle line from the parts-marking requirements of 49 CFR part 541. The agency notes that 49 CFR part 541, Appendix A-1, identifies those lines that are exempted from the Theft Prevention Standard for a given model year. 49 CFR part 543.7(f) contains publication requirements incident to the disposition of all Part 543 petitions. Advanced listing, including the release of future product nameplates, the beginning model year for which the petition is granted and a general description of the antitheft device is necessary in order to notify law enforcement agencies of new vehicle lines exempted from the parts-marking requirements of the Theft Prevention Standard. If BMW decides not to use the exemption for this line, it must formally notify the agency. If such a decision is made, the line must be fully marked as required by 49 CFR parts 541.5 and 541.6 (marking of major component parts and replacement parts). NHTS notes that if BMW wishes in the future to modify the device on which this exemption is based, the company may have to submit a petition to modify the exemption. Part 543.7(d) states that a Part 543 exemption applies only to vehicles that belong to a line exempted under this part and equipped with the anti-theft device on which the line's exemption is based. Further, § 543.9(c)(2) provides for the submission of petitions “to modify an exemption to permit the use of an antitheft device similar to but differing from the one specified in that exemption.” The agency wishes to minimize the administrative burden that Part 543.9(c)(2) could place on exempted vehicle manufacturers and itself. The agency did not intend Part 543 to require the submission of a modification petition for every change to the components or design of an antitheft device. The significance of many such changes could be *de minimis.* Therefore, NHTSA suggests that if the manufacturer contemplates making any changes the effects of which might be characterized as *de minimis,* it should consult the agency before preparing and submitting a petition to modify. Authority: 49 U.S.C. 33106; delegation of authority at 49 CFR 1.50. Issued on: September 7, 2007. Stephen R. Kratzke, Associate Administrator for Rulemaking. [FR Doc. 07-4501 Filed 9-12-07; 8:45 am]

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