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Code · REGISTER · 2008-07-14 · Employee Benefits Security Administration, Department of Labor · Rules and Regulations

Rules and Regulations. Notice

67,309 words·~306 min read·/register/2008/07/14/08-1430

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 Employee Benefits Security Administration Proposed Extension of Information Collection Request Submitted for Public Comment; Proposed Amendment to PTE 84-14 for Plan Asset Transactions Determined by Independent Qualified Professional Asset Managers AGENCY: Employee Benefits Security Administration, Department of Labor. ACTION: Notice. SUMMARY: The Department of Labor (the Department), in accordance with the Paperwork Reduction Act of 1995 (PRA 95) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed and continuing collections of information.
This helps the Department assess the impact of its information collection requirements and minimize the reporting burden on the public and helps the public understand the Department's information collection requirements and provide the requested data in the desired format. Currently, the Employee Benefits Security Administration is soliciting comments on the proposed extension of the information collection provisions of Proposed Amendment to PTE 84-14 for Plan Asset Transactions Determined by Independent Qualified Professional Asset Managers.
A copy of the information collection request
(ICR)may be obtained by contacting the office listed in the ADDRESSES section of this notice. DATES: Written comments must be submitted to the office shown in the Addresses section on or before September 9, 2008. ADDRESSES: Joseph S. Piacentini, Department of Labor, Employee Benefits Security Administration, 200 Constitution Avenue, NW., Washington, DC 20210,
(202)693-8410, FAX
(202)693-4745 (these are not toll-free numbers). SUPPLEMENTARY INFORMATION: I. Background PTE 84-14 is a class exemption from ERISA's prohibited transaction rules that permits various parties that are related to employee benefit plans to engage in transactions involving plan assets if, among other conditions, the assets are managed by “qualified professional asset managers” (QPAMs), which are independent of the parties in interest and which meet specified financial standards. Additional exemptive relief is provided for employers to furnish limited amounts of goods and services to a managed fund in the ordinary course of business. Limited relief also is provided for leases of office or commercial space between managed funds and QPAMs or contributing employers. Finally, relief is provided for transactions involving places of public accommodation owned by a managed fund. The proposed amendment to PTE 84-14 (70 FR 49305, August 23, 2005) would permit a “qualified professional asset manager”
(QPAM)to prospectively manage an investment fund containing the assets of its own employee benefit plan or the plan of an affiliate, to the extent that the conditions of the proposal have been met. Under section 406(a) of ERISA, sales, leases, loans or the provision of services between a party in interest and a plan, as well as a use of plan assets by or for the benefit of, or a transfer of plan assets to, a party in interest, is prohibited. Section 408(a) of ERISA permits the Department to grant an exemption from a prohibited transaction provision where it has been able to determine that certain criteria for granting such exemptions have been satisfied. Without the proposed amendment, a financial institution that acted as a QPAM for its own plan, prospectively, would be in violation of section 406(a). In order for a transaction to qualify for an exemption under the proposed amendment, a QPAM must, among other requirements, establish written policies and procedures that are designed to assure compliance with the conditions of the proposed amendment, including the steps adopted by the QPAM to measure compliance. The proposed amendment also requires an independent auditor required to conduct an exemption audit, on an annual basis, the results of which are presented in a written report to the plan. These requirements constitute an information collection within the meaning of the PRA, for which the Department has obtained approval from the Office of Management and Budget
(OMB)under OMB Control No. 1210-0128. The OMB approval is currently scheduled to expire on October 31, 2008. II. Current Actions This notice requests public comment pertaining to the Department's request for extension of OMB approval of the information collection contained in the proposed amendment to PTE 84-14. After considering comments received in response to this notice, the Department intends to submit an ICR to OMB for continuing approval. No change to the existing ICR is proposed or made at this time. An agency may not conduct or sponsor, and a person is not required to respond to, an information collection unless it displays a valid OMB control number. A summary of the ICR and the current burden estimates follows: *Agency:* Employee Benefits Security Administration, Department of Labor. *Title:* Proposed Amendment to Prohibited Transaction Class Exemption 84-14. *Type of Review:* Extension of a currently approved collection of information. *OMB Number:* 1210-0218. *Affected Public:* Individuals or households; Business or other for-profit; Not-for-profit institutions. *Respondents:* 6,500. *Responses:* 6,500. *Estimated Total Burden Hours:* 6,500. *Estimated Total Burden Cost (Operating and Maintenance):* $546,000. III. Focus of Comments *The Department of Labor (Department) is particularly interested in comments that:* • 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.* , by permitting electronic submissions of responses. Comments submitted in response to this notice will be summarized and/or included in the ICR for OMB approval of the extension of the information collection; they will also become a matter of public record. Dated: July 8, 2008. Joseph S. Piacentini, Director, Office of Policy and Research, Employee Benefits Security Administration. [FR Doc. E8-15848 Filed 7-11-08; 8:45 am] BILLING CODE 4510-29-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-62,875] Bolton Metal Products Co., Including On-Site Leased Workers of Adecco Staffing, Bellefonte, PA; Amended Notice of Revised Determination on Reconsideration In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273), and Section 246 of the Trade Act of 1974 (26 U.S.C. 2813), as amended, the Department of Labor issued a Notice of Revised Determination on Reconsideration on May 9, 2008. The notice was published in the **Federal Register** on May 15, 2008 (72 FR 28169-28170). At the request of the petitioners, the Department reviewed the Notice of Revised Determination on Reconsideration for workers of the subject firm. The workers are engaged in the production of brass rod, wire and low melt alloys. The workers are separately identifiable by product line. New information shows that leased workers of Adecco Staffing were employed on-site at the Bellefonte, Pennsylvania location of Bolton Metal Products, Co. The Department has determined that these workers were sufficiently under the control of Bolton Metal Products Co. to be considered leased workers. Based on these findings, the Department is amending this certification to include leased workers of Adecco Staffing working on-site at the Bellefonte, Pennsylvania location of the subject firm. The intent of the Department's certification is to include all workers employed at Bolton Metal Products Co., Bellefonte, Pennsylvania who were adversely-impacted by increased imports of brass rod, wire, and low melt alloys. The amended notice applicable to TA-W-62,875 is hereby issued as follows: All workers of Bolton Metal Products Co., including on-site leased workers of Adecco Staffing, Bellefonte, Pennsylvania, who became totally or partially separated from employment on or after February 18, 2007, through May 9, 2010, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974. Signed at Washington, DC this 26th day of June 2008. Elliott S. Kushner, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E8-15861 Filed 7-11-08; 8:45 am] BILLING CODE 4510-FN-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-60,699] Filtronic Comtek, Inc., Currently Known as Powerwave Technologies, Inc., Including On-Site Leased Workers From Quality Staffing Services, Salisbury, MD; Amended Certification Regarding Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273), and Section 246 of the Trade Act of 1974 (26 U.S.C. 2813), as amended, the Department of Labor issued a Certification Regarding Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance on February 13, 2007, applicable to workers of Filtronic Comtek, Inc., including on-site leased workers from Quality Staffing Services, Salisbury, Maryland. The notice was published in the **Federal Register** on February 27, 2007 (72 FR 8795). At the request of the State agency, the Department reviewed the certification for workers of the subject firm. The workers are engaged in the production of microwave filters for cellular telephone base stations. New information shows that following a change in ownership in October 2006, Filtronic Comtek, Inc. is currently known as Powerwave Technologies, Inc. Workers separated from employment at the subject firm had their wages reported under a separate unemployment insurance
(UI)tax account for Powerwave Technologies, Inc. Accordingly, the Department is amending this certification to show that Filtronic Comtek, Inc. is currently known as Powerwave Technologies, Inc. The intent of the Department's certification is to include all workers of Filtronic Comtek, Inc., currently known as Powerwave Technologies, Inc., who were adversely affected by a shift in production to China. The amended notice applicable to TA-W-60,699 is hereby issued as follows: All workers of Filtronic Comtek, Inc., currently known as Powerwave Technologies, Inc., including on-site leased workers from Quality Staffing Services, Salisbury, Maryland, who became totally or partially separated from employment on or after January 3, 2006, through February 13, 2009, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974. Signed at Washington, DC this 27th day of June 2008. Linda G. Poole, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E8-15858 Filed 7-11-08; 8:45 am] BILLING CODE 4510-FN-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-61,931] Tyco Electronics Including On-Site Leased Workers From Kelly Staffing and Diversco East Berlin, PA; Amended Certification Regarding Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273), and Section 246 of the Trade Act of 1974 (26 U.S.C. 2813), as amended, the Department of Labor issued a Certification of Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance on October 4, 2007, applicable to workers of Tyco Electronics, including on-site leased workers of Kelly Staffing, East Berlin, Pennsylvania. The notice was published in the **Federal Register** on October 17, 2007 (72 FR 58898). At the request of the State agency, the Department reviewed the certification for workers of the subject firm. The workers are engaged in the production of electronic connectors. New information shows that leased workers of Diversco were employed on-site at the East Berlin, Pennsylvania, location of Tyco Electronics. The Department has determined that these workers were sufficiently under the control of the subject firm to be considered leased workers. Based on these findings, the Department is amending this certification to include leased workers of Diversco working on-site at the East Berlin, Pennsylvania, location of the subject firm. The intent of the Department's certification is to include all workers employed at Tyco Electronics who were adversely affected by increased imports of electronic connectors. The amended notice applicable to TA-W-61,931 is hereby issued as follows: “All workers of Tyco Electronics, including on-site leased workers from Kelly Staffing and Diversco, East Berlin, Pennsylvania, who became totally or partially separated from employment on or after August 2, 2006, through October 4, 2009, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974.” Signed at Washington, DC, this 27th day of June 2008. Linda G. Poole, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E8-15859 Filed 7-11-08; 8:45 am] BILLING CODE 4510-FN-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-62,833; TA-W-62,833A] Megtec Systems, Inc. a Subsidiary of Sequa Corporation Depere, WI; Including an Employee in Support of Megtec Systems, Inc. a Subsidiary of Sequa Corporation, Depere, WI Working out of Fayetteville, GA; Amended Certification Regarding Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273), and Section 246 of the Trade Act of 1974 (26 U.S.C. 2813), as amended, the Department of Labor issued a Certification Regarding Eligibility to Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance on May 16, 2008, applicable to workers of Megtec Systems, Inc., a subsidiary of Sequa Corporation, DePere, Wisconsin. The notice was published in the **Federal Register** on May 29, 2008 (73 FR 30977). At the request of the State agency, the Department reviewed the certification for workers of the subject firm. New information shows that a worker separation has occurred involving an employee (Mr. Eugene Barry Lewis) working out of Fayetteville, Georgia, in support of and under the control of Megtec Systems, Inc., a subsidiary of Sequa Corporation, in DePere, Wisconsin. Based on these findings, the Department is amending this certification to include an employee in support of the DePere, Wisconsin location of the subject firm working out of Fayetteville, Georgia. The intent of the Department's certification is to include all workers of Megtec Systems, Inc., a subsidiary of Sequa Corporation, DePere, Wisconsin who were adversely affected by increased imports of air flotation drying, pollution control and paper handling equipment. The amended notice applicable to TA-W-62,833 is hereby issued as follows: “All workers of Megtec Systems, Inc., a subsidiary of Sequa Corporation, DePere, Wisconsin (TA-W-62,833), including an employee in support of Megtec Systems, Inc., a subsidiary of Sequa Corporation, DePere, Wisconsin, working out of Fayetteville, Georgia (TA-W-62,833A), who became totally or partially separated from employment on or after February 11, 2007, through May 16, 2010, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974.” Signed at Washington, DC, this 26th day of June 2008. Linda G. Poole Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E8-15860 Filed 7-11-08; 8:45 am] BILLING CODE 4510-FN-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-63,085; TA-W-63,085A] Trimtex Co., Inc., Williamsport, PA; Novtex Division of Trimtex Co., Inc., Adams, MA; Amended Certification Regarding Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273) the Department of Labor issued a Certification of Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance on April 24, 2008, applicable to workers of Trimtex Co., Inc., Williamsport, Pennsylvania. The notice was published in the **Federal Register** on May 13, 2008 (73 FR 27560). At the request of a company official, the Department reviewed the certification for workers of the subject firm. The workers are engaged in the production of decorative trimmings. New findings show that worker separations occurred at the Novtex Division of Trimtex Co., Inc., Adams, Massachusetts. Workers at the Adams, Massachusetts facility provide sales, inventory control, product development, design and sourcing and various other activities supporting the production of decorative trimmings that is produced at the Williamsport, Pennsylvania location of the subject firm. Accordingly, the Department is amending the certification to cover workers at Novtex Division of Trimtex Co., Inc., Adams, Massachusetts. The intent of the Department's certification is to include all workers of Trimtex Co., Inc. who were adversely affected by a shift in production of decorative trimmings to Mexico and China. The amended notice applicable to TA-W-63,085 is hereby issued as follows: “All workers of Trimtex Co., Inc., Williamsport, Pennsylvania (TA-W-63,085), and Novtex Division of Trimtex Co., Inc., Adams, Massachusetts (TA-W-63,085A), who became totally or partially separated from employment on or after March 24, 2007, through April 24, 2010, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974.” Signed at Washington, DC, this 26th day of June 2008. Richard Church, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E8-15863 Filed 7-11-08; 8:45 am] BILLING CODE 4510-FN-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-63,155] Amphenol-TCS a Subsidiary of Amphenol Corporation Including On-Site Temporary Workers From Microtech and Triton Staffing Nashua, NH; Amended Certification Regarding Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273), and Section 246 of the Trade Act of 1974 (26 U.S.C. 2813), as amended, the Department of Labor issued a Certification of Eligibility to Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance on May 12, 2008, applicable to workers of Amphenol-TCS, a subsidiary of Amphenol Corporation, Nashua, New Hampshire. The notice was published in the **Federal Register** on May 29, 2008 (73 FR 30977). At the request of the State agency, the Department reviewed the certification for workers of the subject firm. The workers are engaged in the production of electronic connectors and backplane assemblies. The workers are separately identifiable by articles produced. New information shows that temporary workers from Microtech and Triton Staffing were employed on-site at the Nashua, New Hampshire location of Amphenol-TCS, a subsidiary of Amphenol Corporation. The Department has determined that these workers were sufficiently under the control of the subject firm to be considered temporary workers. Based on these findings, the Department is amending this certification to include temporary workers from Microtech and Triton Staffing working on-site at the Cleveland, Ohio location of the subject firm. The intent of the Department's certification is to include all workers employed at Amphenol-TCS, a subsidiary of Amphenol Corporation who were adversely affected by a shift in production of backplane assemblies to Mexico. The amended notice applicable to TA-W-63,155 is hereby issued as follows: “All workers of Amphenol-TCS, a subsidiary of Amphenol Corporation, including on-site temporary workers from Microtech and Triton Staffing, engaged in the production of backplane assemblies, Nashua, New Hampshire, who became totally or partially separated from employment on or after March 11, 2007, through May 12, 2010, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974.” Signed at Washington, DC this 27th day of June 2008. Linda G. Poole, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E8-15865 Filed 7-11-08; 8:45 am] BILLING CODE 4510-FN-P DEPARTMENT OF LABOR Employment and Training Administration Notice of Determinations Regarding Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance In accordance with Section 223 of the Trade Act of 1974, as amended (19 U.S.C. 2273) the Department of Labor herein presents summaries of determinations regarding eligibility to apply for trade adjustment assistance for workers (TA-W) number and alternative trade adjustment assistance
(ATAA)by (TA-W) number issued during the period of June 16 through June 20, 2008. In order for an affirmative determination to be made for workers of a primary firm and a certification issued regarding eligibility to apply for worker adjustment assistance, each of the group eligibility requirements of Section 222(a) of the Act must be met. I. Section (a)(2)(A) all of the following must be satisfied: A. A significant number or proportion of the workers in such workers' firm, or an appropriate subdivision of the firm, have become totally or partially separated, or are threatened to become totally or partially separated; B. The sales or production, or both, of such firm or subdivision have decreased absolutely; and C. Increased imports of articles like or directly competitive with articles produced by such firm or subdivision have contributed importantly to such workers' separation or threat of separation and to the decline in sales or production of such firm or subdivision; or II. Section (a)(2)(B) both of the following must be satisfied: A. A significant number or proportion of the workers in such workers' firm, or an appropriate subdivision of the firm, have become totally or partially separated, or are threatened to become totally or partially separated; B. There has been a shift in production by such workers' firm or subdivision to a foreign country of articles like or directly competitive with articles which are produced by such firm or subdivision; and C. One of the following must be satisfied: 1. The country to which the workers' firm has shifted production of the articles is a party to a free trade agreement with the United States; 2. The country to which the workers' firm has shifted production of the articles to a beneficiary country under the Andean Trade Preference Act, African Growth and Opportunity Act, or the Caribbean Basin Economic Recovery Act; or 3. There has been or is likely to be an increase in imports of articles that are like or directly competitive with articles which are or were produced by such firm or subdivision. Also, in order for an affirmative determination to be made for secondarily affected workers of a firm and a certification issued regarding eligibility to apply for worker adjustment assistance, each of the group eligibility requirements of Section 222(b) of the Act must be met.
(1)Significant number or proportion of the workers in the workers' firm or an appropriate subdivision of the firm have become totally or partially separated, or are threatened to become totally or partially separated;
(2)The workers' firm (or subdivision) is a supplier or downstream producer to a firm (or subdivision) that employed a group of workers who received a certification of eligibility to apply for trade adjustment assistance benefits and such supply or production is related to the article that was the basis for such certification; and
(3)Either—
(A)The workers' firm is a supplier and the component parts it supplied for the firm (or subdivision) described in paragraph
(2)accounted for at least 20 percent of the production or sales of the workers' firm; or
(B)A loss or business by the workers' firm with the firm (or subdivision) described in paragraph
(2)Contributed importantly to the workers' separation or threat of separation. In order for the Division of Trade Adjustment Assistance to issue a certification of eligibility to apply for Alternative Trade Adjustment Assistance
(ATAA)for older workers, the group eligibility requirements of Section 246(a)(3)(A)(ii) of the Trade Act must be met. 1. Whether a significant number of workers in the workers' firm are 50 years of age or older. 2. Whether the workers in the workers' firm possess skills that are not easily transferable. 3. The competitive conditions within the workers' industry (i.e., conditions within the industry are adverse). Affirmative Determinations for Worker Adjustment Assistance The following certifications have been issued. The date following the company name and location of each determination references the impact date for all workers of such determination. The following certifications have been issued. The requirements of Section 222(a)(2)(A) (increased imports) of the Trade Act have been met. TA-W-63,367; Novatech Electro-Luminescent, Chino,CA: May 6, 2007. The following certifications have been issued. The requirements of Section 222(a)(2)(B) (shift in production) of the Trade Act have been met. None. The following certifications have been issued. The requirements of Section 222(b) (supplier to a firm whose workers are certified eligible to apply for TAA) of the Trade Act have been met. TA-W-63,435; Gold Shield Inc., RV Group, Subsidiary of Fleetwood Enterprises, Inc., Riverside, CA: May 5, 2007. The following certifications have been issued. The requirements of Section 222(b) (downstream producer for a firm whose workers are certified eligible to apply for TAA based on increased imports from or a shift in production to Mexico or Canada) of the Trade Act have been met. None. Affirmative Determinations for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance The following certifications have been issued. The date following the company name and location of each determination references the impact date for all workers of such determination. The following certifications have been issued. The requirements of Section 222(a)(2)(A) (increased imports) and Section 246(a)(3)(A)(ii) of the Trade Act have been met. TA-W-63,395; Methode Electronics, Inc., Connector Products, Source One Staffing, Rolling Meadows, IL: May 15, 2007. TA-W-63,459; Chaco, Inc., Paonia, CO: May 31, 2007. TA-W-63,460; A S America Incorporated, Salem Facility, American Standard, Inc, Salem, OH: May 30, 2007. TA-W-62,828; JMS Converters/Sabee Products, Appleton, WI: January 28, 2007. TA-W-63,174; Harvey Industries, LLC, Wabash, IN: April 9, 2007. TA-W-63,261; Simpson Timber Company, Shelton, WA: April 17, 2007. TA-W-63,262; Simpson Timber Company, Commencement Bay Operations Division, Tacoma,WA: April 17, 2007. TA-W-63,288; Sigma Industries, Inc., Arcadia Staffing, United Employment, Quality Staffing, Springport, MI: April 30, 2007. TA-W-63,290; LB Furniture Industries, LLC, Hudson, NY: April 29, 2007. TA-W-63,346; Tower Automotive, Kendallville, IN: October 28, 2007. TA-W-63,369; Wisconsin Die Casting, Milwaukee, WI: April 28, 2007. TA-W-63,370; Ranger Industries, South Montrose, PA: May 6, 2007. TA-W-63,379; Plastech Engineered Products Inc., Interior Division, Shreveport, LA: May 12, 2007. The following certifications have been issued. The requirements of Section 222(a)(2)(B) (shift in production) and Section 246(a)(3)(A)(ii) of the Trade Act have been met. TA-W-63,177; Joseph T Ryerson & Son, Inc., Chicago Service Center, Chicago, IL: April 8, 2007. TA-W-63,313; Simclar (North America), Inc., Executive Personnel, Action Staffing, Kelly Services, Winterville, NC: May 5, 2007. TA-W-63,380; LZB Manufacturing, Tremonton, UT: May 13, 2007. TA-W-63,423; American Axle and Manufacturing, Tonawanda Forge Plant, Adecco, Tonawanda, NY: May 21, 2007. TA-W-63,425; Steris Corporation, Healthcare-Erie Operations Division, Erie, PA: May 26, 2008. TA-W-63,432; Kongsberg Automotive, Driveline Systems Division, People Link, Staffing Sol, Van Wert, OH: May 8, 2007. TA-W-63,434; Plastech Engineered Products, Exterior Division, Byesville, OH: May 23, 2007. TA-W-63,464; Dura Automotive Systems, On-Site Leased Workers of Spherion Co., Galdwin, MI: May 30, 2007. TA-W-63,477; Kwikset Corporation, Nickel Plating Department, Kelly Services, Denison, TX: June 2, 2007. TA-W-63,491; Sensus Metering Systems, Uniontown, PA: June 5, 2007. TA-W-63,371; Sumitomo Electric Wintec America, Edmonton, KY: May 9, 2007. TA-W-63,408; Milwaukee Electric Tool Corp., Blytheville, AR: May 19, 2007. TA-W-63,421; Kimble Chase, LLC, Vineland, NJ: May 19, 2007. TA-W-63,439; Watson Laboratories, Inc., A Connecticut Corporation, Carmel, NY: May 27, 2007. TA-W-63,437; Tytex, Inc., Woonsocket, RI: May 27, 2007. TA-W-63,493; Evergy, Inc., Vitrus Division, Pawtucket, RI: June 5, 2007. The following certifications have been issued. The requirements of Section 222(b) (supplier to a firm whose workers are certified eligible to apply for TAA) and Section 246(a)(3)(A)(ii) of the Trade Act have been met. TA-W-63,139; Valspar—Furniture Sales Group & Int'l Color Design Center, D/B/A Engineered Polymer Solutions, High Point, NC: May 6, 2007. TA-W-63,139A; Valspar—Furniture Sales Group & Int'l Color Design Center, D/B/A Engineered Polymer Solutions, Orangeburg, SC: April 4, 2007. TA-W-63,139B; Valspar—Furniture Sales Group & Int'l Color Design Center, D/B/A Engineered Polymer Solutions, Montebello, CA: April 4, 2007. TA-W-63,139C; Valspar—Furniture Sales Group & Int'l Color Design Center, D/B/A Engineered Polymer Solutions, South Seattle,WA: April 4, 2007. TA-W-63,330; Spectrum Yarns, Inc., Marion, NC: May 6, 2007. The following certifications have been issued. The requirements of Section 222(b) (downstream producer for a firm whose workers are certified eligible to apply for TAA based on increased imports from or a shift in production to Mexico or Canada) and Section 246(a)(3)(A)(ii) of the Trade Act have been met. None. Negative Determinations for Alternative Trade Adjustment Assistance In the following cases, it has been determined that the requirements of 246(a)(3)(A)(ii) have not been met for the reasons specified. The Department has determined that criterion
(1)of Section 246 has not been met. The firm does not have a significant number of workers 50 years of age or older. TA-W-63,367; Novatech Electro-Luminescent, Chino, CA. The Department has determined that criterion
(2)of Section 246 has not been met. Workers at the firm possess skills that are easily transferable. TA-W-63,435; Gold Shield Inc., RV Group, Subsidiary of Fleetwood Enterprises, Inc., Riverside, CA. The Department has determined that criterion
(3)of Section 246 has not been met. Competition conditions within the workers' industry are not adverse. None. Negative Determinations for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance In the following cases, the investigation revealed that the eligibility criteria for worker adjustment assistance have not been met for the reasons specified. Because the workers of the firm are not eligible to apply for TAA, the workers cannot be certified eligible for ATAA. The investigation revealed that criteria (a)(2)(A)(I.A.) and (a)(2)(B)(II.A.) (employment decline) have not been met. TA-W-63,115; Granite Knitwear, Inc., Granite Quarry, NC. TA-W-63,377; Agilent Technologies, Inc., Electronic Instrument Business Unit, Santa Rosa, CA. TA-W-63,381; Merix Corporation, Forest Grove, OR. The investigation revealed that criteria (a)(2)(A)(I.B.) (Sales or production, or both, did not decline) and (a)(2)(B)(II.B.) (shift in production to a foreign country) have not been met. TA-W-63,498; Westland Controls Systems Incorporated, O.P. Six, Inc., Westland, MI. The investigation revealed that criteria (a)(2)(A)(I.C.) (increased imports) and (a)(2)(B)(II.B.) (shift in production to a foreign country) have not been met. TA-W-62,910; The Hoover Company, Division of TTI Floorcare, El Paso, TX. TA-W-62,930; ACE Style Intimate Apparel, Inc., New York, NY. TA-W-63,151; Kretz Lumber Company, Inc., Dimension Plant, Antigo, WI. TA-W-63,315; Performance Fibers Operations, Inc., Salisbury, NC. TA-W-63,341; Baja Marine Corporation, Division of Brunswick Corporation, Bucyrus, OH. TA-W-63,368; Eco Building Systems, LLC, Oxford, ME. The workers' firm does not produce an article as required for certification under Section 222 of the Trade Act of 1974. TA-W-63,540; Sento Corporation, Raleigh, NC. TA-W-63,049; Cardinal Health Inc., Medical Products—Convertors, Select Staffing, El Paso, TX. TA-W-63,084; Prime Health Care, West Anaheim, CA. TA-W-63,084A; Prime Health Care, Huntington Beach, CA. TA-W-63,084B; Prime Health Care, LaPalma, CA. TA-W-63,392; First American Real Estate Tax Service, LLC, Exton, PA. TA-W-63,414; Uster Technologies, Inc., Charlotte, NC. TA-W-63,461; Logistic Services, Inc., Janesville, WI. TA-W-63,481; Compucom Sytems, Inc., Pfizer Help Desk Operations, Parsippany, NJ. TA-W-63,497; Decoro USA, Ltd, High Point, NC. The investigation revealed that criteria of Section 222(b)(2) has not been met. The workers' firm (or subdivision) is not a supplier to or a downstream producer for a firm whose workers were certified eligible to apply for TAA. TA-W-63,238; Alliance Industries, Inc., Troy, IN. I hereby certify that the aforementioned determinations were issued during the period of June 16 through June 20, 2008. Copies of these determinations are available for inspection in Room C-5311, U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 20210 during normal business hours or will be mailed to persons who write to the above address. Dated: June 30, 2008. Linda G. Poole, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E8-15857 Filed 7-11-08; 8:45 am] BILLING CODE 4510-FN-P DEPARTMENT OF LABOR Employment and Training Administration Investigations Regarding Certifications of Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance Petitions have been filed with the Secretary of Labor under Section 221(a) of the Trade Act of 1974 (“the Act”) and are identified in the Appendix to this notice. Upon receipt of these petitions, the Director of the Division of Trade Adjustment Assistance, Employment and Training Administration, has instituted investigations pursuant to Section 221(a) of the Act. The purpose of each of the investigations is to determine whether the workers are eligible to apply for adjustment assistance under Title II, Chapter 2, of the Act. The investigations will further relate, as appropriate, to the determination of the date on which total or partial separations began or threatened to begin and the subdivision of the firm involved. The petitioners or any other persons showing a substantial interest in the subject matter of the investigations may request a public hearing, provided such request is filed in writing with the Director, Division of Trade Adjustment Assistance, at the address shown below, not later than July 24, 2008. Interested persons are invited to submit written comments regarding the subject matter of the investigations to the Director, Division of Trade Adjustment Assistance, at the address shown below, not later than July 24, 2008. The petitions filed in this case are available for inspection at the Office of the Director, Division of Trade Adjustment Assistance, Employment and Training Administration, U.S. Department of Labor, Room C-5311, 200 Constitution Avenue, NW., Washington, DC 20210. Signed at Washington, DC, this 2nd day of July 2008. Linda G. Poole, Certifying Officer, Division of Trade Adjustment Assistance. Appendix [TAA petitions instituted between 6/23/08 and 6/27/08] TA-W Subject firm (petitioners) Location Date of institution Date of petition 63577 Russell Corporation/Coosa River
(Comp)Wetumpka, AL 06/23/08 06/20/08 63578 Gibbs Die Casting
(Comp)Henderson, KY 06/23/08 06/20/08 63579 Alcatel-Lucent
(Comp)Oklahoma City, OK 06/23/08 06/13/08 63580 Credit Payment Services, Inc.
(Wkrs)Reno, NV 06/23/08 06/20/08 63581 Varian Semiconductor Equipment
(Comp)Gloucester, MA 06/23/08 06/18/08 63582 Actuant Power Packer (State) Milwaukee, WI 06/23/08 06/23/08 63583 Dicon Fiber Optics, Inc. (State) Richmond, CA 06/23/08 06/07/08 63584 NxStage Medical, Inc.
(Comp)Lawrence, MA 06/24/08 06/23/08 63585 Black Dot/CAPS Group Acquisition
(Wkrs)Crystal Lake, IL 06/24/08 06/23/08 63586 EPCO LLC
(Wkrs)Fremont, OH 06/24/08 06/11/08 63587 SAF Holland, Inc.
(Comp)Holland, MI 06/24/08 06/10/08 63588 Hermle Uhren GHBH and Co.
(Wkrs)Amherst, VA 06/24/08 06/23/08 63589 Delfingen US, Inc.
(Comp)San Antonio, TX 06/24/08 06/24/08 63590 General Fibers and Fabrics, Inc.
(Comp)LaGrange, GA 06/24/08 06/17/08 63591 Southwest Metal Finishing, Inc.
(Wkrs)New Berlin, WI 06/24/08 06/23/08 63592 Intermet Corporation
(Wkrs)Pulaski, TN 06/24/08 06/16/08 63593 Minco Manufacturing, LLC
(Comp)Colorado Springs, CO 06/24/08 06/20/08 63594 Hanes Industries
(Comp)Newton, NC 06/24/08 06/23/08 63595 Connectivity Technologies, Inc.
(Wkrs)Carrollton, TX 06/24/08 06/21/08 63596 Medtronic Vascular (State) Danvers, MA 06/24/08 06/23/08 63597 Murpac of Indiana, LLC
(Comp)Remington, IN 06/25/08 06/19/08 63598 Bemcore Tool, Inc.
(Wkrs)Dayton, OH 06/25/08 06/20/08 63599 ExamOne, Quest Diagnostics
(Wkrs)Lenexa, KS 06/25/08 06/23/08 63600 Colson Monette (State) Monette, AR 06/25/08 06/18/08 63601 General Ribbon Corp.
(Comp)Chatsworth, CA 06/25/08 06/02/08 63602 Talport Industries, LLC
(Comp)Hattiesburg, MS 06/25/08 06/24/08 63603 Western Mattress
(Wkrs)San Angelo, TX 06/26/08 06/16/08 63604 Destron Fearing (State) South St. Paul, MN 06/26/08 06/23/08 63605 CPUZ, LLC
(Comp)Arden, NC 06/26/08 06/25/08 63606 Lakeland Mold Company, LLC
(Comp)Stow, OH 06/27/08 06/26/08 63607 Tecnicor International, Inc. (State) Hingham, MA 06/27/08 06/17/08 63608 Lennox Manufacturing (State) Marshall Town, IA 06/27/08 06/26/08 63609 C.A. Garner Veneer, Inc.
(Comp)Smithfield, KY 06/27/08 06/10/08 63610 RF Micro Devices
(Rep)Greensboro, NC 06/27/08 06/24/08 63611 Ametek Aerospace and Power Instruments (IUECWA) Wilmington, MA 06/27/08 06/24/08 63612 American Axle and Manufacturing—Cheektowaga Facility
(UAW)Cheektowaga, NY 06/27/08 06/26/08 63613 Swaim Incorporated
(Wkrs)High Point, NC 06/27/08 06/09/08 63614 Benmatt Industries (State) Federalsburg, MD 06/27/08 06/26/08 63615 Acuity Brands, Holophane
(IBEW)Newark, OH 06/27/08 06/26/08 [FR Doc. E8-15856 Filed 7-11-08; 8:45 am] BILLING CODE 4510-FN-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-63,095] Western Union Financial Services, Inc. Bridgeton, MO; Notice of Negative Determination Regarding Application for Reconsideration By application dated May 15, 2008, the petitioner requested administrative reconsideration of the Department's negative determination regarding eligibility to apply for Trade Adjustment Assistance
(TAA)and Alternative Trade Adjustment Assistance (ATAA), applicable to workers and former workers of the subject firm. The denial notice was signed on April 10, 2008 and published in the **Federal Register** on April 23, 2008 (73 FR 21992). The request for reconsideration also includes workers of Western Union Financial Services, Inc., St. Charles, Missouri. The initial petition and consequent determination did not include workers of the above mentioned location. If the petitioner wishes the Department to consider TAA eligibility for workers of Western Union Financial Services, Inc. in St. Charles, Missouri, a new petition applicable to these workers should be filed. Pursuant to 29 CFR 90.18(c) reconsideration may be granted under the following circumstances:
(1)If it appears on the basis of facts not previously considered that the determination complained of was erroneous;
(2)If it appears that the determination complained of was based on a mistake in the determination of facts not previously considered; or
(3)If in the opinion of the Certifying Officer, a mis-interpretation of facts or of the law justified reconsideration of the decision. The negative TAA determination issued by the Department for workers of Western Union Financial Services, Inc., Bridgeton, Missouri was based on the finding that the worker group does not produce an article within the meaning of Section 222 of the Trade Act of 1974. The investigation revealed that workers of the subject firm are engaged in call center services. The investigation further revealed that no production of article(s) occurred within the firm or appropriate subdivision within the Western Union Financial Services, Inc. during the relevant time period. The petitioner in the request for reconsideration contends that the Department erred in its interpretation of the work performed by the workers of the subject firm. The petitioner states that the workers of the subject firm “are customer service representatives picking up telephone calls from customers wishing to send money orders to recipients either in the United States or overseas”. The petitioner also states that “the article produced domestically in this case is the money order” generated after obtaining various financial information about customer's credit history. The petitioner alleges that the money order, “consisting of tangible cash at the receiving end of the order” is a product just as “an article or piece of clothing”, therefore, workers of the subject firm should be considered as engaged in production of articles. The investigation revealed that Western Union is a global leader in money transfer services, offering the ability to send money to various locations, including numerous foreign countries and territories. No articles are produced within Western Union. The workers of Western Union Financial Services, Inc., Bridgeton, Missouri provide customer service support to Western Union customers and agents. These functions, as described above, are not considered production of an article within the meaning of Section 222 of the Trade Act and while the provision of services may result in printed material, it is incidental to the provision of these services. Money order is a document used by the subject firm as incidental to money transfer services provided by the subject firm. No production took place at the subject facility nor did the workers support production of an article at any domestic affiliated location during the relevant period. The petitioner also alleges that job functions have been shifted from the subject firm overseas. The allegation of a shift to another country might be relevant if it was determined that workers of the subject firm produced an article. However, the investigation determined that workers of Western Union Financial Services, Inc., Bridgeton, Missouri do not produce an article within the meaning of Section 222 of the Trade Act of 1974. Conclusion After review of the application and investigative findings, I conclude that there has been no error or misinterpretation of the law or of the facts which would justify reconsideration of the Department of Labor's prior decision. Accordingly, the application is denied. Signed in Washington, DC, this 25th day of June, 2008. Elliott S. Kushner, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E8-15864 Filed 7-11-08; 8:45 am] BILLING CODE 4510-FN-P DEPARTMENT OF LABOR Employment and Training Administration [SGA/DFA-PY 08-04] Solicitation for Grant Applications (SGA); Technology-Based Learning
(TBL)Initiative AGENCY: Employment and Training Administration (ETA), Labor. ACTION: Notice: Amendment to SGA/DFA-PY 08-04. SUMMARY: The Employment and Training Administration published a document in the **Federal Register** on June 20, 2008, announcing the availability of funds and solicitation for grant applications
(SGA)under the TBL Initiative to be awarded through a competitive process. This notice is a second amendment to the SGA and it amends “Part V. Applications Review Process,” under the specific heading “Strength of Partnerships.” FOR FURTHER INFORMATION CONTACT: James Stockton, Grant Officer, Division of Federal Assistance, at
(202)693-3335. *Supplementary Information Correction:* In the **Federal Register** of June 20, 2008, in FR Doc. E8-13967. On page 35161 under the first
(1st)paragraph, under the specific heading “Strength of Partnerships” (8 points) delete the last sentence, “The applicant must designate one organization from the workforce investment or education system from among the application's partners to act as grant recipient.” DATES: *Effective Date:* This notice is effective July 14, 2008. Signed at Washington, DC this 8th day of July, 2008. James W. Stockton, Grant Officer. [FR Doc. E8-15935 Filed 7-11-08; 8:45 am] BILLING CODE 4510-FN-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-63,306] Art Guild of Philadelphia, Inc., Eastern Display Division, Providence, RI; Notice of Termination of Investigation In accordance with Section 221 of the Trade Act of 1974, as amended, an investigation was initiated on May 5, 2008 in response to a petition filed by a company official on behalf of workers of Art Guild of Philadelphia, Inc., Eastern Display Division, Providence, Rhode Island. The petitioner has requested that the petition be withdrawn. Consequently, the investigation has been terminated. Signed in Washington, DC, this 30th day of June, 2008. Richard Church, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E8-15866 Filed 7-11-08; 8:45 am] BILLING CODE 4510-FN-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-63,596] Medtronic Vascular, Danvers, MA Notice of Termination of Investigation Pursuant to Section 221 of the Trade Act of 1974, as amended, an investigation was initiated on June 24, 2008 in response to a worker petition filed by a state agency representative on behalf of workers of Medtronic Vascular, Danvers, Massachusetts. The petitioner has requested that the petition be withdrawn. Consequently, the investigation has been terminated. Signed at Washington, DC, this 30th day of June 2008. Linda G. Poole, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E8-15868 Filed 7-11-08; 8:45 am] BILLING CODE 4510-FN-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-63,581] Varian Semiconductor Equipment, Gloucester, MA; Notice of Termination of Investigation Pursuant to Section 221 of the Trade Act of 1974, as amended, an investigation was initiated on June 23, 2008 in response to a worker petition filed by a company official on behalf of workers at Varian Semiconductor Equipment, Gloucester, Massachusetts. The petitioner has requested that the petition be withdrawn. Consequently, the investigation has been terminated. Signed at Washington, DC this 30th day of June 2008. Linda G. Poole, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E8-15867 Filed 7-11-08; 8:45 am] BILLING CODE 4510-FN-P LIBRARY OF CONGRESS Copyright Office [Docket No. 2008-6] Notice of Intent to Audit AGENCY: Copyright Office, Library of Congress. ACTION: Public notice. SUMMARY: The Copyright Office of the Library of Congress is announcing receipt of six notices of intent to audit various eligible nonsubscription and new subscription services that transmit sound recordings under statutory licenses. The audits intend to verify statements of account for the year 2005. FOR FURTHER INFORMATION CONTACT: Tanya M. Sandros, General Counsel, P.O. Box 70400, Washington, DC 20024-0977. Telephone:
(202)707-8380. Telefax:
(202)252-3423. SUPPLEMENTARY INFORMATION: Section 106(6) of the Copyright Act, title 17 of the United States Code, gives the copyright owner of a sound recording the right to perform a sound recording publicly by means of a digital audio transmission, subject to certain limitations. Among these limitations are certain exemptions and a statutory license which allows for the public performance of sound recordings as part of “eligible nonsubscription transmissions” and digital transmissions made by “new subscription services.” 1 17 U.S.C. 114. Moreover, these services may make any necessary ephemeral reproductions to facilitate the digital transmission of a sound recording under a second license set forth in section 112(e) of the Copyright Act. Use of these licenses requires that services make payments of royalty fees to and file reports of sound recording performances with SoundExchange. SoundExchange is a collecting rights entity that was designated by the Librarian of Congress to collect statements of account and royalty fee payments from services and distribute the royalty fees to copyright owners and performers entitled to receive such royalties under sections 112(e) and 114(g) following a proceeding before a Copyright Arbitration Royalty Panel (“CARP”) that set rates for the year 2005. 69 FR 5693 (Feb. 6, 2004). CARP was the entity responsible for setting rates and terms for use of the section 112 and section 114 licenses prior to the passage of the Copyright Royalty and Distribution Reform Act of 2004 (“CRDRA”). 1 An “eligible nonsubscription transmission” is a noninteractive digital audio transmission which, as the name implies, does not require a subscription for receiving the transmission. The transmission must also be made as a part of a service that provides audio programming consisting in whole or in part of performances of sound recordings the primary purpose of which is to provide audio or entertainment programming, but not to sell, advertise, or promote particular goods or services. *See* 17 U.S.C. 114(j)(6). A “new subscription service” is “a service that performs sound recordings by means of noninteractive subscription digital audio transmissions and that is not a preexisting subscription or a preexisting satellite digital audio radio service.” 17 U.S.C. 114(j)(8). The CRDRA, which became effective on May 31, 2005, amends the Copyright Act, title 17 of the United States Code, by phasing out the CARP system and replacing it with three permanent Copyright Royalty Judges (“CRJs”). Consequently, the CRJs are now responsible for carrying out the functions heretofore performed by the CARPs, including the adjustment of rates and terms for certain statutory licenses such as the section 114 and 112 licenses. However, verification of statements of account for 2005 are still governed by § 262.6 of title 37 of the Code of Federal Regulations, which states that SoundExchange, as the Designated Agent, may conduct a single audit of a Licensee for the purpose of verifying their royalty payments. As a preliminary matter, the Designated Agent is required to submit a notice of its intent to audit a Licensee with the Copyright Office and serve this notice on the service to be audited. 37 CFR 262.6(c). On June 27, 2008, the Copyright Office received six notices of intent to audit, which were submitted by SoundExchange. The notices announced an intent to audit the following eligible new subscription services for the year 2005: Yahoo!, Inc.; Real Networks, Inc.; and Last.fm, Ltd. The notices also announced an intent to audit the following eligible nonsubscription transmission services for the year 2005: Yahoo!, Inc.; Real Networks, Inc.; AOL LLC; MTV Networks; Susquehanna Radio Corp.; and Last.fm, Ltd. 2 2 A copy of the Notices of Intent to Audit is posted on the Copyright Office Web site at http://www.copyright.gov/carp/AuditNotices2005.pdf SoundExchange also stated in the notice its intent to audit Last.fm Ltd. for the calendar years 2006 and 2007. Verification of statements of account for 2006 and 2007 are governed by 37 CFR 380.6 of the CRJs' regulations. See 73 FR 15778 (Mar. 25, 2008). Section 262.6(c) requires the Copyright Office to publish a notice in the Federal Register within thirty days of receipt of the filing announcing the Designated Agent's intent to conduct an audit. In accordance with this regulation, the Office is publishing today's notice to fulfill this requirement with respect to the notices of intent to audit as received from SoundExchange on June 27, 2008. Dated: July 8, 2008 Tanya M. Sandros, General Counsel. [FR Doc. E8-15952 Filed 7-11-08; 8:45 am] BILLING CODE 1410-30-S NATIONAL SCIENCE FOUNDATION Notice of Permit Application Received Under the Antarctic Conservation Act of 1978 AGENCY: National Science Foundation. ACTION: Notice of Permit Applications Received Under the Antarctic Conservation Act. SUMMARY: Notice is hereby given that the National Science Foundation
(NSF)has received a waste management permit application for operation of a remote field support and emergency provisions for the *M/V Discovery.* for the 2008-2009 austral summer season. The application is submitted to NSF pursuant to regulations issued under the Antarctic Conservation Act of 1978. DATES: Interested parties are invited to submit written data, comments, or views with respect to this permit application within August 13, 2008. Permit applications 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: Dr. Polly A. Penhale, Environmental Officer at the above address or
(703)292-8030. SUPPLEMENTARY INFORMATION: NSF's Antarctic Waste Regulation, 45 CFR Part 671, requires all U.S. citizens and entities to obtain a permit for the use or release of a designated pollutants in Antarctica, and for the release of wastes in Antarctica. NSF has received a permit application under this Regulation for Voyages of Discovery's vessel, *Discovery* for operation of remote field support and emergency provisions for passenger landings in Antarctica. On each landing of passengers, emergency gear is taken ashore in case the weather deteriorates and passengers are required to stay ashore for an extended period. Emergency provisions include: food rations, orange smoke signals, a parachute rocket, cyalume light sticks, water bottles, flashlights, thermal protective aids
(TPA)and paper towels. All waste products (paper, food, human wastes, and expended smoke signals and parachute rockets) will be removed from Antarctica and properly disposed in an appropriate port of disembarkation. In the event of an accidental spill from a cyalume light stick, all contaminated snow and or soil will be removed. in accordance with Antarctic waste regulations. Application for the permit is made by: Mark Flager, Vice President, Voyages of Discovery, 1800 SE 10th Avenue, Suite 205, Ft Lauderdale, FL 33316. *Location:* Antarctic Peninsula. *Dates:* December 6, 2008 to February 10, 2009. Nadene G. Kennedy, Permit Officer. [FR Doc. E8-15854 Filed 7-11-08; 8:45 am] BILLING CODE 7555-01-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, Public Law 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 August 13, 2008. 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 as requiring special protection. The regulations establish such a permit system to designate Antarctic Specially Protected Areas. The applications received are as follows: 1. *Applicant:* Douglas P. Nowacek, Duke University, Marine Laboratory, 135 Duke Marine Lab Rd., Beaufort, NC 28516. *Permit Application No.:* 2009-014. *Activity for Which Permit Is Requested:* Take. The applicant plans to approach up to 50 Humpback and Minke whales each per season to conduct visual observations, photograph and attach non-invasive DTags to record fine-scale movement patterns and foraging behavior of the whales. An active release, which corrodes in sea water, can be timed to release the tag once data storage is complete. The tags will be recovered and returned to the ship. In addition, photography and observations of the whales will help to identify individual whales and determine approximate ages. *Location:* Near-shore waters of the Western Antarctic Peninsula between Anvers Island and Adelaide Islands. *Dates:* February 1, 2009 to June 30, 2010. Nadene G. Kennedy, Permit Officer, Office of Polar Programs. [FR Doc. E8-15933 Filed 7-11-08; 8:45 am] BILLING CODE 7555-01-P NUCLEAR REGULATORY COMMISSION Agency Information Collection Activities: Submission for the Office of Management and Budget
(OMB)Review; Comment Request AGENCY: U.S. Nuclear Regulatory Commission (NRC). ACTION: Notice of the OMB review of information collection and solicitation of public comment. SUMMARY: The NRC has recently submitted to OMB for review the following proposal for the collection of information under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). The NRC hereby informs potential respondents that an agency may not conduct or sponsor, and that a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The NRC published a **Federal Register** Notice with a 60-day comment period on this information collection on March 3, 2008. 1. *Type of submission, new, revision, or extension:* Revision. 2. *The title of the information collection:* NRC Form 445, Request for Approval of Official Foreign Travel. 3. *Current OMB approval number:* 3150-0193. 4. *The form number if applicable:* Form 445. 5. *How often the collection is required:* On occasion. 6. *Who will be required or asked to report:* Non-Federal consultants, contractors and invited travelers. 7. *An estimate of the number of annual responses:* 120. 8. *The estimated number of annual respondents:* 120. 9. *An estimate of the total number of hours needed annually to complete the requirement or request:* 120 10. *Abstract:* Form 445, “Request for Approval of Foreign Travel,” is supplied by consultants, contractors, and NRC invited travelers who must travel to foreign countries in the course of conducting business for the NRC. In accordance with 48 CFR 20, “NRC Acquisition Regulation,” contractors traveling to foreign countries are required to complete this form. The information requested includes the name of the Office Director/Regional Administrator or Chairman, as appropriate, the traveler's identifying information, purpose of travel, listing of the trip coordinators, other NRC travelers and contractors attending the same meeting, and a proposed itinerary. A copy of the final supporting statement may be viewed free of charge at the NRC Public Document Room, One White Flint North, 11555 Rockville Pike, Room O-1 F21, Rockville, MD 20852. OMB clearance requests are available at the NRC World Wide Web site: *http://www.nrc.gov/public-involve/doc-comment/omb/index.html.* The document will be available on the NRC home page site for 60 days after the signature date of this notice. Comments and questions should be directed to the OMB reviewer listed below by August 13, 2008. Comments received after this date will be considered if it is practical to do so, but assurance of consideration cannot be given to comments received after this date. Nathan J. Frey, Office of Information and Regulatory Affairs (3150-0193), NEOB-10202, Office of Management and Budget, Washington, DC 20503. Comments can also be e-mailed to *Nathan_J._Frey@omb.eop.gov* or submitted by telephone at
(202)395-7345. The NRC Clearance Officer is Margaret A. Janney,
(301)415-7245. Dated at Rockville, Maryland, this 8th day of July, 2008. For the Nuclear Regulatory Commission. Tremaine Donnell, Acting NRC Clearance Officer, Office of Information Services. [FR Doc. E8-15926 Filed 7-11-08; 8:45 am] BILLING CODE 7590-01-P NUCLEAR REGULATORY COMMISSION [Docket Nos. 52-018-COL, 52-019-COL; ASLBP No. 08-865-03-COL-BD01] Duke Energy Carolinas, LLC; Establishment of Atomic Safety and Licensing Board Pursuant to delegation by the Commission dated December 29, 1972, published in the **Federal Register** , 37 FR 28,710 (1972), and the Commission's regulations, *see* 10 CFR 2.104, 2.300, 2.303, 2.309, 2.311, 2.318, and 2.321, notice is hereby given that an Atomic Safety and Licensing Board (Board) is being established to preside over the following proceeding; Duke Energy Carolinas, LLC (William States Lee III Nuclear Station, Units 1 and 2) This proceeding concerns a Petition to Intervene and Request for Hearing submitted by the Blue Ridge Environmental Defense League, and a request to participate in any hearing by the South Carolina Office of Regulatory Staff, which were submitted in response to an April 28, 2008 Notice of Hearing and Opportunity To Petition for Leave To Intervene on a Combined License for William States Lee III Units 1 and 2 (73 FR 22,978). The Petition to Intervene and Request for Hearing challenges the application filed by Duke Energy Carolinas, LLC, pursuant to Subpart C of 10 CFR Part 52 for a combined license for William States Lee III Nuclear Station, Units 1 and 2, which would be located in Cherokee County, South Carolina. The Board is comprised of the following administrative judges: Paul S. Ryerson, Chair, Atomic Safety and Licensing Board Panel, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; Nicholas G. Trikouros, Atomic Safety and Licensing Board Panel, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; Dr. William H. Murphy, Atomic Safety and Licensing Board Panel, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001. All correspondence, documents, and other materials shall be filed in accordance with the NRC E-Filing rule, which the NRC promulgated in August 2007 (72 FR 49,139). Issued at Rockville, Maryland, this 8th day of July 2008. Anthony J. Baratta, Associate Chief Administrative Judge—Technical, Atomic Safety and Licensing Board Panel. [FR Doc. E8-16008 Filed 7-11-08; 8:45 am] BILLING CODE 7590-01-P NUCLEAR REGULATORY COMMISSION [Docket Nos. 50-424 and 50-425] Southern Nuclear Operating Company, Inc., Georgia Power Company, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia, City of Dalton, GA, Vogtle Electric Generating Plant, Units 1 and 2; Notice of Consideration of Issuance of Amendment to Facility Operating License, Proposed No Significant Hazards Consideration Determination, and Opportunity for a Hearing and Order Imposing Procedures for Access to Sensitive Unclassified Non-Safeguards Information The U.S. Nuclear Regulatory Commission (the Commission) is considering issuance of an amendment to Facility Operating License No. NPF-68 and NPF-81 issued to the Southern Nuclear Operating Company, Inc. (the licensee), acting for itself, Georgia Power Company, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia, and City of Dalton, Georgia (the owners), for operation of the Vogtle Electric Generating Plant (VEGP), Units 1 and 2 (VEGP Units 1 and 2) located in Wayne County, Georgia. This amendment application proposes a one-time steam generator
(SG)tubing eddy current inspection interval revision to the VEGP Units 1 and 2, Technical Specifications
(TSs)5.5.9, “Steam Generator
(SG)Program,” to incorporate an interim alternate repair criterion in the provisions for SG tube repair criteria during the Unit 2 inspection performed in Refueling Outage 13 and subsequent operating cycle. This amendment application requests approval of an interim alternate repair criterion
(IARC)that requires full-length inspection of the tubes within the tubesheet but does not require plugging tubes if any axial or circumferential cracking observed in the region greater than 17 inches below the top of the tubesheet
(TTS)is less than a value sufficient to permit the remaining circumferential ligament to transmit the limiting axial loads. This amendment application is required to preclude unnecessary plugging while still maintaining structural and leakage integrity. This amendment application includes SUNSI (proprietary information). Before issuance of the proposed license amendment, the Commission will have made findings required by the Atomic Energy Act of 1954, as amended (the Act), and the Commission's regulations. The Commission has made a proposed determination that the amendment request involves no significant hazards consideration. Under the Commission's regulations in Title 10 of the Code of Federal Regulations (10 CFR), Section 50.92, this means that operation of the facility in accordance with the proposed amendment would not
(1)involve a significant increase in the probability or consequences of an accident previously evaluated; or
(2)create the possibility of a new or different kind of accident from any accident previously evaluated; or
(3)involve a significant reduction in a margin of safety. As required by 10 CFR 50.91(a), the licensee has provided its analysis of the issue of no significant hazards consideration, which is presented below:
(1)Does the proposed change involve a significant increase in the probability or consequences of an accident previously evaluated? *Response:* No. Of the various accidents previously evaluated, the proposed changes only affect the steam generator tube rupture
(SGTR)event evaluation and the postulated steam line break (SLB), locked rotor and control rod ejection accident evaluations. Loss-of-coolant accident
(LOCA)conditions cause a compressive axial load to act on the tube. Therefore, since the LOCA tends to force the tube into the tubesheet rather than pull it out, it is not a factor in this licensing amendment request. Another faulted load consideration is a safe shutdown earthquake (SSE); however, the seismic analysis of Model F steam generators has shown that axial loading of the tubes is negligible during an SSE. At normal operating pressures, leakage from primary water stress corrosion cracking (PWSCC) below 17 inches from the top of the tubesheet is limited by both the tube-to-tubesheet crevice and the limited crack opening permitted by the tubesheet constraint. Consequently, negligible normal operating leakage is expected from cracks within the tubesheet region. For the SGTR event, the required structural margins of the steam generator tubes is maintained by limiting the maximum allowable through-wall circumferential crack size to remain in service to 203 degrees below 17 inches from the top of the tubesheet and for the lower-most 1 inch limiting the maximum allowable through-wall circumferential crack size to 94 degrees, for the duration of the 18-month SG tubing eddy current inspection interval. Tube rupture is precluded for cracks in the hydraulic expansion region due to the constraint provided by the tubesheet. The potential for tube pullout is mitigated by limiting the maximum allowable through-wall circumferential crack size to remain in service to 203 degrees below 17 inches from the top of the tubesheet and for the lower-most 1 inch limiting the maximum allowable through-wall circumferential crack size 94 degrees, for the duration of the 18-month SG tubing eddy current inspection interval. These allowable crack sizes take into account eddy current uncertainty and crack growth rate. It has been shown that a circumferential crack with an azimuthal extent of 203 degrees, and to 94 degrees for the bottom 1 inch, for the 18-month SG tubing eddy current inspection interval meets the performance criteria of NEI 97-06, Rev. 2, “Steam Generator Program Guidelines” and the August 1976 draft Regulatory Guide
(RG)1.121, “Bases for Plugging Degraded PWR Steam Generator Tubes.” (Reference 14). Therefore, the margin against tube burst/pullout is maintained during normal and postulated accident conditions and the proposed change does not result in a significant increase in the probability or consequence of a SGTR. The probability of a SLB is unaffected by the potential failure of a SG tube as the failure of a tube is not an initiator for a SLB event. SLB leakage is limited by leakage flow restrictions resulting from the leakage path above potential cracks through the tube-to-tubesheet crevice. The leak rate during postulated accident conditions (including locked rotor and control rod ejection) has been shown to remain within the accident analysis assumptions for all axial or circumferentially oriented cracks occurring 17 inches below the top of the tubesheet. Since normal operating leakage is limited to 150 gpd (approximately 0.10 gpm), the attendant accident condition leak rate, assuming all leakage to be from indications below 17 inches from the top of the tubesheet, would be bounded by 0.35 gpm. This value is within the accident analysis assumptions for the limiting design basis accident for VEGP, which is the postulated SLB event. Based on the above, the performance criteria of NEI-97-06, Rev. 2 and draft [Regulatory Guide] RG 1.121 continue to be met and the proposed change does not involve a significant increase in the probability or consequences of an accident previously evaluated.
(2)Does the proposed change create the possibility of a new or different accident from any accident previously evaluated? *Response:* No. The proposed change does not introduce any changes or mechanisms that create the possibility of a new or different kind of accident. Tube bundle integrity is expected to be maintained for all plant conditions upon implementation of the interim alternate repair criterion. The proposed change does not introduce any new equipment or any change to existing equipment. No new effects on existing equipment are created nor are any new malfunctions introduced. Therefore, based on the above evaluation, the proposed changes do not create the possibility of a new or different kind of accident from any accident previously evaluated.
(3)Does the proposed change involve a significant reduction in a margin of safety? *Response:* No. The proposed change maintains the required structural margins of the steam generator tubes for both normal and accident conditions. NEI 97-06, Rev. 2 and draft RG 1.121 are used as the basis in the development of the limited tubesheet inspection depth methodology for determining that steam generator tube integrity considerations are maintained within acceptable limits. Draft RG 1.121 describes a method acceptable to the NRC staff for meeting General Design Criteria 14, 15, 31, and 32 by reducing the probability and consequences of a SGTR. Draft RG 1.121 concludes that by determining the limiting safe conditions of tube wall degradation beyond which tubes with unacceptable cracking, as established by inservice inspection, should be removed from service or repaired, the probability and consequences of a SGTR are reduced. This draft RG uses safety factors on loads for tube burst that are consistent with the requirements of Section III of the ASME Code. For axially oriented cracking located within the tubesheet, tube burst is precluded due to the presence of the tubesheet. For circumferentially oriented cracking in a tube or the tube-to-tubesheet weld, Reference 3 defines a length of remaining tube ligament that provides the necessary resistance to tube pullout due to the pressure induced forces (with applicable safety factors applied). Additionally, it is shown that application of the limited tubesheet inspection depth criteria will not result in unacceptable primary-to-secondary leakage during all plant conditions. Based on the above, it is concluded that the proposed changes do not result in any reduction of margin with respect to plant safety as defined in the Updated Safety Analysis Report or bases of the plant Technical Specifications. The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. The Commission is seeking public comments on this proposed determination. Any comments received within 30 days after the date of publication of this notice will be considered in making any final determination. Normally, the Commission will not issue the amendment until the expiration of 60 days after the date of publication of this notice. The Commission may issue the license amendment before expiration of the 60-day period provided that its final determination is that the amendment involves no significant hazards consideration. In addition, the Commission may issue the amendment prior to the expiration of the 30-day comment period should circumstances change during the 30-day comment period such that failure to act in a timely way would result, for example, in derating or shutdown of the facility. Should the Commission take action prior to the expiration of either the comment period or the notice period, it will publish in the **Federal Register** a notice of issuance. Should the Commission make a final No Significant Hazards Consideration Determination, any hearing will take place after issuance. The Commission expects that the need to take this action will occur very infrequently. Written comments may be submitted by mail to the Chief, Rulemaking, Directives and Editing Branch, Division of Administrative Services, Office of Administration, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, and should cite the publication date and page number of this **Federal Register** notice. Written comments may also be delivered to Room 6D59, Two White Flint North, 11545 Rockville Pike, Rockville, Maryland, from 7:30 a.m. to 4:15 p.m. Federal workdays. Documents may be examined, and/or copied for a fee, at the NRC's Public Document Room (PDR), located at One White Flint North, Public File Area O1F21, 11555 Rockville Pike (first floor), Rockville, Maryland. The filing of requests for hearing and petitions for leave to intervene is discussed below. Within 60 days after the date of publication of this notice, the person(s) may file a request for a hearing with respect to issuance of the amendment to the subject facility operating license and any person(s) whose interest may be affected by this proceeding and who wishes to participate as a party in the proceeding must file a written request via electronic submission through the NRC E-filing system for a hearing and a petition for leave to intervene. Requests for a hearing and a petition for leave to intervene shall be filed in accordance with the Commission's “Rules of Practice for Domestic Licensing Proceedings” in 10 CFR part 2. Interested person(s) should consult a current copy of 10 CFR 2.309, which is available at the Commission's PDR, located at One White Flint North, Public File Area O1F21, 11555 Rockville Pike (first floor), Rockville, Maryland. Publicly available records will be accessible from the Agencywide Documents Access and Management System's (ADAMS) Public Electronic Reading Room on the Internet at the NRC Web site, *http://www.nrc.gov/reading-rm/doc-collections/cfr/.* If a request for a hearing or petition for leave to intervene is filed by the above date, the Commission or a presiding officer designated by the Commission or by the Chief Administrative Judge of the Atomic Safety and Licensing Board Panel, will rule on the request and/or petition; and the Secretary or the Chief Administrative Judge of the Atomic Safety and Licensing Board will issue a notice of a hearing or an appropriate order. As required by 10 CFR 2.309, a petition for leave to intervene shall set forth with particularity the interest of the petitioner in the proceeding, and how that interest may be affected by the results of the proceeding. The petition should specifically explain the reasons why intervention should be permitted with particular reference to the following general requirements:
(1)The name, address and telephone number of the requestor or petitioner;
(2)the nature of the requestor's/petitioner's right under the Act to be made a party to the proceeding;
(3)the nature and extent of the requestor's/petitioner's property, financial, or other interest in the proceeding; and
(4)the possible effect of any decision or order which may be entered in the proceeding on the requestor's/petitioner's interest. The petition must also identify the specific contentions which the petitioner/requestor seeks to have litigated at the proceeding. Each contention must consist of a specific statement of the issue of law or fact to be raised or controverted. In addition, the petitioner/requestor shall provide a brief explanation of the bases for the contention and a concise statement of the alleged facts or expert opinion which support the contention and on which the petitioner intends to rely in proving the contention at the hearing. The petitioner/requestor must also provide references to those specific sources and documents of which the petitioner is aware and on which the petitioner intends to rely to establish those facts or expert opinion. The petition must include sufficient information to show that a genuine dispute exists with the applicant on a material issue of law or fact. Contentions shall be limited to matters within the scope of the amendment under consideration. The contention must be one which, if proven, would entitle the petitioner to relief. A petitioner/requestor who fails to satisfy these requirements with respect to at least one contention will not be permitted to participate as a party. Those permitted to intervene become parties to the proceeding, subject to any limitations in the order granting leave to intervene, and have the opportunity to participate fully in the conduct of the hearing. If a hearing is requested, the Commission will make a final determination on the issue of no significant hazards consideration. The final determination will serve to decide when the hearing is held. If the final determination is that the amendment request involves no significant hazards consideration, the Commission may issue the amendment and make it immediately effective, notwithstanding the request for a hearing. Any hearing held would take place after issuance of the amendment. If the final determination is that the amendment request involves a significant hazards consideration, any hearing held would take place before the issuance of any amendment. A request for hearing or a petition for leave to intervene must be filed in accordance with the NRC E-Filing rule, which the NRC promulgated on August 28, 2007 (72 FR 49139). The E-Filing process requires participants to submit and serve documents over the Internet or in some cases to mail copies on electronic storage media. Participants may not submit paper copies of their filings unless they seek a waiver in accordance with the procedures described below. To comply with the procedural requirements of E-Filing, at least ten
(10)days prior to the filing deadline, the petitioner/ requestor must contact the Office of the Secretary by e-mail at *hearingdocket@nrc.gov* , or by calling
(301)415-1677, to request
(1)a digital ID certificate, which allows the participant (or its counsel or representative) to digitally sign documents and access the E-Submittal server for any proceeding in which it is participating; and/or
(2)creation of an electronic docket for the proceeding (even in instances in which the petitioner/requestor (or its counsel or representative) already holds an NRC-issued digital ID certificate). Each petitioner/requestor will need to download the Workplace Forms Viewer TM to access the Electronic Information Exchange (EIE), a component of the E-Filing system. The Workplace Forms Viewer TM is free and is available at *http://www.nrc.gov/site-help/e-submittals/install-viewer.html* . Information about applying for a digital ID certificate is available on NRC's public Web site at *http://www.nrc.gov/site-help/e-submittals/apply-certificates.html* . Once a petitioner/requestor has obtained a digital ID certificate, had a docket created, and downloaded the EIE viewer, it can then submit a request for hearing or petition for leave to intervene. Submissions should be in Portable Document Format
(PDF)in accordance with NRC guidance available on the NRC public Web site at *http://www.nrc.gov/site-help/e-submittals.html* . A filing is considered complete at the time the filer submits its documents through EIE. To be timely, an electronic filing must be submitted to the EIE system no later than 11:59 p.m., Eastern Time on the due date. Upon receipt of a transmission, the E-Filing system time-stamps the document and sends the submitter an e-mail notice confirming receipt of the document. The EIE system also distributes an e-mail notice that provides access to the document to the NRC Office of the General Counsel and any others who have advised the Office of the Secretary that they wish to participate in the proceeding, so that the filer need not serve the documents on those participants separately. Therefore, applicants and other participants (or their counsel or representative) must apply for and receive a digital ID certificate before a hearing request/petition to intervene is filed so that they can obtain access to the document via the E-Filing system. A person filing electronically may seek assistance through the “Contact Us” link located on the NRC Web site at *http://www.nrc.gov/site-help/e-submittals.html* or by calling the NRC technical help line, which is available between 8:30 a.m. and 4:15 p.m., Eastern Time, Monday through Friday. The help line number is
(800)397-4209 or locally,
(301)415-4737. Participants who believe that they have a good cause for not submitting documents electronically must file a motion, in accordance with 10 CFR 2.302(g), with their initial paper filing requesting authorization to continue to submit documents in paper format. Such filings must be submitted by:
(1)First class mail addressed to the Office of the Secretary of the Commission, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, Attention: Rulemaking and Adjudications Staff; or
(2)courier, express mail, or expedited delivery service to the Office of the Secretary, Sixteenth Floor, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852, Attention: Rulemaking and Adjudications Staff. Participants filing a document in this manner are responsible for serving the document on all other participants. Filing is considered complete by first-class mail as of the time of deposit in the mail, or by courier, express mail, or expedited delivery service upon depositing the document with the provider of the service. Non-timely requests and/or petitions and contentions will not be entertained absent a determination by the Commission, the presiding officer, or the Atomic Safety and Licensing Board that the petition and/or request should be granted and/or the contentions should be admitted, based on a balancing of the factors specified in 10 CFR 2.309(c)(1)(i)-(viii). To be timely, filings must be submitted no later than 11:59 p.m., Eastern Time on the due date. Documents submitted in adjudicatory proceedings will appear in NRC's electronic hearing docket which is available to the public at *http://ehd.nrc.gov/EHD_Proceeding/home.asp* , unless excluded pursuant to an order of the Commission, an Atomic Safety and Licensing Board, or a Presiding Officer. Participants are requested not to include personal privacy information, such as social security numbers, home addresses, or home phone numbers in their filings. With respect to copyrighted works, except for limited excerpts that serve the purpose of the adjudicatory filings and would constitute a Fair Use application, participants are requested not to include copyrighted materials in their submissions. For further details with respect to this license amendment application, see the application for amendment dated April 14, 2008, which is available for public inspection at the Commission's PDR, located at One White Flint North, File Public Area O1 F21, 11555 Rockville Pike (first floor), Rockville, Maryland. Publicly available records will be accessible electronically from the Agencywide Documents Access and Management System's (ADAMS) Public Electronic Reading Room on the Internet at the NRC Web site, *http://www.nrc.gov/reading-rm/adams.html* . Persons who do not have access to ADAMS or who encounter problems in accessing the documents located in ADAMS should contact the NRC PDR Reference staff by telephone at 1-800-397-4209, 301-415-4737, or by e-mail to *pdr.resource@nrc.gov* . Order Imposing Procedures for Access to Sensitive Unclassified Non-Safeguards Information (SUNSI) for Contention Preparation Southern Nuclear Operating Company, Inc., Georgia Power Company, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia, City of Dalton, GA, Vogtle Electric Generating Plant, Units 1 and 2, Docket Nos. 50-424 and 50-425 1. This order contains instructions regarding how potential parties to this proceeding may request access to documents containing sensitive unclassified information (including SUNSI and SGI). 2. Within ten
(10)days after publication of this notice of opportunity for hearing, any potential party as defined in 10 CFR 2.4 who believes access to SUNSI or SGI is necessary for a response to the notice may request access to SUNSI or SGI. A “potential party” is any person who intends or may intend to participate as a party by demonstrating standing and the filing of an admissible contention under 10 CFR 2.309. Requests submitted later than ten
(10)days will not be considered absent a showing of good cause for the late filing, addressing why the request could not have been filed earlier. 3. The requester shall submit a letter requesting permission to access SUNSI and/or SGI to the Office of the Secretary, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, Attention: Rulemakings and Adjudications Staff, and provide a copy to the Associate General Counsel for Hearings, Enforcement and Administration, Office of the General Counsel, Washington, DC 20555-0001. The expedited delivery or courier mail address for both offices is U.S. Nuclear Regulatory Commission, 11555 Rockville Pike, Rockville, Maryland 20852. The e-mail address for the Office of the Secretary and the Office of the General Counsel are *HearingDocket@nrc.gov* and *OGCmail@nrc.gov* , respectively. 1 The request must include the following information: 1 See footnote 6. While a request for hearing or petition to intervene in this proceeding must comply with the filing requirements of the NRC's “E-Filing Rule,” the initial request to access SUNSI and/or SGI under these procedures should be submitted as described in this paragraph. a. A description of the licensing action with a citation to this **Federal Register** notice of opportunity for hearing; b. The name and address of the potential party and a description of the potential party's particularized interest that could be harmed by the licensing action identified in
(a)if the licensing action is not sustained; c. If the request is for SUNSI, the identity of the individual requesting access to SUNSI and the requester's need for the information in order to meaningfully participate in this adjudicatory proceeding, particularly why publicly available versions of the application would not be sufficient to provide the basis and specificity for a proffered contention; d. If the request is for SGI, the identity of the individual requesting access to SGI and the identity of any expert, consultant or assistant who will aid the requester in evaluating the SGI, and information that shows:
(i)Why the information is indispensable to meaningful participation in this licensing proceeding; and
(ii)The technical competence (demonstrable knowledge, skill, experience, training or education) of the requester to understand and use (or evaluate) the requested information to provide the basis and specificity for a proffered contention. The technical competence of a potential party or its counsel may be shown by reliance on a qualified expert, consultant or assistant who demonstrates technical competence as well as trustworthiness and reliability, and who agrees to sign a non-disclosure affidavit and be bound by the terms of a protective order; and e. If the request is for SGI, Form SF-85, “Questionnaire for Non-Sensitive Positions,” Form FD-258 (fingerprint card), and a credit check release form completed by the individual who seeks access to SGI and each individual who will aid the requester in evaluating the SGI. For security reasons, Form SF-85 can only be submitted electronically, through a restricted-access database. To obtain online access to the form, the requester should contact the NRC's Office of Administration at 301-415-0320. 2 The other completed forms must be signed in original ink, accompanied by a check or money order payable in the amount of $191 to the U.S. Nuclear Regulatory Commission for each individual, and mailed to the: Office of Administration, Security Processing Unit, Mail Stop T-6E46, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0012. 2 The requester will be asked to provide his or her full name, social security number, date and place of birth, telephone number, and e-mail address. After providing this information, the requester usually should be able to obtain access to the online form within one business day. These forms will be used to initiate the background check, which includes fingerprinting as part of a criminal history records check. Note: Copies of these forms do *not* need to be included with the request letter to the Office of the Secretary, but the request letter should state that the forms and fees have been submitted as described above. 4. To avoid delays in processing requests for access to SGI, all forms should be reviewed for completeness and accuracy (including legibility) before submitting them to the NRC. Incomplete packages will be returned to the sender and will not be processed. 5. Based on an evaluation of the information submitted under items 2 and 3.a through 3.d, above, the NRC staff will determine within ten days of receipt of the written access request whether
(1)there is a reasonable basis to believe the petitioner is likely to establish standing to participate in this NRC proceeding, and
(2)there is a legitimate need for access to SUNSI or need to know the SGI requested. For SGI, the need to know determination is made based on whether the information requested is necessary ( *i.e.* , indispensable) for the proposed recipient to proffer and litigate a specific contention in this NRC proceeding 3 and whether the proposed recipient has the technical competence (demonstrable knowledge, skill, training, education, or experience) to evaluate and use the specific SGI requested in this proceeding. 3 Broad SGI requests under these procedures are thus highly unlikely to meet the standard for need to know; furthermore, staff redaction of information from requested documents before their release may be appropriate to comport with this requirement. These procedures do not authorize unrestricted disclosure or less scrutiny of a requester's need to know than ordinarily would be applied in connection with an already-admitted contention. 6. If standing and need to know SGI are shown, the NRC staff will further determine based upon completion of the background check whether the proposed recipient is trustworthy and reliable. The NRC staff will conduct (as necessary) an inspection to confirm that the recipient's information protection systems are sufficient to protect SGI from inadvertent release or disclosure. Recipients may opt to view SGI at the NRC's facility rather than establish their own SGI protection program to meet SGI protection requirements. 7. A request for access to SUNSI or SGI will be granted if: a. The request has demonstrated that there is a reasonable basis to believe that a potential party is likely to establish standing to intervene or to otherwise participate as a party in this proceeding; b. The proposed recipient of the information has demonstrated a need for SUNSI or a need to know for SGI, and that the proposed recipient of SGI is trustworthy and reliable; c. The proposed recipient of the information has executed a Non-Disclosure Agreement or Affidavit and agrees to be bound by the terms of a Protective Order setting forth terms and conditions to prevent the unauthorized or inadvertent disclosure of SUNSI and/or SGI; and d. The presiding officer has issued a protective order concerning the information or documents requested. 4 Any protective order issued shall provide that the petitioner must file SUNSI or SGI contentions 25 days after receipt of (or access to) that information. However, if more than 25 days remain between the petitioner's receipt of (or access to) the information and the deadline for filing all other contentions (as established in the notice of hearing or opportunity for hearing), the petitioner may file its SUNSI or SGI contentions by that later deadline. 4 If a presiding officer has not yet been designated, the Chief Administrative Judge will issue such orders, or will appoint a presiding officer to do so. 8. If the request for access to SUNSI or SGI is granted, the terms and conditions for access to sensitive unclassified information will be set forth in a draft protective order and affidavit of non-disclosure appended to a joint motion by the NRC staff, any other affected parties to this proceeding, 5 and the petitioner(s). If the diligent efforts by the relevant parties or petitioner(s) fail to result in an agreement on the terms and conditions for a draft protective order or non-disclosure affidavit, the relevant parties to the proceeding or the petitioner(s) should notify the presiding officer within five
(5)days, describing the obstacles to the agreement. 5 Parties/persons other than the requester and the NRC staff will be notified by the NRC staff of a favorable access determination (and may participate in the development of such a motion and protective order) if it concerns SUNSI and if the party/person's interest independent of the proceeding would be harmed by the release of the information ( *e.g.* , as with proprietary information). 9. If the request for access to SUNSI is denied by the NRC staff or a request for access to SGI is denied by NRC staff either after a determination on standing and need to know or, later, after a determination on trustworthiness and reliability, the NRC staff shall briefly state the reasons for the denial. Before the Office of Administration makes an adverse determination regarding access, the proposed recipient must be provided an opportunity to correct or explain information. The requester may challenge the NRC staff's adverse determination with respect to access to SUNSI or with respect to standing or need to know for SGI by filing a challenge within five
(5)days of receipt of that determination with
(a)the presiding officer designated in this proceeding;
(b)if no presiding officer has been appointed, the Chief Administrative Judge, or if he or she is unavailable, another administrative judge, or an administrative law judge with jurisdiction pursuant to 10 CFR 2.318(a); or
(c)if another officer has been designated to rule on information access issues, with that officer. In the same manner, an SGI requester may challenge an adverse determination on trustworthiness and reliability by filing a challenge within fifteen
(15)days of receipt of that determination. In the same manner, a party other than the requester may challenge an NRC staff determination granting access to SUNSI whose release would harm that party's interest independent of the proceeding. Such a challenge must be filed within five
(5)days of the notification by the NRC staff of its grant of such a request. If challenges to the NRC staff determinations are filed, these procedures give way to the normal process for litigating disputes concerning access to information. The availability of interlocutory review by the Commission of orders ruling on such NRC staff determinations (whether granting or denying access) is governed by 10 CFR 2.311. 6 6 As of October 15, 2007, the NRC's final “E-Filing Rule” became effective. See Use of Electronic Submissions in Agency Hearings (72 FR 49139; Aug. 28, 2007). Requesters should note that the filing requirements of that rule apply to appeals of NRC staff determinations (because they must be served on a presiding officer or the Commission, as applicable), but not to the initial SUNSI/SGI requests submitted to the NRC staff under these procedures. 10. The Commission expects that the NRC staff and presiding officers (and any other reviewing officers) will consider and resolve requests for access to SUNSI and/or SGI, and motions for protective orders, in a timely fashion in order to minimize any unnecessary delays in identifying those intervenors/petitioners who have standing and who have propounded contentions meeting the specificity and basis requirements in 10 CFR part 2. Attachment 1 to this Order summarizes the general target schedule for processing and resolving requests under these procedures. Dated at Rockville, Maryland, this 8th day of July 2008. For the Nuclear Regulatory Commission. Annette L. Vietti-Cook, Secretary of the Commission. Attachment 1.—General Target Schedule for Processing and Resolving Requests for Access to Sensitive Unclassified Non-Safeguards Information (SUNSI) and Safeguards Information
(SGI)in This Proceeding Day Event/activity 0 Publication of Federal Register notice of proposed action and opportunity for hearing, including order with instructions for access requests. 10 Deadline for submitting requests for access to SUNSI and/or SGI with information: supporting the standing of a potential party identified by name and address; describing the need for the information in order for the potential party to participate meaningfully in an adjudicatory proceeding; demonstrating that access should be granted (e.g., showing technical competence for access to SGI); and, for SGI, including application fee for fingerprint/background check. [20, 30 or 60] Deadline for submitting petition for intervention containing:
(i)Demonstration of standing;
(ii)all contentions whose formulation does not require access to SUNSI and/or SGI (+25 Answers to petition for intervention; +7 petitioner/requestor reply). 20 NRC staff informs the requester of the staff's determination whether the request for access provides a reasonable basis to believe standing can be established and shows
(1)need for SUNSI, or
(2)need to know for SGI. (For SUNSI, NRC staff also informs any party to the proceeding whose interest independent of the proceeding would be harmed by the release of the information.) If NRC staff makes the finding of need for SUNSI and likelihood of standing, NRC staff begins document processing (preparation of redactions or review of redacted documents). If NRC staff makes the finding of need to know for SGI and likelihood of standing, NRC staff begins background check (including fingerprinting for a criminal history records check), information processing (preparation of redactions or review of redacted documents), and readiness inspections. 25 If NRC staff finds no “need,” “need to know,” or likelihood of standing, the deadline for petitioner/requester to file a motion seeking a ruling to reverse the NRC staff's denial of access; NRC staff files copy of access determination with the presiding officer (or Chief Administrative Judge or other designated officer, as appropriate). If NRC staff finds “need” for SUNSI, the deadline for any party to the proceeding whose interest independent of the proceeding would be harmed by the release of the information to file a motion seeking a ruling to reverse the NRC staff's grant of access. 30 Deadline for NRC staff reply to motions to reverse NRC staff determination(s). 40 (Receipt +30) If NRC staff finds standing and need for SUNSI, deadline for NRC staff to complete information processing and file motion for Protective Order and draft Non-Disclosure Affidavit. Deadline for applicant/licensee to file Non-Disclosure Agreement for SUNSI. 190 (Receipt +180) If NRC staff finds standing, need to know for SGI, and trustworthiness and reliability, deadline for NRC staff to file motion for Protective Order and draft Non-disclosure Affidavit (or to make a determination that the proposed recipient of SGI is not trustworthy or reliable). Note: Before the Office of Administration makes an adverse determination regarding access, the proposed recipient must be provided an opportunity to correct or explain information. 205 Deadline for petitioner to seek reversal of a final adverse NRC staff determination either before the presiding officer or another designated officer. A If access granted: Issuance of presiding officer or other designated officer decision on motion for protective order for access to sensitive information (including schedule for providing access and submission of contentions) or decision reversing a final adverse determination by the NRC staff. A + 3 Deadline for filing executed Non-Disclosure Affidavits. Access provided to SUNSI and/or SGI consistent with decision issuing the protective order. A + 28 Deadline for submission of contentions whose development depends upon access to SUNSI and/or SGI. However, if more than 25 days remain between the petitioner's receipt of (or access to) the information and the deadline for filing all other contentions (as established in the notice of hearing or opportunity for hearing), the petitioner may file its SUNSI or SGI contentions by that later deadline. A + 53 (Contention receipt +25) Answers to contentions whose development depends upon access to SUNSI and/or SGI. A + 60 (Answer receipt +7) Petitioner/Intervenor reply to answers. B Decision on contention admission. 205 Deadline for petitioner to seek reversal of a final adverse NRC staff determination either before the presiding officer or another designated officer. [FR Doc. E8-16042 Filed 7-11-08; 8:45 am] BILLING CODE 7590-01-P SECURITIES AND EXCHANGE COMMISSION Proposed Collection; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549-0213. Extension: Rule 17f-2(c); SEC File No. 270-35; OMB Control No. 3235-0029. 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”) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval. • Rule 17f-2(c) (17 CFR 240.17f-2(c)). Rule 17f-2(c) allows persons required to be fingerprinted pursuant to Section 17(f)(2) of the Securities Exchange Act of 1934 to submit their fingerprints through a registered securities exchange or a national securities association in accordance with a plan submitted to and approved by the Commission. The Commission has approved such plans for several exchanges and for the Financial Industry Regulatory Authority, Inc. (“FINRA”). It is estimated that 5,984 respondents submit approximately 368,000 fingerprint cards to exchanges or a national securities association on an annual basis. The Commission estimates that it would take approximately 15 minutes to create and submit each fingerprint card. The total reporting burden is therefore estimated to be 92,000 hours, or approximately 15 hours per respondent, annually. In addition, the exchanges and FINRA charge an estimated $30 fee for processing fingerprint cards, resulting in a total annual cost to all 5,984 respondents of $11,040,000, or $1,845 per respondent per year. Because the Federal Bureau of Investigation will not accept fingerprint cards directly from submitting organizations, Commission approval of plans from certain exchanges and national securities associations is essential to the Congressional goal of fingerprint personnel in the security industry. The filing of these plans for review assures users and their personnel that fingerprint cards will be handled responsibly and with due care for confidentiality. *Written comments are invited on:*
(a)Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(b)the accuracy of the agency's estimate of the burden of the collection of information;
(c)ways to enhance the quality, utility, and clarity of the information collected; and
(d)ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to Lewis W. Walker, Acting Director/Chief Information Officer, Securities and Exchange Commission, c/o Shirley Martinson, 6432 General Green Way, Alexandria, Virginia, 22312; or send an e-mail to: *PRA_Mailbox@sec.gov* . Dated: July 7, 2008. Florence E. Harmon, Acting Secretary. [FR Doc. E8-15904 Filed 7-11-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION Proposed Extension of Existing Collection; Comment Request Upon Written Request, Copies Available From: U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549-0213. *Extension:* Rule 17a-19; OMB Control No. 3235-0133; SEC File No. 270-148; Form X-17A-19. 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”) is soliciting comments on the existing collection of information provided for in the following rule: Rule 17a-19 (17 CFR 240.17a-19) and Form X-17A-19 (17 CFR 249.635) under the Securities Exchange Act of 1934 (15 U.S.C. 78a *et seq.* ) (“Exchange Act”). The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval. Rule 17a-19 requires every national securities exchange and registered national securities association to file a Form X-17A-19 with the Commission within 5 business days of the initiation, suspension, or termination of any member and, when terminating the membership interest of any member, to notify that member of its obligation to file financial reports as required by Exchange Act Rule 17a-5(b) (17 CFR 240.17a-5). The Commission uses the information contained in Form X-17A-19 to assign the appropriate self-regulatory organization to be the designated examining authority for the member firm. This information is also used by the Securities Investor Protection Corporation (“SIPC”) in determining which self-regulatory body is the collection agent for the SIPC fund. The information requested by Form X-17A-19 is obtained from the respondent's membership files. The Commission staff estimates that, in its experience, Form X-17A-19 can be completed and signed within 15 minutes. The number of responses per year per respondent varies, depending on the number of membership changes reported. The number of filings is approximately 600 per year. The aggregate time spent by all respondents per year in complying with the rule is therefore approximately 150 hours (600 responses times 1/4 hour equals 150 hours). Written comments are invited on:
(a)Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility;
(b)the accuracy of the Commission's estimates of the burden of the proposed collection of information;
(c)ways to enhance the quality, utility, and clarity of the information to be collected; and
(d)ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Comments should be directed to Lewis W. Walker, Acting 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* . Dated: July 7, 2008. Florence E. Harmon, Acting Secretary. [FR Doc. E8-15905 Filed 7-11-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58110; File No. SR-BSE-2008-34] Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Permit the Listing and Trading of Options on Foreign Currency ETFs and Commodity Pool ETFs July 7, 2008. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on June 27, 2008, 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 and II below, which Items have been substantially prepared by the Exchange. The Exchange filed the proposed rule change as a “non-controversial” proposed rule change pursuant to section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend certain rules of the Boston Options Exchange (“BOX”) to permit the listing and trading of options on:
(1)Shares of exchange-traded funds (“ETFs”) that hold specified non-U.S. currency options, futures, or options on futures on such currency, or any other derivatives based on such currency (referred collectively herein as “Foreign Currency ETFs”); and
(2)trust-issued receipts (“TIRs”), partnership units, and securities issued by other entities that hold or invest in commodity futures products (referred collectively herein as “Commodity Pool ETFs”). The text of the proposed rule change is available at the principal office of the Exchange, the Commission's Public Reference Room, and *http://www.bostonstock.com.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. 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 enable the listing and trading on BOX of options on Foreign Currency ETFs and Commodity Pool ETFs. Currently, section 3(i) of Chapter IV of the BOX Rules provides that securities deemed appropriate for options trading shall include shares or other securities (“Exchange-Traded Fund Shares”) that are traded on a national securities exchange and represent interests in registered investment companies, unit investment trusts, or similar entities that hold portfolios of securities and/or financial instruments, including, but not limited to, stock index futures contracts, options on futures, options on securities and indexes, equity caps, collars and floors, swap agreements, forward contracts, repurchase agreements, and reverse repurchase agreements (“Financial Instruments”), and money market instruments, including but not limited to U.S. government securities and repurchase agreements (the “Money Market Instruments”), comprising or otherwise based on or representing investments in broad-based indexes or portfolios of securities and/or Financial Instruments and Money Market Instruments (or that hold securities in one or more other registered investment companies that themselves hold such portfolios of securities and/or Financial Instruments and Money Market Instruments). The Exchange proposes to amend section 3(i) of Chapter IV of the BOX Rules to expand the types of options listed and traded on BOX to include options on: • Trusts that hold a specified non-U.S. currency or currencies deposited which when aggregated in some specified minimum number may be surrendered to the trust by the beneficial owner to receive the specified non-U.S. currency or currencies and pays the beneficial owner interest and other distributions on the deposited non-U.S. currency or currencies, if any, declared and paid by the trust; and • Shares issued by an entity holding commodity pool interests principally engaged, directly or indirectly, in holding and/or managing portfolios or baskets of securities, commodity futures contracts, options on commodity futures contracts, swaps, forward contracts, and/or options on physical commodities and/or non-U.S. currency. In particular, the proposed amendment to section 3(i) of Chapter IV would permit the Exchange to list options on the CurrencyShares Euro Trust (“Trust”) 5 which issues Euro CurrencyShares (“Shares”) 6 and other similarly structured currency-based products. 5 Rydex Specialized Products LLC, d/b/a “Rydex Investments,” is the sponsor of the Trust (“Sponsor”) and may be deemed the “issuer” of the Shares pursuant to Section 2(a)(4) of the Securities Act of 1933. The Bank of New York is the trustee of the Trust (“Trustee”); JPMorgan Chase Bank, N.A., London Branch, is the depository for the Trust (“Depository”); and Rydex Distributors, Inc. is the distributor for the Trust (“Distributor”). The Trust intends to issue additional Shares on a continuous basis through the Trustee. 6 The Shares are listed and trade on NYSE Arca under the symbol “FXE.” The Shares may also trade in other markets. The investment objective of Foreign Currency ETFs is for the shares of a particular fund to reflect the price of the particular foreign currency held therein. They are intended to provide institutional and retail investors with a simple, cost-effective means of gaining investment benefits similar to those of holding the particular foreign currency whose value is reflected. Additionally, the proposed amendment to section 3(i) of Chapter IV would permit the Exchange to list options on Commodity Pool ETFs. Commodity Pool ETFs may hold or trade in one or more types of investments that may include any combination of securities, commodity futures contracts, options on commodity futures contracts, swaps, and forward contracts. Proposed section 3(i) of Chapter IV of the BOX Rules sets forth that for BOX to list an option on a Commodity Pool ETF, the Commodity Pool ETF must be traded on a national securities exchange and defined as an “NMS stock” under Rule 600 of Regulation NMS. The Exchange believes that permitting options on Foreign Currency ETFs and Commodity Pool ETFs to be traded on BOX is consistent with the Commission's approvals of rule changes filed by the International Securities Exchange (“ISE”) and NYSE Arca to list and trade shares of the Trust and similarly structured currency-based products. 7 This rule change to BOX's listing criteria for ETFs is intended to provide appropriate listing standards and is necessary to enable the Exchange to list and trade options shares of Foreign Currency ETFs and Commodity Pool ETFs that are now listed or may be listed in the future. 8 The Exchange believes that it is reasonable to expect other types of Foreign Currency ETFs and Commodity Pool ETFs to be introduced for trading in the near future. The proposed amendment to the Exchange's listing criteria for options on Foreign Currency ETFs and Commodity Pool ETFs are necessary to ensure that the Exchange will be able to list options on existing Foreign Currency ETFs and Commodity Pool ETFs as well as any other similar ETFs that may be listed and traded in the future. 7 *See* Securities Exchange Act Release Nos. 54087 (June 30, 2006), 71 FR 38918 (July 10, 2006) (SR-ISE-2005-60) (approving the listing and trading of options on ETFs that hold specified non-U.S. currency); 54730 (November 9, 2006), 71 FR 66999 (November 17, 2006) (SR-NYSEArca-2006-04) (approving the listing and trading of options on ETFs that hold specified non-U.S. currency); 55635 (April 16, 2007), 72 FR 19999 (April 20, 2007) (SR-ISE-2007-16) (approving the listing and trading of options on Commodity Pool ETFs); and 56073 (July 13, 2007) 72 FR 39654 (July 19, 2007) (SR-NYSEArca-2007-53) (approving the listing and trading of options on Commodity Pool ETFs). 8 *See, e.g.* , Securities Exchange Act Release Nos. 53105 (January 11, 2006), 71 FR 3129 (SR-Amex-2005-59) (January 19, 2006) (approving the listing and trading of the DB Commodity Index Tracking Fund); 53582 (March 31, 2006), 71 FR 17510 (SR-Amex-2005-127) (April 6, 2006) (approving the listing and trading of Units of the United States Oil Fund, L.P.); and 54450 (September 14, 2006), 71 FR 51245 (September 21, 2006) (SR-Amex-2006-44) (approving the listing and trading of the PowerShares DB G10 Currency Harvest Fund). ETFs on which BOX-listed options are based have to satisfy the listing standards in section 3(i) of Chapter IV of the BOX Rules. Specifically, the Exchange-Traded Fund Shares must be traded on a national securities exchange or through the facilities of a national securities association and must be an “NMS stock” as defined under Rule 600 of Regulation NMS. The ETF must also either:
(1)Meet the criteria and guidelines under sections 3(a) and 3(b) of Chapter IV (Criteria for Underlying Securities); or
(2)be available for creation or redemption each business day from and through the issuer in cash or in-kind at a price related to net asset value. In addition, the trust, commodity pool, or other similar entity shall provide that shares may be created even if some or all of the investment assets and/or cash required to be deposited have not been received by the issuer, subject to the condition that the person obligated to deposit the investment assets has undertaken to deliver the shares as soon as possible and such undertaking has been secured by the delivery and maintenance of collateral consisting of cash or cash equivalents satisfactory to the issuer. Under the applicable continued listing criteria in section 4(h) of Chapter IV of the BOX Rules, ETF options approved for trading would not be deemed to meet the requirements for continued approval, and Boston Options Exchange Regulation (“BOXR”) would not open for trading any additional series of options contracts of the class covering such ETF in any of the following circumstances: • The ETF is halted from trading on its primary market; • The ETF is delisted in accordance with the terms of Section 4(b)(vi) of Chapter IV of the BOX Rules; • Following the initial 12-month period beginning upon the commencement of trading of the ETF, there are fewer than 50 record and/or beneficial holders of such ETF for 30 or more consecutive trading days; • The value of the index or portfolio of securities or non-U.S. currency, portfolio of commodities including commodity futures contracts, options on commodity futures contracts, swaps, forward contracts and/or options on physical commodities and/or Financial Instruments and Money Market Instruments on which the ETF is based is no longer calculated or available; or • Such other event occurs or condition exists that in the opinion of BOXR makes further dealing of the options on BOX inadvisable. As part of this revision, the Exchange proposes to add paragraphs (i)(B)(iv) and (i)(B)(v) to section 3 of Chapter IV of the BOX Rules to require that, for Foreign Currency ETFs and Commodity Pool ETFs, a comprehensive surveillance sharing agreement be in place with the marketplace(s) with last-sale reporting that represent the highest volume in the underlying derivatives. Such derivatives consist of options or futures on the specified non-U.S. currency, commodity futures contracts, and/or options on commodity futures contracts on the specified commodities or non-U.S. currency, which are utilized by the national securities exchange where the underlying Foreign Currency ETFs and Commodity Pool ETFs are listed and traded. The Exchange represents that it has an adequate surveillance program in place for options based on Foreign Currency ETFs and Commodity Pool ETFs, and intends to apply those same program procedures that it applies to ETF options currently traded on BOX. In addition, BOX may obtain trading information via the Intermarket Surveillance Group (“ISG”) from other exchanges who are members or affiliates of the ISG. 9 The Exchange represents that prior to listing and trading options on Foreign Currency ETFs and Commodity Pool ETFs, it will have the ability to obtain specific trading information either via ISG or from the exchange or exchanges where the particular underlying non-U.S. currency futures and/or options and commodity futures and/or options on commodity futures are traded. 10 9 For a list of current members and affiliate members of the ISG, *see http://www.isgportal.com.* 10 E-mail from Maura Looney, Associate Vice President Regulation and Enforcement, Exchange, to Michou H.M. Nguyen, Special Counsel, Division of Trading and Markets, Commission, on July 7, 2008 (correcting drafting error in purpose section of Form 19b-4). The Exchange is also proposing to amend section 4(a) of Chapter III of the BOX Rules to require each Options Participant to establish, maintain, and enforce written policies and procedures to prevent the misuse of material nonpublic information it might have or receive regarding applicable non-U.S. currency; non-U.S. currency options, futures, or options on futures on such currency; or any other derivatives on such currency, option, or derivative, or regarding the applicable related commodity, commodity futures, options on commodity futures, or any other related commodity derivatives. The Exchange is further proposing to amend section 7 of Chapter VI and Section 1 of Chapter VIII of the BOX Rules to ensure that market makers handling options on ETFs provide BOXR with all necessary information relating to their trading in the applicable non-U.S. currency; non-U.S. currency options, futures, or options on futures on such currency; any other derivatives based on such currency; physical commodities; physical commodity options; and commodity futures contracts, options on commodity futures contracts, or any other derivatives based on such commodity, and that all such trading occurs in an account which has been reported to BOXR. Finally, the Exchange represents that the addition of options on Foreign Currency ETFs and Commodity Pool ETFs would not have any effect on the rules pertaining to position and exercise limits 11 or margin. 12 11 *See* Section 7 and Section 9 of Chapter III of the BOX Rules. 12 *See* Section 3 of Chapter XIII of the BOX Rules. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act, 13 in general, and furthers the objectives of section 6(b)(5) of the Act, 14 in particular, in that it is designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. 13 15 U.S.C. 78f(b). 14 15 U.S.C. 78f(b)(5). The Exchange believes that amending the BOX rules to accommodate the listing and trading of options on Foreign Currency ETFs and Commodity Pool ETFs would provide investors with greater risk management tools and, in general, would allow for the protection of investors and the public interest. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change does not:
(i)Significantly affect the protection of investors or the public interest;
(ii)impose any significant burden on competition; and
(iii)become operative for 30 days after the date of filing (or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest), the proposed rule change has become effective pursuant to section 19(b)(3)(A) of the Act 15 and subparagraph (f)(6) of Rule 19b-4 thereunder. 16 15 15 U.S.C. 78s(b)(3)(A). 16 17 CFR 240.19b-4(f)(6). The Exchange has satisfied the five-day pre-filing requirement of Rule 19b-4(f)(6)(iii). The Exchange has requested that the Commission waive the 30-day operative delay and designate the proposed rule change as operative upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. The proposed rule change is substantially similar to those of other options exchanges that have been previously approved by the Commission 17 and does not appear to present any novel regulatory issues. Therefore, the Commission designates the proposal operative upon filing. 18 17 *See* Securities Exchange Act Release Nos. 54087 (June 30, 2006), 71 FR 38918 (July 10, 2006) (SR-ISE-2005-60) and 54983 (December 20, 2006), 71 FR 78476 (December 29, 2006)( SR-Amex-2006-87) (approving the listing and trading of options on Foreign Currency ETFs); Securities Exchange Act Release Nos. 55547 (March 28, 2007) 72 FR 16388 (April 4, 2007) (SR-AMEX-2006-110) and 55635 (April 16, 2007) 72 FR 19999 (April 20, 2007) (SR-ISE-2007-16) (approving the listing and trading of options on Commodity Pool ETFs). 18 For purposes only of waiving the operative delay of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in the furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-BSE-2008-34 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-BSE-2008-34. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the 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 3p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. 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-2008-34 and should be submitted on or before August 4, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 19 19 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-15886 Filed 7-11-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58103; File No. SR-FINRA-2008-036] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to the Incorporated NYSE Rules July 3, 2008. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on July 3, 2008, Financial Industry Regulatory Authority, Inc. (“FINRA”) (f/k/a National Association of Securities Dealers, Inc. (“NASD”)) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II and III below, which Items have been prepared substantially by FINRA. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change FINRA proposes to amend certain rules of the New York Stock Exchange LLC (“NYSE”) to reduce regulatory duplication and relieve firms that are members of both FINRA and the NYSE (“Dual Members”) of conflicting or unnecessary regulatory burdens in the interim period before a consolidated FINRA rulebook is completed. 3 The text of the proposed rule change is available at *http://www.finra.org* , the principal offices of FINRA, and the Commission's Public Reference Room. 3 This proposal is an extension of the SRO Rule Harmonization Initiative, which compared NYSE regulatory requirements to corresponding NASD regulatory provisions. The purpose of the process was to achieve, to the extent practicable, substantive harmonization of the two regulatory schemes. 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 such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Background On July 30, 2007, FINRA was formed through the consolidation of NASD and the member regulation, enforcement and arbitration operations of NYSE. As part of the consolidation, FINRA incorporated into its rulebook certain NYSE rules related to member firm conduct (“Incorporated NYSE Rules”). As a result, the current FINRA rulebook consists of two sets of rules:
(1)NASD Rules and
(2)Incorporated NYSE Rules (together referred to herein as the “Transitional Rulebook”). While the NASD Rules generally apply to all FINRA members, the Incorporated NYSE Rules apply only to Dual Members. FINRA is developing a new consolidated rulebook (“Consolidated FINRA Rulebook”), which, upon completion, will consist only of FINRA Rules. In the interim period before the Consolidated FINRA Rulebook is completed, FINRA is proposing amendments to certain Incorporated NYSE Rules to reduce regulatory disparities and to relieve Dual Members of conflicting or unnecessary regulatory burdens. The proposed rule change includes those rule changes proposed in the NYSE's Omnibus filing that would reach an interim solution to an unnecessary regulatory burden or to an inconsistent standard between the Incorporated NYSE Rules and NASD Rules. 4 Additionally, this proposal would rescind certain Incorporated NYSE Rules in substantive areas that are sufficiently addressed by NASD Rules. 4 *See* Securities Exchange Act Release No. 56142 (July 26, 2007), 72 FR 42195 (August 1, 2007) (SR-NYSE-2007-22). FINRA believes that the proposed rule change will provide a timely solution to achieve greater harmonization between Incorporated NYSE Rules and NASD Rules of similar purpose, resulting in less burdensome and more efficient regulatory compliance for Dual Members. The proposed rule change would affect the Transitional Rulebook in its application to Dual Members only and does not necessarily reflect FINRA's intent or conclusion as to the ultimate rule text that will populate the Consolidated FINRA Rulebook. Proposed Amendments Allied Member The proposed rule change would delete the term “allied member” from the Incorporated NYSE Rules. The “allied member” designation is a regulatory category based on a person's “control” over a member organization. 5 Allied membership, as currently administered, has no direct analogue under the FINRA membership scheme. 5 *See* NYSE Rule 304(b) (Allied Members and Approved Persons). FINRA did not incorporate NYSE Rule 304. NYSE Rule 2(c) currently defines the term “allied member” as a natural person who is a general partner of a member organization or other employee of a member organization who controls, 6 or is a principal executive officer of, such member organization, and who has been approved by the NYSE as an allied member. In instances where the term “allied member” appears in a rule to denote an individual's status as a member organization “control person,” FINRA is proposing to substitute, for the term “allied member,” the newly defined category of “principal executive” ( *see* proposed NYSE Rule 311.17). The proposed definition for “principal executive” is identical to the current definition of “principal executive officer” in NYSE Rule 311(b)(5) with additional language to clarify that the functional equivalents of such persons would also be included in this category. As such, FINRA is proposing to replace “principal executive officer” with “principal executive.” 6 *See* NYSE Rule 2(f) for the definition of “control.” A “principal executive” would be defined to include: An employee of a member organization designated to exercise senior principal executive responsibility over the various areas of the business of the member organization including: Operations, compliance with rules and regulations of regulatory bodies, finances and credit, sales, underwriting, research and administration; and any employee of a member organization who is a functional equivalent of such person. Thus, the “principal executive” designation would encompass each Chief Executive Officer, Chief Financial Officer, Chief Operations Officer, Chief Compliance Officer, Chief Legal Officer or any person assigned comparable functions or responsibilities ( *e.g.* , a person in a Limited Liability Company with principal executive responsibilities but with other than a principal executive title). Unlike the “allied member” designation, “principal executive” would not require a registration process, approval by the NYSE or a particular qualification examination. However, each “principal executive” would be required to take and pass any qualification examinations necessary to perform his or her assigned functions. Buy-In Rules In an effort to harmonize and update the SRO Operational, Clearing and Settlement Rules (collectively referred to herein as the “Buy-In Rules”), FINRA is proposing to reposition NYSE Rules 283, 285, 286, 287, 288, 289, and 290 into NYSE Rule 282 so that NYSE Rule 282 would serve as a complete, central repository for all requirements and procedures related to transactions subject to the Buy-In Rules. The substance of the repositioned rules would not be altered by the proposed rule change. The proposed rule change would bring the NYSE Buy-In Rules closer to the format of NASD Rule 11810 (Buying-In). Additionally, consistent with the NYSE's Omnibus filing, FINRA is proposing to add the substance of NYSE Rule 140 to NYSE Rule 282. 7 Although FINRA did not incorporate NYSE Rule 140 into its rulebook, FINRA staff believes that the Omnibus proposal appropriately places the substance of NYSE Rule 140 into Rule 282. FINRA is also proposing amendments to the current text of NYSE Rule 282 to clarify that fails that are subject to the rules of a Qualified Clearing Agency must comply with the procedures or requirements of the Qualified Clearing Agency. This proposal harmonizes the scope of NYSE Rule 282 with the scope of NASD's 11000 Rule Series. 7 *See* proposed Rule 282.15. Lastly, the proposed rule change would amend NYSE Rule 282 to adopt certain provisions of NASD Rule 11810 to further harmonize the requirements related to transactions subject to the Buy-In Rules. Specifically, FINRA proposes to add to the Supplementary Material of NYSE Rule 282 the following sections of NASD Rule 11810:
(f)(Securities in Transit);
(h)(“Close-Out” Under Committee or Exchange Rulings);
(i)(Failure to Deliver and Liability Notice Procedures);
(j)(Contracts Made for Cash);
(l)(“Buy-In” Desk Required); and
(m)(Buy-In of Accrued Securities). NYSE Rule 311 (Formation and Approval of Member Organizations) and Its Interpretation NYSE Rule 311 governs the formation and approval of member organizations. In addition to the “allied member” proposals to NYSE Rule 311 noted above, the proposed rule change would delete paragraph
(h)of NYSE Rule 311, which prescribes the number of partners to be named in a member organization in order for it to conduct business. There is no equivalent NASD requirement. The proposed deletion recognizes that NYSE Rule 311(h) is outdated and no longer necessary in light of the current spectrum of member organizations' business models. NYSE Rule 342.13 (Acceptability of Supervisors) and Its Interpretation NYSE Rule 342.13(a) currently requires that persons who are to be assigned certain prescribed supervisory responsibilities 8 have a creditable three-year record as a registered representative or have three years of equivalent experience before functioning as a supervisor. 9 FINRA is proposing to amend NYSE Rule 342.13(a) and its Interpretation to eliminate the prescribed three-year record requirement for supervisory personnel. Additionally, the proposal would conform NYSE Rule 342.13(a) to the standard outlined in NASD Rule 1014(a)(10)(D) with respect to firms that are submitting an application to become FINRA members. In such instances, supervisory candidates would be required to have one year of “direct experience” or two years of “related experience” in the subject area to be supervised. 8 In this regard, NYSE Rule 342.13(a) references NYSE Rule 342(d) which requires that “[q]ualified persons acceptable to the Exchange shall be in charge of:
(1)Any office of a member or member organization,
(2)any regional or other group of offices,
(3)any sales department or activity.” 9 NYSE Rule 342.13(a) also requires that persons assigned supervisory responsibility pursuant to NYSE Rule 342(d) must pass a qualification examination acceptable to the NYSE that demonstrates competence relevant to assigned responsibilities. NYSE Rule 345 (Employees—Registration, Approval, Records) and Its Interpretation NYSE Rule 345 and its Interpretation 10 currently provide that certain exam-qualified registered persons will not receive NYSE approval to perform functions pursuant to such qualifications without first completing certain prescribed training periods. To harmonize NYSE Rule 345 with NASD registration requirements, FINRA is proposing to eliminate the prescribed training periods in NYSE Rule 345 and its Interpretation. The proposed amendments would allow member organizations to determine, consistent with their overall supervisory obligations, the extent and duration of training for such registered persons before they are permitted to perform functions requiring registration. 10 *See* NYSE Rule Interpretation 345.15/01 and /02. NYSE Rule 345(a) prohibits member organizations from permitting any natural person to perform regularly the duties customarily performed by a registered representative, a securities lending representative, a securities trader or a direct supervisor of such persons, unless such person shall have been registered with, qualified by and is acceptable to the NYSE. To reduce regulatory duplication and in furtherance of the SRO Rule Harmonization Initiative, the proposed rule change would limit the prohibition in paragraph
(a)to securities lending representatives and their direct supervisors. The substance of NYSE Rule 345(a) with respect to registered representatives and their supervisors is effectively addressed by NASD Rule 1031. FINRA is proposing to delete the registration category of “securities trader” from the Incorporated NYSE Rules because it does not serve any regulatory purpose. Registration as a securities trader requires an individual to pass the Series 7 examination, which qualifies an individual as a general securities representative. FINRA understands that the securities trader registration category was created to avoid application of the four-month training requirement for a registered representative. 11 In view of the fact that the four-month training requirement in NYSE Rule 345 is being eliminated, there is no need for an additional registration category tied to the Series 7. However, if the NYSE wishes to retain the securities trader registration category, it can do so in a unique NYSE rule. 11 *See* NYSE Rule 345.15(b)(2) and (5). NYSE Rule 345(b) currently prohibits any natural person, other than a member or allied member, to assume the duties of an officer with the power to legally bind such member or member organization unless such member or member organization has filed an application with and received the approval of the NYSE. The proposed rule change would delete NYSE Rule 345(b) in its entirety. There is no equivalent NASD rule. NYSE Rule 346 (Limitations—Employment and Association With Members and Member Organizations) and Its Interpretation NYSE Rule 346 sets forth limitations on the outside business activities of member organization employees. FINRA is proposing to delete NYSE Rule 346(c) which currently requires that prompt written notice be given to the NYSE whenever any member or member organization knows, or in the exercise of reasonable care should know, that any person, other than a member, allied member or employee, directly or indirectly, controls, is controlled by or is under common control with such member or member organization. FINRA believes that this provision is unnecessary as it is a requirement on Form BD that each broker-dealer disclose such control relationships. 12 The proposed rule change also harmonizes with the NASD regulatory structure as there is no corresponding NASD requirement. 12 *See* Question 10 on Form BD. NYSE Rule 407 (Transactions—Employees of Members, Member Organizations and the Exchange) provides, in part, that no employee of a member organization shall establish or maintain a securities or commodities account or enter into a private securities transaction without the prior written consent of his or her member organization. FINRA is proposing to reposition the requirements pertaining to “private securities transactions” ( *e.g.* , interests in oil or gas ventures, real estate syndications, tax shelters, etc.) from NYSE Rule 407 13 to NYSE Rule 346 since NYSE Rule 346 more directly addresses issues related to the outside activities of registered persons. Additionally, FINRA is proposing definitions of the terms “private securities transactions,” “selling compensation” and “immediate family members” that are substantially identical to the NASD's corresponding definitions. 14 13 *See* NYSE Rule 407(b) and section .11 in the Supplementary Material. 14 *See* proposed changes to NYSE Rule 346 Supplementary Material. NYSE Rule 346(e) currently requires that persons who are assigned or delegated supervisory authority pursuant to NYSE Rule 342 devote their entire time during business hours to their member organization, unless otherwise permitted by the NYSE. FINRA is proposing amendments to NYSE Rule 346(e) and Supplementary Material section .10 that would eliminate the SRO approval requirement in order for supervisory persons to devote less than their entire time to the business of their member organization. In lieu thereof, the amended rule would require the prior written approval of the member organization, pursuant to the exercise of due diligence, for such arrangements. The proposed rule change would require the identification of any entity for which the supervisory person will be performing services during business hours and a description of such services. The member organization's written approval would be required to set forth the approximate amount of time the supervisory person is expected to devote to each entity, with particular attention paid to the approximate time expected to be required for the person, based upon qualifications and experience, to effectively discharge his or her supervisory responsibilities on behalf of the member organization. In addition, the amendments would require documentation that the member organization has made a good faith determination that the arrangement will not compromise the protection of investors or the public interest, compromise the supervisor's duties at the member organization, or give rise to a material conflict of interest. FINRA is also proposing, as conforming changes, to delete the NYSE Rule 346 Interpretation relating to the outside connections of supervisory persons 15 and to amend the Interpretation to NYSE Rule 311, which includes a reference to Rule 346(e). 15 *See* NYSE Rule Interpretation 346/03 (Outside Connections—Supervisory Persons). NYSE Rule 351 (Reporting Requirements) NYSE Rule 351(d) requires each member organization to report certain statistical information regarding customer complaints. The requirement currently extends to both oral and written complaints. The proposed rule change would adopt NYSE Rule 351.13 to limit the definition of the term “customer complaint” to any written statement of a customer, or any person acting on behalf of a customer, other than a broker or dealer, alleging a grievance involving the activities of those persons under the control of a member organization. This proposed definition is substantially similar to the current definition in NASD Rule 3070(c). NYSE Rule 352 (Guarantees, Sharing in Accounts, and Loan Arrangements) NYSE Rule 352 restricts the extent to which member organization personnel may share in customer account profits or losses. NYSE Rule 352(b) generally prohibits member organizations, allied members and registered representatives from sharing profits or losses in any customer account. However, NYSE Rule 352(c) permits such sharing in proportion to financial contributions made to a joint account. First, FINRA is proposing to amend NYSE Rule 352(c) to exempt, from the proportional contribution requirement, joint accounts with immediate family members held by principal executives or registered representatives of a member organization. This amendment would limit the regulation of accounts that may reasonably entail profit and loss participation on a disproportionate basis, as with joint accounts between husband and wife, while retaining coverage of the rule for other accounts. NASD Rule 2330(f)(1)(A) similarly addresses the circumstances under which a FINRA member or a person associated with a FINRA member may share in profits and losses with a customer, provided such sharing is proportionate to the financial contributions of each account holder; NASD Rule 2330(f)(1)(B) exempts from this proportionality requirement accounts shared between an associated person and a customer who is an immediate family member of such associated person. Second, the proposed rule change would make clear that any sharing arrangement entered into pursuant to NYSE Rule 352(c) is subject to the NYSE Rule 352(a) provision that no member organization shall guarantee or in any way represent that it will guarantee any customer against loss in any account or on any transaction; and no employee of such member organization shall guarantee or in any way represent that either he or she, or his or her employer, will guarantee any customer against loss in any customer account or on any customer transaction. Third, the proposed rule change would define the term “immediate family” in NYSE Rule 352(c) to include parents, mother-in-law or father-in-law, husband or wife, children or any relative to whose support the principal executive or registered representative contributes directly or indirectly. This proposed definition would harmonize with the standard under NASD Rule 2330(f)(1)(B). The existing definition of “immediate family” in NYSE Rule 352(g) is retained for other provisions in the Rule, essentially allowing persons acting in the capacity of a registered representative or principal executive to lend to or borrow from a more extensive range of family members. The broader NYSE Rule 352(g) standard is also consistent with the corresponding NASD standard in connection with borrowing from or lending to customers. 16 16 *See* NASD Rule 2370(c) (Borrowing From or Lending To Customers). Lastly, FINRA is proposing amendments to NYSE Rule 352(d) to streamline the reference in the rule to Rule 205-3 of the Investment Advisers Act of 1940. Specifically, the revised provision would provide that, notwithstanding the general prohibition against sharing in profits under paragraph (b), a person acting as an investment adviser (whether or not registered as such) may receive compensation based on a share of profits or gains in an account if all of the conditions in Rule 205-3 of the Investment Advisers Act of 1940 are satisfied. This proposal better aligns NYSE Rule 352 with NASD Rule 2330(f). NYSE Rule 404 (Individual Members Not to Carry Accounts) A FINRA Letter of Approval that details the scope of approved activities is sent to new FINRA members. The requirements of NYSE Rule 404 are duplicative of this Letter. Therefore, FINRA is proposing to rescind NYSE Rule 404. NYSE Rule 408 (Discretionary Power in Customers' Accounts) NYSE Rule 408 provides, in part, that no employee of a member organization shall exercise discretionary power in any customer's account or accept orders for an account from a person other than the customer without first obtaining written authorization from the customer. FINRA is proposing amendments to NYSE Rule 408(a) that would require member organizations to obtain the signature of any person or persons authorized to exercise discretion in such accounts, of any substitute so authorized, and the date such discretionary authority was granted. The proposed amendment would conform NYSE Rule 408(a) to corresponding requirements in NASD Rule 3110(c)(3). NYSE Rule 412 (Customer Account Transfer Contracts) and Its Interpretation NYSE Rule 412 governs the transfer of customer accounts from one member to another. This rule is duplicative of NASD Rule 11870 (Customer Account Transfer Contracts). Thus, FINRA is proposing to rescind NYSE Rule 412 and its Interpretation. NYSE Rule 436 (Interest on Credit Balances) and Its Interpretation FINRA is proposing to rescind NYSE Rule 436 and its Interpretation as it has become outdated and is no longer applicable to the current business models of members. There is no comparable NASD Rule. NYSE Rule 446 (Business Continuity and Contingency Plans) NYSE Rule 446 is nearly identical to NASD Rules 3510 (Business Continuity Plans) and 3520 (Emergency Contact Information). To reduce regulatory duplication in these areas and to advance the efforts to create a Consolidated FINRA Rulebook, FINRA is proposing to delete NYSE Rule 446 because NASD Rules sufficiently address this area. Following Commission approval of the proposed rule change, FINRA will publish a *Regulatory Notice(s)* setting forth the effective date(s) of the proposals. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of section 15A(b)(6) of the Act, 17 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. FINRA believes that the proposed rule change will provide greater harmonization between Incorporated NYSE Rules and NASD Rules of similar purpose, resulting in less burdensome and more efficient regulatory compliance for Dual Members. Where proposed amendments do not entirely conform to existing NASD rules or address a provision without a direct NASD Rule counterpart, FINRA believes the standards they would establish otherwise further the objectives of the Act by providing greater regulatory clarity and practicality and relieving unnecessary regulatory burdens in the interim period until a Consolidated FINRA Rulebook is completed. 17 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 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 FINRA 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-FINRA-2008-036 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-FINRA-2008-036. 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 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 publicly available. All submissions should refer to File Number SR-FINRA-2008-036 and should be submitted on or before August 4, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 18 18 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-15817 Filed 7-11-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58114; File No. SR-NASD-2007-041] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc. (f/k/a National Association of Securities Dealers, Inc.); Notice of Filing of Amendment No. 2 to Proposed Rule Change To Amend the Minimum Price-Improvement Standards Set Forth in NASD Interpretive Material
(IM)2110-2 July 7, 2008. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on June 26, 2008, the Financial Industry Regulatory Authority, Inc. (“FINRA”) (f/k/a National Association of Securities Dealers, Inc. (“NASD”)) 3 filed with the Securities and Exchange Commission (“SEC” or “Commission”) Amendment No. 2 to SR-NASD-2007-041 as described in Items I, II, and III below, which Items have been substantially prepared by FINRA. 4 The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 2, from interested parties. 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 the NASD to amend the 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* Securities Exchange Act Release No. 56146 (July 26, 2007), 72 FR 42190 (August 1, 2007) (SR-NASD-2007-053). 4 FINRA filed the original proposed rule change on June 27, 2007. FINRA filed Amendment No. 1 to the proposed rule change on May 20, 2008. Amendment No. 2 supersedes and replaces Amendment No. 1. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change FINRA proposes to amend the proposed rule change to address an inconsistency in the application of the proposed minimum price-improvements standards. The text of the proposed rule change is available on FINRA's Web site ( *http://www.finra.org* ), at FINRA's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of the Proposed Rule Change A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On June 27, 2007, FINRA filed with the Commission SR-NASD-2007-041, proposing amendments to the minimum price-improvement provisions in IM-2110-2 (“original proposal”). On August 28, 2007, the Commission published for comment the proposed rule change in the **Federal Register** . 5 The Commission received one commenter letter on the proposed rule change. 6 On November 1, 2007, FINRA submitted a response letter to the Commission. 7 On May 20, 2008, FINRA filed with the Commission Amendment No. 1 to the proposed rule change. FINRA is filing this Amendment No. 2, which replaces and supersedes Amendment No. 1 to SR-NASD-2007-041, to amend the proposed rule change to address an inconsistency in the application of the proposed minimum price improvement standards as discussed herein. 5 *See* Securities Exchange Act Release No. 56297 (August 21, 2007), 72 FR 49337 (August 28, 2007) (notice of filing of SR-NASD-2007-041). 6 *See* Letter to Secretary, Commission, from Jess Haberman, Compliance Director, Fidessa Corp., dated September 5, 2007. 7 *See* Letter from Andrea Orr, FINRA, to Nancy M. Morris, Secretary, Commission, dated November 1, 2007 (“FINRA Response Letter”). On February 26, 2007, the Commission approved SR-NASD-2005-146, which, among other things, expanded the scope of IM-2110-2 8 to apply to over-the-counter (“OTC”) equity securities and amended the minimum level of price-improvement that a member must provide to trade ahead of an unexecuted customer limit order (“price-improvement standards”). The rule changes in SR-NASD-2005-146 were initially scheduled to become effective on July 26, 2007. 9 8 Currently, IM-2110-2 generally prohibits a member from trading for its own account in an exchange-listed security at a price that is equal to or better than an unexecuted customer limit order in that security, unless the member immediately thereafter executes the customer limit order at the price at which it traded for its own account or better. 9 *See* NASD Notice to Members 07-19 (April 2007). Following Commission approval of SR-NASD-2005-146, several firms raised concerns regarding the timing of the implementation of the proposed rule change and the application of the approved minimum price-improvement standards. In response to these concerns, FINRA filed a proposed rule change to delay the effective date of the changes in SR-NASD-2005-146 pending its review of the amended price-improvement standards. 10 10 *See* Securities Exchange Act Release No. 56103 (July 19, 2007), 72 FR 40918 (July 25, 2007) (notice of filing and immediate effectiveness of SR-NASD-2007-039). *See also* See Securities Exchange Act Release No. 56822 (November 20, 2007), 72 FR 67326 (November 28, 2007) (notice of filing and immediate effectiveness of SR-FINRA-2007-023); and Securities Exchange Act Release No. 57133 (January 11, 2008), 73 FR 3500 (January 18, 2008) (notice of filing and immediate effectiveness of SR-FINRA-2007-038). Subsequently, FINRA filed SR-NASD-2007-041 with the Commission to further amend the price-improvement standards in IM-2110-2 based on new tiered standards that varied according to the price of the customer limit order. In response to the publication of the proposed rule change in the **Federal Register** , the Commission received one comment letter on the proposal. 11 11 *See supra* note 6. As further detailed in the FINRA Response Letter, the commenter noted an inconsistency in the application of proposed minimum price-improvement standards in low-priced securities when the customer limit order and the proprietary trade fall into different minimum price improvement tiers ( *e.g.* , a customer limit order to sell is priced at $1.00 and the proprietary trade is at $.998). For example, assume the best inside market for an NMS stock is $.996 to $1.00 and a firm is holding customer limit orders to sell at prices of $.998 and $1.00. If the firm sells for its own account at $.996, only customer limit orders to sell priced below $.998 and from $1.00 up to, but not including, $1.006 would be protected due to the firm's $.996 triggering proprietary trade. As a result, the firm would not have an obligation under IM-2110-2 to protect the more aggressively priced $.998 customer limit order to sell ( *i.e.* , the minimum price improvement standard applicable to that order is the lesser of $.01 or one-half ( 1/2 ) of the current inside spread ($.002 ( 1/2 of $.004)), such that the $.996 proprietary trade would only trigger customer limit orders priced less than $.998), but would have an obligation to protect the $1.00 customer limit order to sell ( *i.e.* , the minimum price improvement standard applicable to that order is $.01 such that a $.996 proprietary trade would trigger customer limit orders priced at $1.00 up to, but not including, $1.006). In the FINRA Response Letter, FINRA indicated that firms may choose to voluntarily protect those more aggressively priced customer limit orders that fall within the gaps, which would not be an unreasonable policy or procedure and would be consistent with the principles underlying IM-2110-2 and the duty of best execution. However, upon further reflection, FINRA believes that it is important that the more aggressively priced customer limit orders also receive protection and that any potential “gaps” be eliminated. Therefore, FINRA is now proposing to require, and codify as part of IM-2110-2, that any more aggressively priced customer limit orders also receive protection. In other words, once a customer limit order is triggered under the Rule, firms would be required to protect any more aggressively priced customer limit orders, even if those limit orders were not directly triggered by the minimum price improvement standards of IM-2110-2. FINRA is not, however, mandating any particular order handling procedures or execution priorities among protected orders. A firm may choose any reasonable methodology for the way in which it executes multiple orders triggered by the Interpretive Material, but the firm must ensure that such methodology is applied consistently and complies with applicable rules and regulations. Using the example above, once the limit order priced at $1.00 is activated upon the execution of the firm's trade at $.996 ( *i.e.* , it is activated because it is within .01 of the price of the firm's trade), a firm may implement a methodology that executes all more aggressively priced customer limit orders first ( *i.e.* , the limit order priced at $.998) before executing the limit order priced at $1.00. The proposed requirements would only apply in the limited circumstance where a firm has a limit order that is protected by IM-2110-2, but more aggressively priced customer limit orders are not protected. Therefore, in the above example, if the firm was only holding a customer limit order to sell of $.998 (and not a customer limit order of $1.00), the $.998 order would not be triggered by the proposed requirements. As noted above, FINRA proposes to implement the proposed rule change on the final implementation date of SR-NASD-2005-146, which will be 60 days after Commission approval of this filing. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of section 15A(b)(6) of the Act, 12 which requires, among other things, that FINRA rules 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. FINRA believes that the proposed rule change better reflects trading in low-priced securities and the application of IM-2110-2. 12 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 The proposed rule change was published for comment in the **Federal Register** and the SEC received one commenter letter, which was previously summarized and responded to in the FINRA Response Letter and therefore is not being included as part of this Amendment No. 2. 13 13 *See supra* note 6. 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, as modified by Amendment No. 2, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File No. SR-NASD-2007-041 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASD-2007-041. 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-2007-041 and should be submitted on or before August 4, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 14 14 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-15889 Filed 7-11-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION Release No. 34-58115; File No. SR-FINRA-2007-026] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving Proposed Rule Change as Modified by Amendment No. 1 Thereto for TRACE To Disseminate Additional Data Elements Relating to Each Transaction July 7, 2008. I. Introduction On December 5, 2007, Financial Industry Regulatory Authority, Inc. (“FINRA”) (f/k/a National Association of Securities Dealers, Inc. (“NASD”) 1 ) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 2 and Rule 19b-4 thereunder, 3 a proposal to adopt a policy to publicly disseminate additional data elements for corporate bond transactions that are reported to the Trade Reporting and Compliance Engine (“TRACE”). These additional elements are whether a transaction is an inter-dealer transaction or a transaction with a customer and, if the latter, whether the dealer is on the buy or the sell side. On May 20, 2008, FINRA filed Amendment No. 1 to the proposed rule change. The proposal, as modified by Amendment No. 1, was published for comment in the **Federal Register** on June 2, 2008. 4 The Commission received one comment on the proposal. 5 This order approves the proposed rule change. 1 Effective July 30, 2007, FINRA was formed through the consolidation of NASD and the member regulatory functions of NYSE Regulation, Inc. Generally, pre-consolidation actions by NASD are referred to as FINRA actions, except for NASD Rules, when referenced singularly, and NASD *Notices to Members* . When FINRA files proposed rule changes to create a consolidated FINRA rule manual, such NASD rules and interpretations, as incorporated in the consolidated FINRA Manual, will no longer be referred to as “NASD” rules. 2 15 U.S.C. 78s(b)(1). 3 17 CFR 240.19b-4. 4 Securities Exchange Act Release No. 34-57866 (May 23, 2008), 73 FR 31518 (June 2, 2008) (SR-FINRA-2007-026). 5 *See* submission via SEC WebForm from Rebecca E. Carsten, dated June 20, 2008. II. Description of the Proposed Rule Change Under the TRACE rules, a FINRA member that is party to a transaction in a TRACE-eligible security must report several types of information to the TRACE system—including whether it is buying or selling (“Buy/Sell data element”) and whether its counterparty is a broker-dealer or a customer (“Dealer/Customer data element”). 6 Currently, these two data elements are not disseminated. 7 6 For an interdealer transaction, FINRA receives a TRACE report from each dealer but disseminates data reflecting only the information received from the sell side. For a customer transaction, only one side of the trade has to be reported—the dealer side—and FINRA disseminates the data from the dealer's report. 7 The data elements that are disseminated include: The bond identifier ( *i.e.* , the TRACE symbol); the price inclusive of any mark-up, mark-down, or commission; the quantity (expressed as the total par value); the yield; the time of execution; and, if the transaction were executed on a day other than when TRACE data is being disseminated, the actual date of execution. FINRA has proposed that these two data elements now be publicly disseminated for each transaction. FINRA believes that these data elements would enhance market transparency by allowing TRACE users to better understand what a reported price actually represents. Customer transaction prices are “all-in prices” that include a mark-up/mark-down or a commission, while interdealer transaction prices are not. A customer could compare the “all-in price” of its transaction with other customer transactions. Dealer pricing could be approximated by “backing out” the mark-up, mark-down, or commission from the “all-in price” of a customer transaction. FINRA represented that it would announce the effective date of the proposed rule change in a *Regulatory Notice* to be published no later than 90 days following any Commission approval. The effective date would be no later than 120 days following publication of that *Regulatory Notice* . III. Summary of Comments The Commission received one comment. The commenter strongly supported the proposal, arguing that dissemination of the additional data elements “would improve the system tremendously.” 8 8 *See supra* note 5. IV. Discussion and Findings After carefully considering the proposal and the comment submitted, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association. 9 In particular, the Commission finds that the proposed rule change is consistent with Section 15A(b)(6) of the Act, 10 which requires, among other things, that FINRA rules 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 Commission notes that it has previously approved the collection and real-time dissemination of similar transaction information for municipal securities. 11 The Commission believes that the current proposal will make the corporate debt markets more transparent by allowing market participants to make more accurate assessments of reported prices for transactions in TRACE-eligible securities. 9 In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 10 15 U.S.C. 78o-3(b)(6). 11 *See* Securities Exchange Act Release No. 42241 (December 16, 1999), 64 FR 72123 (December 23, 1999) (SR-MSRB-99-8) (requiring that transaction reports be disseminated for certain municipal securities transactions identifying the transaction as either a sale by a dealer to a customer, a purchase by a dealer from a customer, or an inter-dealer trade); Securities Exchange Act Release No. 50294 (August 31, 2004), 69 FR 54170 (September 7, 2004) (SR-MSRB-2004-02) (implementing real-time reporting for most municipal securities transactions and adding a capacity field to reports to allow for the dissemination of data showing whether an inter-dealer trade was done as agent for a customer). V. Conclusion *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 12 that the proposed rule change (File No. SR-FINRA-2007-026) as modified by Amendment No. 1 thereto be, and hereby is, approved. 12 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 13 13 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-15890 Filed 7-11-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58102; File No. SR-NASDAQ-2008-019] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of a Proposed Rule Change and Amendment No. 1 Thereto To Remove From the Nasdaq Rules Fee Provisions Relating to Nasdaq's Mutual Fund Quotation Service July 3, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on March 12, 2008, The NASDAQ Stock Market LLC (“Nasdaq”) 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 prepared substantially by Nasdaq. On July 3, 2008, Nasdaq filed Amendment No. 1 to the proposed rule change. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq is proposing to remove from the Nasdaq rules fee provisions relating to Nasdaq's Mutual Fund Quotation Service (“MFQS”). Nasdaq's rule book contains rules pertaining to “facilities” of the exchange, and MFQS is not a “facility” within the meaning of the Act. The text of the proposed rule change is available at *http://www.complinet.com/nasdaq,* the principal offices of Nasdaq, and the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq 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. Nasdaq 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 Developed by the National Association of Securities Dealers (“NASD”) in the 1980s, MFQS receives daily price-related information from participating money market funds, mutual funds and unit investment trusts (“UITs”). Nasdaq disseminates the MFQS-collected information (as well as certain related publicly-available information) to the public on a daily basis through its Mutual Funds Dissemination Service (“MFDS”). Neither MFQS nor MFDS includes either “last sale” reports or other “real time” information. Both members and non-members of Nasdaq are able to participate in MFQS and to receive the information. Services similar to MFQS/MFDS can be provided by other entities, including entities that are not national securities exchanges. The ease with which money market, mutual fund and UIT information can be collected and transmitted over the Internet makes the environment in which MFQS and MFDS operate potentially highly competitive. Nasdaq included MFQS in its rule book when Nasdaq was registered as a national securities exchange in 2006. 3 Current Nasdaq Rules 7033
(a)through
(d)contain charges paid by funds and UITs for participating in MFQS. Rules 7033(e) and 7019(b) contain charges paid by subscribers for the MFQS information provided to them via the MFDS. 4 3 As Nasdaq prepared to begin operating as an independent national securities exchange in 2006, it replicated sections of the NASD rule manual and proposed that they be included in the new Nasdaq rule manual in the same form. *See* Securities Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006). 4 The language of the current Rule 7033(e), which had been approved for inclusion in the NASD rule manual prior to Nasdaq's separation, was inadvertently omitted from the form of the Nasdaq rule manual approved by the Commission in 2006. *See supra.* Since at that time no substantive changes to these provisions were intended, the omitted language was subsequently reinserted in the Nasdaq rule manual with retroactive effect to the 2006 separation date. *See* Securities Exchange Act Release No. 57347 (February 19, 2008), 73 FR 10080 (February 25, 2008) (SR-NASDAQ-2007-100). Nasdaq believes that by operating MFQS and MFDS, it facilitates the distribution of information regarding non-exchange activity. As such, Nasdaq does not believe that either MFQS or MFDS is a facility of a national securities exchange within the meaning of the Act or that the applicable charges are rules that need to be filed with the Commission under Section 19(b)(1) of the Act 5 and Rule 19b-4 thereunder. 6 5 15 U.S.C. 78s(b)(1). 6 17 CFR 240.19b-4. If, at a later date, Nasdaq proposed to modify the operation of MFQS (or MFDS) in a manner that would cause this service to fit within the definition of a facility of the exchange, or if Nasdaq proposed to tie the fees for this service to fees for or usage of exchange services, Nasdaq would file a proposed rule change with the Commission. 7 7 *See* Securities Exchange Act Release No. 56237 (August 9, 2007), 72 FR 46118 (August 16, 2007) (SR-NASDAQ-2007-043) (approving removal from Nasdaq rule book of provisions governing operation of the ACES system). 2. Statutory Basis Nasdaq believes that MFQS is not a facility of a national securities exchange within the meaning of the Act and the terms of MFQS use are not rules that must be filed with the Commission under Section 19(b)(1) of the Act 8 and Rule 19b-4 thereunder. 9 Therefore, removing the applicable provisions from the Nasdaq rule book would be consistent with the provisions of Section 6(b) of the Act. 10 8 15 U.S.C. 78s(b)(1). 9 17 CFR 240.19b-4. 10 15 U.S.C. 78f(b). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. 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 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 Nasdaq 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-NASDAQ-2008-019 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASDAQ-2008-019. 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 Nasdaq. 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 publicly available. All submissions should refer to File Number SR-NASDAQ-2008-019 and should be submitted on or before August 4, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 11 11 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-15818 Filed 7-11-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58112; File No. SR-NSX-2008-11] Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change as Modified by Amendment Nos. 1, 2, and 3 Thereto Relating to the Termination of the Intermarket Trading System Plan and to a Technical Change to Rule 8.15 July 7, 2008 Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on June 19, 2008, the National Stock Exchange (“NSX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. On June 27, 2008, the Exchange filed Amendment Nos. 1 and 2 to the proposal. On July 2, 2008, the Exchange filed Amendment No. 3 to the proposal. The Exchange filed the proposal pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder, 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. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Due to the termination of the Intermarket Trading System (“ITS”) Plan, the Exchange is proposing to eliminate all references to the ITS Plan in its Rules and Fee Schedules, and to otherwise make technical and conforming changes related to the termination of ITS, as well as a minor technical change to Rule 8.15 (“Imposition of Fines for Minor Violation(s) of Rules”). The text of the proposed rule change is available on the Exchange's Web site at *http://www.nsx.com* , at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Chapter XIV (“Intermarket Trading System Plan”) of the NSX Rules provides the rules relating to the ITS Plan under which the Exchange conducted intermarket trading in exchange-listed equity securities with those market centers that were linked under the ITS Plan. 3 In connection with the implementation of Regulation NMS, 4 the ITS Plan was officially eliminated. 5 Because elimination of ITS has rendered Chapter XIV obsolete, the Exchange now proposes to eliminate Chapter XIV, the Fee Schedule for ITS Transactions, and all other references to Chapter XIV and the ITS Plan in the NSX Rules. 3 *See* Securities Exchange Act Release No. 19456 (January 27, 1983), 48 FR 4938 (February 3, 1983)(File No. 4-208). 4 17 CFR 242.600 *et al.* 5 *See* Securities Exchange Act Release No. 55397 (March 5, 2007), 72 FR 11066 (March 12, 2007)(File No. 4-208). In addition, the Exchange proposes to make a technical and conforming change to Interpretation .01 to Rule 8.15, which has been renumbered due to the deletion of ITS related provisions. The Exchange also proposes that the Rule cited in this Interpretation be changed from Rule 11.9(c) to Rule 11.8(a)(1). This change is required as Rule 11.9(c), relating to the Exchange's legacy trading system, has been functionally replaced by Rule 11.8(a)(1) relating to the Exchange's new trading system, NSX BLADE. 6 6 *See* Securities Exchange Act Release No. 54391 (August 31, 2006), 71 FR 52836 (September 7, 2006) (SR-NSX-2006-08). Finally, the Exchange proposes to amend NSX Rule 11.3(a)(ii) to allow sub-penny bids, offers, orders and indications of interest (hereinafter “orders”) in all securities where such orders are priced less than $1.00 per share. Due to programming issues relating to ITS, the rule previously only permitted sub-penny price increments for securities priced below $1.00 per share that were listed on the Nasdaq Stock Market. Now that the ITS Plan has terminated, and consistent with Regulation NMS, the Exchange proposes to allow sub-penny increments for all securities traded on the Exchange for orders priced less than $1.00 per share, regardless of the listing exchange. 7 7 17 CFR 242.612. 2. Statutory Basis The Exchange believes that its proposed rule change is consistent with Section 6(b) of the Act 8 in general, and furthers the objectives of Section 6(b)(5) of the Act, 9 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received by the Exchange. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 10 and Rule 19b-4(f)(6) thereunder. 11 Because the foregoing proposed rule change does not: 10 15 U.S.C. 78s(b)(3)(A)(iii). 11 17 CFR 240.19b-4(f)(6).
(i)Significantly affect the protection of investors or the public interest;
(ii)Impose any significant burden on competition; and
(iii)Become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act 12 and Rule 19b-4(f)(6) thereunder. 13 As required under Rule 19b-4(f)(6)(iii) under the Act, 14 the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of the filing of the proposed rule change. 12 15 U.S.C. 78s(b)(3)(A). 13 17 CFR 240.19b-4(f)(6). 14 17 CFR 240.19b-4(f)(6)(iii). A proposed rule change filed under 19b-4(f)(6) normally may not become operative prior to 30 days after the date of filing. 15 However, Rule 19b-4(f)(6)(iii) 16 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay and render the proposed rule change operative immediately. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Waiver of the 30-day operative delay would enable the Exchange to: eliminate all references to the ITS Plan in its Rules and Fee Schedules and to otherwise make technical and conforming changes required as a result of the termination of the ITS Plan as quickly as possible and eliminate any potential confusion. The waiver would also allow sub-penny bids, offers, orders in all securities where such orders are priced less than $1.00 per share, which would enable investors to expand their trading options. Accordingly, the Commission designates the proposal to be operative upon filing with the Commission. 17 15 *Id.* 16 *Id.* 17 For purposes of waiving the operative date of this proposal only, the Commission has considered the impact of the proposed rule on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-NSX-2008-11 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NSX-2008-11. 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, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of NSX. 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-NSX-2008-11 and should be submitted on or before August 4, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 18 18 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-15887 Filed 7-11-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58108; File No. SR-NYSE-2007-64] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1, Relating to Section 31 Accumulated Funds July 7, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on July 12, 2007, the New York Stock Exchange LLC (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (the “SEC” or “Commission”) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. On June 26, 2008, the Exchange filed Amendment No. 1 to the proposed rule change. The Commission is publishing this notice and order to solicit comments on the proposed rule change from interested persons and to approve the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to adopt Supplementary Material .30 to NYSE Rule 440H (“Activity Assessment Fee”) to allow member firms to voluntarily submit, during a six-month period after the effective date of this rule proposal, funds previously accumulated by member firms to satisfy their, and subsequently NYSE's, obligation to remit SEC Section 31-related fees, to the Exchange. In addition, a member or member organization may designate all or part of any accumulated excess held by the Exchange and allocated to such member or member organization to be used by the Exchange in accordance with the terms of proposed Supplementary Material .30. Finally, to the extent the payment of these historically accumulated funds or Exchange-accumulated excess is in excess of the fees due the Commission from NYSE under Section 31 of the Act, 3 such surplus shall be used by the Exchange to offset Exchange regulatory costs. 3 15 U.S.C. 78ee. The text of the proposed rule changes is available on the Exchange's Web site ( *http://www.nyse.com* ), at the Exchange's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change. The text of these statements may be examined at the places specified in Item III below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Pursuant to Section 31 of the Act and Rule 31 thereunder, 4 national securities exchanges and associations (collectively, “self-regulatory organizations” or “SROs”) are required to pay a transaction fee to the SEC that is designed to recover the costs related to the government's supervision and regulation of the securities markets and securities professionals. To offset this obligation, the Exchange assesses its members and member organizations an Activity Assessment Fee in accordance with NYSE Rule 440H. NYSE Rule 440H requires members and member organizations effecting “covered sales” (as defined in Section 31 of the Act) of securities on the Exchange to pay Activity Assessment Fees based upon their covered sales. The Exchange calculates such fees by multiplying the aggregate dollar amount of covered sales effected on the Exchange during the appropriate period by the Section 31(b) fee rate in effect during that period. Clearing members may in turn seek to charge a fee to their customers or correspondent firms. Any allocation of the fee between the clearing member and its correspondent firm or customer is the responsibility of the clearing member. 4 17 CFR 240.31. Reconciling the amounts billed by the Exchange and the amounts collected from the customers historically had been difficult for member firms, causing surpluses to accumulate at some broker-dealer firms (referred to herein as “accumulated funds”). These accumulated funds were not remitted to NYSE by certain firms, despite the fact that these charges may have been previously identified as “Section 31 Fees” or “SEC Fees” by the firms. 5 In addition, prior to direct billing of members and member organizations of Activity Assessment Fees as of June 1, 2005, the Exchange utilized “self-reporting” on Form 120-A of amounts payable under Rule 440H, and the Exchange has accumulated amounts so paid in excess of amounts paid by the Exchange to the SEC pursuant to Section 31 of the Act (“Exchange accumulated excess”). 5 The SEC stated in its release adopting new Rule 31 and Rule 31T that “it is misleading to suggest that a customer or [SRO] member incurs an obligation to the Commission under Section 31.” *See* Securities Exchange Act Release No. 49928 (June 28, 2004), 69 FR 41060, 41072 (July 7, 2004). In response to this statement, the Exchange amended Rule 440H to refer to this fee as an “Activity Assessment Fee.” *See* Securities Exchange Act Release No. 52018 (July 12, 2005), 70 FR 41467 (July 19, 2005) (SR-NYSE-2005-39). The Exchange issued Information Memos regarding the Exchange's “Activity Assessment Fee” and the SEC's “Section 31 Fee”, and provided guidance for members and member organizations that choose to charge their customers fees. *See* Information Memo 05-48 (July 19, 2005) and Information Memo 05-36 (May 13, 2005). In November 2004, the Exchange and other SROs received a letter from the SEC's Division of Market Regulation 6 requesting, among other things, that the Exchange conduct an analysis to ascertain the amount of accumulated funds and present a plan for broker-dealers to dispose of or otherwise resolve title to such accumulated funds. Following discussion among the SROs and staff of the Division of Market Regulation, in an effort to ascertain the amount of accumulated funds, NASD surveyed 240 member clearing and self-clearing firms to review their practices regarding the collection of such fees from customers. After compiling and analyzing the data provided by member firms, NASD staff found that over half of the firms surveyed did not have an accumulated funds balance. NASD worked with the other SROs to recommend a potential solution to allow NASD and other SRO member firms to resolve title to the accumulated funds. It was determined, based upon information provided in connection with NASD's survey, that it would be virtually impossible to return customer-related accumulated funds to the customers that had paid these funds to the firms. 7 6 As of November 2007, the Division of Market Regulation was renamed the Division of Trading and Markets. 7 NASD had asked all surveyed firms whether they could “identify and relate the funds to specific customers on a transaction by transaction basis.” The surveyed firms universally stated that tracking fractions of a penny to individual customers would be impossible and any over-collections could not be passed back at the customer level. *See* Securities Exchange Act Release No. 55886 (June 8, 2007), 72 FR 32935 (June 14, 2007) (Order approving SR-NASD-2007-027). The proposed rule change is aimed at enabling those fees that may have been collected for purposes of paying an “SEC Fee” or “Section 31 Fee” to be used to pay such fees. The Exchange is proposing new Supplementary Material .30 to NYSE Rule 440H that will allow firms, on a one-time-only basis, voluntarily to remit historically accumulated funds to the Exchange. These funds then would be used to pay the Exchange's current Section 31 fees in conformity with prior representations made by member firms. In addition, a member or member organization could designate all or part of the Exchange accumulated excess held by the Exchange and allocated to such member or member organization to be used by the Exchange in accordance with the terms of Supplementary Material .30. Finally, to the extent the payment of these historically accumulated funds or Exchange accumulated excess is in excess of the fees due the SEC from NYSE under Section 31, such surplus shall be used by the Exchange to offset Exchange regulatory costs. Specifically, the Exchange will subject such surplus to the same treatment utilized with respect to unused fine income that has accumulated beyond a level reasonably necessary for future contingencies. That is, the board of directors of NYSE Regulation would utilize any such surplus to fund one or more special projects of NYSE Regulation, to reduce fees charged by NYSE Regulation to its member organizations or the markets that it serves, or for a charitable purpose. 8 8 *See* Securities Exchange Act Release No. 55003 (December 22, 2006), 71 FR 78497 (December 29, 2007) (SR-NYSE-2006-109) (approved in Securities Exchange Act Release No. 55216 (January 31, 2007), 72 FR 5779 (February 7, 2007) (relating to NYSE Regulation policies regarding exercise of power to fine NYSE member organizations and use of money collected as fines). The Exchange proposes that the effective date of the proposed rule change be the date on which any Commission order approving the proposed rule change is published in the **Federal Register** . In addition, Supplementary Material .30 to Rule 440H would automatically sunset six months after the effective date. 9 9 The proposed effective date and sunset date of the proposed rule change are comparable to those approved by the Commission for a similar proposed rule change by the American Stock Exchange LLC (“Amex”). *See* Securities Exchange Act Release No. 57829 (May 16, 2008), 73 FR 30173 (May 23, 2008) (SR-Amex-2007-107). 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6 of the Act, 10 in general, and further the objectives of Section 6(b)(5), 11 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change will provide a transparent way of addressing the issue of accumulated funds held at the member firm level as well as the Exchange accumulated excess. As this proposed rule change would automatically sunset, it will be of limited duration. Moreover, based on the reminder set for this in the proposed Supplementary Material .30 to NYSE Rule 440H and the issuance of prior Information Memos on this matter, the accumulation of funds that are collected and disclosed as “Section 31 Fees” or “SEC Fees” should not reoccur. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-NYSE-2007-64 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSE-2007-64. 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 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 Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2007-64 and should be submitted on or before August 4, 2008. IV. Commission's Findings and Order Granting Accelerated Approval of the Proposed Rule Changes After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 12 In addition, the Commission finds good cause to approve the proposed rule change prior to the thirtieth day after the date of publication of the notice of filing. The Commission previously found similar proposals from other SROs to be consistent with the Act. 13 The Commission is not aware of any issue that should cause it to revisit those findings or preclude the Commission from approving the NYSE proposal on the same basis. The Commission notes that, because the program is voluntary, it imposes no obligation on any NYSE member that believes that accumulated funds should be retained or disposed of in another manner. 12 In approving this rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 13 *See* Securities Exchange Act Release No. 57829 (May 16, 2008), 73 FR 30173 (May 23, 2008) (SR-Amex-2007-107); Securities Exchange Act Release No. 55886 (June 8, 2007), 72 FR 32935 (June 14, 2007) (SR-NASD-2007-027). V. Conclusion *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 14 that the proposed rule change (SR-NYSE-2007-64), as modified by Amendment No. 1, be and hereby is approved on an accelerated basis. 14 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-15816 Filed 7-11-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58109; File No. SR-NYSEArca-2008-47] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To Waive Retroactively as of June 24, 2008, Certain Initial Listing Fees for Companies Transferring the Listing of Their Securities From Any Other National Securities Exchange July 7, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that, on June 24, 2008, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposal from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange, through its wholly-owned subsidiary NYSE Arca Equities, Inc. (“NYSE Arca Equities”), proposes to waive initial listing fees for companies transferring the listing of their equity securities from any other national securities exchange. The proposed fee waiver would be applied retroactively to any companies that apply to list after the date of initial submission of this filing. The text of the proposed rule change is available at the Exchange's principal office, the Commission's Public Reference Room, and *http://www.nyse.com* . II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to waive initial listing fees for companies transferring the listing of their securities from any other national securities exchange. The waiver will apply to all classes of securities. The Exchange had previously waived initial listing fees in these circumstances for all companies that transferred from the New York Stock Exchange (“NYSE”) at any time or from Nasdaq Stock Market (“Nasdaq”) or the American Stock Exchange prior to December 31, 2007, or had applied to list prior to that date. 3 The proposed amendment brings the Exchange's fee policy in line with those of the NYSE and Nasdaq, 4 both of which currently provide fee waivers to companies transferring from the other national securities exchanges. The proposed fee waiver would be applied retroactively to any companies that apply to list after the date of initial submission of this filing. 3 *See* Securities Exchange Act Release No. 54007 (June 16, 2006), 71 FR 36155 (June 23, 2006) (SR-PCX-2006-16). 4 *See* Section 902.02 of the NYSE Listed Company Manual and Nasdaq Marketplace Rule IM-4500-4. Issuers of securities that qualify for the proposed waiver of initial listing fees will be subject to the same level of annual fees and listing of additional shares fees as other NYSE Arca issuers. The proposed rule change will not affect the Exchange's commitment of resources to its regulatory oversight of the listing process or its regulatory programs. Specifically, companies that benefit from the waiver will be reviewed for compliance with the Exchange initial and continued listing standards in the same manner as any other company that applies to be listed on the Exchange. The Exchange will conduct a full and independent review of each issuer's compliance with the Exchange's initial listing standards. The Exchange believes that the elimination of such fees in the case of securities transferring from other national securities exchanges is justified on several grounds. An issuer that already paid initial listing fees to another national securities exchange when it became a publicly traded company is reluctant to pay a second initial listing fee to another listing venue, even if it concludes that the Exchange offers the issuer and its investors superior services and market quality. Even if an issuer concludes that the Exchange would provide a superior market for its stock, the benefits of the transfer must currently be weighed against the cost of initial inclusion. Since the expected benefits of the transfer would be diffused among the issuers' investors and realized over time, but the initial listing fees must be paid by the issuer immediately, the Exchange is concerned that issuers that stand to benefit may nevertheless opt to forgo a transfer. As such, the Exchange believes that assessing the initial fees against issuers that have already paid fees to list on another market imposes a burden on the competition between exchange markets and markets other than exchange markets, a competition that the Exchange believes is one of the central goals of the national market system. This concern is particularly great in light of the fact that the Commission has approved the waiver of initial listing fees by Nasdaq with respect to the listing of any security being transferred from another national securities exchange. 5 5 *See* Securities Exchange Act Release No. 51004 (January 10, 2005), 70 FR 2917 (January 18, 2005) (SR-NASD-2004-140). The Exchange understands that the effect of this proposed rule change will be to impose a lower level of listing fees on issuers that transfer from another national securities exchange than on some other issuers. In light of the fact that the Exchange will collect the same level of annual fees and listing of additional shares fees from such issuers, however, the Exchange believes that the difference does not constitute an inequitable allocation of fees. In light of a transferring issuer's prior payment to another market and the generally lower burdens associated with reviewing a transferring issuer's eligibility, the Exchange believes that eliminating initial fees for transferring issuers is entirely consistent with an equitable allocation of listing fees. The Exchange will maintain a rigorous regulatory review process with respect to the initial listing qualification of listing applicants transferring from other markets. The Exchange does not expect the financial impact of this proposed rule change to be material, either in terms of increased levels of annual fees from transferring issuers or in terms of diminished initial listing fee revenues. Quite simply, even with the proposed rule change in place, the Exchange understands that a change in listing venue is a major step for an issuer, and therefore the Exchange does not expect that the number of issuers that transfer to NYSE Arca in a given time frame will be sufficient to have a material effect on financial resources. The Exchange will apply the proposed fee waiver retroactively as of the date of initial submission of this rule filing. The Exchange believes that this retroactive effect is necessary and justified because Nasdaq currently operates such a waiver and the Exchange is therefore at a competitive disadvantage vis-à-vis Nasdaq until the Exchange has such a waiver in place. Giving the waiver retroactive effect will therefore have the immediate effect of promoting competition between the Exchange and Nasdaq and alleviating the Exchange's current competitive disadvantage. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act, 6 in general, and furthers the objectives of Section 6(b)(5) of the Act, 7 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments, and to perfect the mechanism of, a free and open market and a national market system, and, in general, to protect investors and the public interest. In light of a transferring issuer's prior payment to another market, the Exchange believes that the proposed fee waiver does not render the allocation of its listing fees inequitable or unfairly discriminatory. The Exchange believes that the fee waiver will increase competition among listing markets and will remove a competitive disadvantage the Exchange currently has vis-à-vis the other national securities exchanges, and it is therefore designed to perfect the mechanism of a free and open market. 6 15 U.S.C. 78f. 7 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments on the proposed rule change were neither solicited nor received. 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-NYSEArca-2008-47 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSEArca-2008-47. 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 Exchange. 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-NYSEArca-2008-47 and should be submitted on or before August 4, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 8 8 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-15885 Filed 7-11-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58113; File No. SR-NYSEArca-2008-40] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Accelerated Approval of Proposed Rule Change Relating to the Listing and Trading of Shares of the NETS Tokyo Stock Exchange REIT Index Fund July 7, 2008. I. Introduction On May 22, 2008, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”), through its wholly owned subsidiary, NYSE Arca Equities, Inc. (“NYSE Arca Equities”), filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to list and trade the shares (“Shares”) of the NETS TM Tokyo Stock Exchange REIT Index Fund (“Fund”) issued by the NETS Trust (“Trust”). The proposed rule change was published for comment in the **Federal Register** on June 6, 2008. 3 The Commission received no comments on the proposal. This order approves the proposed rule change. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Securities Exchange Act Release No. 57906 (June 2, 2008), 73 FR 32377. II. Description of the Proposal The Exchange proposes to list and trade the Shares pursuant to NYSE Arca Equities Rule 5.2(j)(3), the Exchange's listing standards for Investment Company Units (“ICUs”). 4 The Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly-traded securities in the aggregate in the Japanese market, as represented by the Tokyo Stock Exchange REIT Index (“Index”). The Index is a market capitalization weighted index consisting of stocks of all of the real estate investment trusts traded primarily on the Tokyo Stock Exchange. Detailed descriptions of the Fund, the Index, procedures for creating and redeeming Shares, transaction fees and expenses, dividends, distributions, taxes, and reports to be distributed to beneficial owners of the Shares can be found in the Registration Statement 5 or on the Fund's Web site ( *http://www.netsetfs.com* ), as applicable. 4 ICUs are securities that represent interests in a registered investment company that holds securities comprising, or otherwise based on or representing an interest in, an index or portfolio of securities (or holds securities in another registered investment company that holds securities comprising, or otherwise based on or representing an interest in, an index or portfolio of securities). *See* NYSE Arca Equities Rule 5.2(j)(3). 5 *See* the Trust's Registration Statement on Form N-1A, dated February 13, 2008 (File Nos. 333-147077 and 811-22140) (“Registration Statement”). This proposed rule change is required because the Index does not meet all of the “generic” listing requirements of Commentary .01(a)(B) to NYSE Arca Equities Rule 5.2(j)(3) applicable to listing of ICUs based on international or global indexes. The Index meets all such requirements except for those set forth in Commentary .01(a)(B)(2). Commentary .01(a)(B)(2) to NYSE Arca Equities Rule 5.2(j)(3) provides that component stocks that in the aggregate account for at least 90% of the weight of the index or portfolio each shall have a minimum worldwide monthly trading volume during each of the last six months of at least 250,000 shares; for the period of October 2007 up to and including March 2008, component stocks that in the aggregate accounted for at least 90% of the weight of the Index had a minimum worldwide monthly trading volume of 2,918 shares. *The Exchange represents that:*
(1)Except for Commentary .01(a)(B)(2) to NYSE Arca Equities Rule 5.2(j)(3), the Shares currently satisfy all of the generic listing standards under NYSE Arca Equities Rule 5.2(j)(3);
(2)the continued listing standards under NYSE Arca Equities Rules 5.2(j)(3) and 5.5(g)(2) applicable to ICUs shall apply to the Shares; and
(3)the Trust is required to comply with Rule 10A-3 under the Act 6 for the initial and continued listing of the Shares. In addition, the Exchange represents that the Shares will comply with all other requirements applicable to ICUs including, but not limited to, requirements relating to the dissemination of key information such as the Index value and Intraday Indicative Value, rules governing the trading of equity securities, trading hours, trading halts, surveillance, and Information Bulletin to ETP Holders, as set forth in prior Commission orders approving the generic listing rules applicable to the listing and trading of ICUs. 7 6 17 CFR 240.10A-3. 7 *See, e.g.* , Securities Exchange Act Release Nos. 55621 (April 12, 2007), 72 FR 19571 (April 18, 2007) (SR-NYSEArca-2006-86) (approving generic listing standards for ICUs based on international or global indexes); 44551 (July 12, 2001), 66 FR 37716 (July 19, 2001) (SR-PCX-2001-14) (approving generic listing standards for ICUs and Portfolio Depositary Receipts); and 41983 (October 6, 1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) (approving rules for the listing and trading of ICUs). *See also* e-mail from Michael Cavalier, Associate General Counsel, NYSE Euronext, to Christopher W. Chow, Special Counsel, Commission, dated June 2, 2008. III. Discussion and Commission's Findings The Commission has carefully reviewed the proposed rule change and finds that it is consistent with the requirements of Section 6 of the Act 8 and the rules and regulations thereunder applicable to a national securities exchange. 9 In particular, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act, 10 which requires, among other things, that the Exchange's rules be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 8 15 U.S.C. 78f. 9 In approving this proposed rule change the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 10 15 U.S.C. 78f(b)(5). Although the Index does not meet the generic listing requirement that component stocks accounting in the aggregate for at least 90% of the weight of the index have a minimum worldwide monthly trading volume during each of the last six months of at least 250,000 shares, the Commission believes that the proposed rule change should not significantly affect the protection of investors or the public interest or impose any significant burden on competition. Commentary .01(a)(B) was designed to, in conjunction with other listing requirements, ensure that ICUs listed on the Exchange are sufficiently broad-based in scope to be not readily susceptible to manipulation. 11 In approving these standards, the Commission believed that, taken together, they are reasonably designed to ensure that securities with substantial market capitalization and trading volume account for a substantial portion of any underlying index or portfolio that, when applied in conjunction with the other applicable listing requirements, would permit the listing and trading only of products that are sufficiently broad-based in scope to minimize potential manipulation. 12 In this case, the Commission believes that the global notional volume traded (number of shares traded multiplied by price of security) of Index components indicates that the Shares should not be readily susceptible to manipulation: for the period of October 2007 up to and including March 2008, component stocks that in the aggregate accounted for 93.42% of the weight of the Index each had global notional volume traded per month of at least $25,000,000, averaged over the last six months. In addition, the Commission notes the Exchange's representation that the Shares satisfy all of the other generic listing standards under NYSE Arca Equities Rule 5.2(j)(3), which includes:
(1)Commentary .01(a)(B)(1), which establishes a minimum market value of index component stocks that in the aggregate account for at least 90% of the weight of the underlying index;
(2)Commentary .01(a)(B)(3), which prohibits
(a)the most heavily weighted component stock from exceeding 25% of the weight of the underlying index, and
(b)the five most heavily weighted component stocks from exceeding 60% of the weight of the underlying index; and
(3)Commentary .01(a)(B)(4), which establishes (in certain circumstances) a minimum number of component stocks for an underlying index. 11 *See* Securities Exchange Act Release No. 55621 (April 12, 2007), 72 FR 19571, 19574 (April 18, 2007) (SR-NYSEArca-2006-86) (order approving generic listing standards for ICUs based on global or international indexes). 12 *Id.* at 19576. The Commission notes that the Exchange represented that the Shares will be subject to all of its continued listing standards applicable to ICUs and all other requirements applicable to ICUs, and that the Trust is required to comply with Rule 10A-3 under the Act. 13 The Commission also notes that it has previously approved the listing and trading of derivative securities products based on indexes that were composed of stocks that did not meet certain quantitative generic listing criteria, including Commentary .01(a)(B)(2) to NYSE Arca Equities Rule 5.2(j)(3). 14 13 *See* 17 CFR 240.10A-3. 14 *See, e.g.* , Securities Exchange Act Release No. 56695 (October 24, 2007), 72 FR 61413 (October 30, 2007) (SR-NYSEArca-2007-111). IV. Conclusion *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 15 that the proposed rule change (SR-NYSEArca-2008-40) be, and it hereby is, approved. 15 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 16 16 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-15888 Filed 7-11-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58121; File No. PCAOB-2008-03] Public Company Accounting Oversight Board; Notice of Filing of Proposed Changes Regarding Ethics and Independence Rule 3526, Communication With Audit Committees Concerning Independence, Amendment to Interim Independence Standards, and Amendment to Rule 3523, Tax Services for Persons in Financial Reporting Oversight Roles July 9, 2008. Pursuant to Section 107(b) of the Sarbanes-Oxley Act of 2002 (the “Act”), notice is hereby given that on April 24, 2008, the Public Company Accounting Oversight Board (the “Board” or the “PCAOB”) filed with the Securities and Exchange Commission (the “Commission” or “SEC”) the proposed rule changes described in Items I, II, and III below, which items have been prepared by the Board. The Commission is publishing this notice to solicit comments on the proposed rules from interested persons. I. Board's Statement of the Terms of Substance of the Proposed Rule Change On April 22, 2008, the Board adopted Ethics and Independence Rule 3526, *Communication with Audit Committees Concerning Independence,* an amendment to the Board's Interim Independence Standards, and an amendment to Rule 3523, *Tax Services for Persons in Financial Reporting Oversight Roles.* The proposed rule change text is set out below. Language deleted by the amendment to Rule 3523 is in brackets. Language that is added by the amendment to Rule 3523 is italicized. Rules of the Board Section 3. Professional Standards Part 5—Ethics Subpart I—Independence Rule 3523. Tax Services for Persons in Financial Reporting Oversight Roles A registered public accounting firm is not independent of its audit client if the firm, or any affiliate of the firm, during the [audit and] professional engagement period provides any tax service to a person in a financial reporting oversight role at the audit client, or an immediate family member of such person, unless—
(a)The person is in a financial reporting oversight role at the audit client only because he or she serves as a member of the board of directors or similar management or governing body of the audit client;
(b)The person is in a financial reporting oversight role at the audit client only because of the person's relationship to an affiliate of the entity being audited—
(1)Whose financial statements are not material to the consolidated financial statements of the entity being audited; or
(2)Whose financial statements are audited by an auditor other than the firm or an associated person of the firm; or
(c)The person was not in a financial reporting oversight role at the audit client before a hiring, promotion, or other change in employment event and the tax services are—
(1)Provided pursuant to an engagement in process before the hiring, promotion, or other change in employment event; and
(2)Completed on or before 180 days after the hiring or promotion event. Note: In an engagement for an audit client whose financial statements for the first time will be required to be audited pursuant to the standards of the PCAOB, the provision of tax services to a person covered by Rule 3523 before the earlier of the date that the firm:
(1)Signed an initial engagement letter or other agreement to perform an audit pursuant to the standards of the PCAOB, or
(2)began procedures to do so, does not impair a registered public accounting firm's independence under Rule 3523. Rule 3526. Communication With Audit Committees Concerning Independence A registered public accounting firm must—
(a)Prior to accepting an initial engagement pursuant to the standards of the PCAOB—
(1)Describe, in writing, to the audit committee of the issuer, all relationships between the registered public accounting firm or any affiliates of the firm and the potential audit client or persons in financial reporting oversight roles at the potential audit client that, as of the date of the communication, may reasonably be thought to bear on independence;
(2)Discuss with the audit committee of the issuer the potential effects of the relationships described in subsection (a)(1) on the independence of the registered public accounting firm, should it be appointed the issuer's auditor; and
(3)Document the substance of its discussion with the audit committee of the issuer.
(b)At least annually with respect to each of its issuer audit clients —
(1)Describe, in writing, to the audit committee of the issuer, all relationships between the registered public accounting firm or any affiliates of the firm and the audit client or persons in financial reporting oversight roles at the audit client that, as of the date of the communication, may reasonably be thought to bear on independence;
(2)Discuss with the audit committee of the issuer the potential effects of the relationships described in subsection (b)(1) on the independence of the registered public accounting firm;
(3)Affirm to the audit committee of the issuer, in writing, that, as of the date of the communication, the registered public accounting firm is independent in compliance with Rule 3520; and
(4)Document the substance of its discussion with the audit committee of the issuer. Amendment to PCAOB Interim Independence Standards Independence Standards Board Standard No. 1, *Independence Discussions with Audit Committees* (“ISB Standard No. 1”), ISB Interpretation 00-1, *The Applicability of ISB Standard No. 1 When “Secondary Auditors” Are Involved in the Audit of a Registrant,* and ISB Interpretation 00-2, *The Applicability of ISB Standard No. 1 When “Secondary Auditors” Are Involved in the Audit of a Registrant, An Amendment of Interpretation 00-1,* are superseded by Rule 3526. II. Board's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Board included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rules. The text of these statements may be examined at the places specified in Item IV below. The Board has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Board's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
(a)Purpose Section 103(a) of the Act directs the Board, by rule, to establish “ethics standards to be used by registered public accounting firms in the preparation and issuance of audit reports, as required by th[e] Act or the rules of the Commission, or as may be necessary or appropriate in the public interest or for the protection of investors.” Moreover, Section 103(b) of the Act directs the Board to establish such rules on auditor independence “as may be necessary or appropriate in the public interest or for the protection of investors, to implement, or as authorized under, Title II of th[e] Act.” The Board adopted Rule 3526, *Communication with Audit Committees Concerning Independence,* because it believed that the accounting firm should discuss with the audit committee before accepting an initial engagement pursuant to the standards of the PCAOB any relationships the accounting firm has with the issuer that may reasonably be thought to bear on its independence. The rule is intended to build on the communication requirements in *Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees* (“ISB No. 1”) and provide the audit committee with information—including information about the firm's relationships with persons in financial reporting oversight roles (“FROR”) at the company—that may be important to its determination about whether to hire the firm as the company's auditor. The rule also requires a registered firm on at least an annual basis after becoming the issuer's auditor to make a similar communication and also affirm to the audit committee of the issuer, in writing, that the firm is independent. The Board intends for these communications to provide the audit committee with sufficient information to understand how a particular relationship might affect independence and to foster a robust discussion between the firm and the audit committee. The rule also includes a new requirement for the firm to document the substance of its discussion with the audit committee. The Board adopted amendments to Rule 3523, *Tax Services for Persons in Financial Reporting Oversight Roles,* to exclude the portion of the audit period that precedes the beginning of the professional engagement period. The Board believes that it is not necessary for the rule to restrict the provision of tax services during the portion of the audit period that precedes the professional engagement period. The Board also added a note to Rule 3523 that states that in an engagement for an audit client whose financial statements for the first time will be required to be audited pursuant to the standards of the PCAOB, the provision of tax services to persons covered by Rule 3523 before the earlier of the date that the firm
(1)signed an initial engagement letter or other agreement to perform an audit pursuant to the standards of the PCAOB or
(2)began procedures to do so, does not impair a registered public accounting firm's independence under Rule 3523. The proposed rule changes also amend the PCAOB interim independence standards because Rule 3526 will supersede the Board's interim independence requirement, ISB No. 1, and two related interpretations.
(b)Statutory Basis The statutory basis for the proposed rule is Title I of the Act. B. Board's Statement on Burden on Competition The Board does not believe that the proposed rule changes will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule changes would apply equally to all registered public accounting firms. C. Board's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Board released the proposed rules for public comment in PCAOB Release No. 2007-008 (July 24, 2007). The Board received 16 written comments. A copy of PCAOB Release No. 2007-008 and the comment letters received in response to the PCAOB's request for comment are available on the PCAOB's Web site at www.pcaobus.org. The Board has carefully considered all comments it has received. In response to the written comments received, the Board has clarified and modified certain aspects of the proposed rule change, as discussed below. Rule 3526. Communication With Audit Committees Concerning Independence Under Section 301 of the Act, “[t]he audit committee of each issuer, in its capacity as a committee of the board of directors, shall be directly responsible for the appointment, compensation, and oversight of the work of any registered public accounting firm employed by that issuer * * * for the purpose of preparing or issuing an audit report or related work * * *.” 1 PCAOB interim independence standards require the auditor to provide certain information to the audit committee about independence that could assist the audit committee in fulfilling these oversight responsibilities. Specifically, ISB No. 1 requires, among other things, firms to disclose at least annually to the audit committee all relationships between the auditor and its related entities and the company and its related entities that, in the auditor's professional judgment, may reasonably be thought to bear on the auditor's independence. ISB No. 1 does not, however, require the firm to provide information to the audit committee about the firm's independence in connection with becoming the issuer's auditor ( *i.e., before* the person or firm becomes the issuer's auditor). 1 The SEC has implemented this provision by adopting rules directing the national securities exchanges and national securities associations to prohibit the listing of any security of an issuer that is not in compliance with the audit committee requirements mandated by the Act. As discussed in the proposing release, the Board proposed Rule 3526 because it believed that the accounting firm should discuss with the audit committee before accepting an initial engagement pursuant to the standards of the PCAOB any relationships the accounting firm has with the issuer that may reasonably be thought to bear on its independence. The proposed rule was intended to build on the communication requirements in ISB No. 1 and provide the audit committee with information—including information about the firm's relationships with persons in FRORs at the company—that may be important to its determination about whether to hire the firm as the company's auditor. The Board also proposed to include in the rule a new requirement for the firm to document the substance of its discussion with the audit committee. All commenters were generally in favor of the Board adopting the proposed rule, and, as discussed more fully below, some recommended modifications. Commenters stated that Rule 3526 would assist audit committees in fulfilling their responsibilities and would aid them in their decision-making process. After carefully considering the comments, the Board is adopting Rule 3526 with one modification, as described below. If approved by the SEC, Rule 3526 will supersede ISB No. 1 and two related interpretations. 2 2 ISB Interpretation 00-1, *The Applicability of ISB Standard No. 1 When “Secondary Auditors” Are Involved in the Audit of a Registrant,* and ISB Interpretation 00-2, *The Applicability of ISB Standard No. 1 When “Secondary Auditors” Are Involved in the Audit of a Registrant, An Amendment of Interpretation 00-1.* The interpretations state that the responsibility to comply with ISB No. 1 rests solely with the primary auditor, but that the primary auditor should include in its report to the audit committee all of its relationships and those of its domestic and foreign associated firms that could reasonably bear on the independence of the primary auditor. Under these interpretations, if the primary auditor is relying on the work of secondary auditors not associated with the primary auditor's firm, the report of the primary auditor should either describe any such secondary auditors' relationships, or it should state that it does not do so. The treatment of secondary auditors under Rule 3526 will be similar to the treatment of secondary auditors under ISB No. 1 and the two interpretations. Secondary auditors will not need to comply with Rule 3526, but the primary auditor will need to disclose to the audit committee any relationships of the firm's affiliates that could reasonably be thought to bear on the independence of the primary auditor. As under ISB No. 1 and the related interpretations, the scope of any communications about secondary auditors under Rule 3526 should be clear to the audit committee. Accordingly, the Board expects the primary auditor's report to either include any covered relationships of any secondary auditors not affiliated with the firm or state that it does not do so. One commenter recommended that the Board consider providing an exemption for secondary auditors. Because the rule does not require communications by secondary auditors, an exemption is not necessary. Scope of the Required Communication The Board proposed in Rule 3526(a) to require the registered firm, prior to accepting an initial engagement pursuant to the standards of the PCAOB, to describe in writing to the audit committee 3 all relationships between the accounting firm or any affiliates of the firm 4 and the potential audit client or persons in FRORs at the potential audit client that may reasonably be thought to bear on independence. The Board also proposed to require the firm to discuss with the audit committee the potential effects of those relationships on the firm's independence. In Rule 3526(b), the Board proposed to require a registered firm on at least an annual basis after becoming the issuer's auditor to provide the same information described above and also affirm to the audit committee of the issuer, in writing, that the firm is independent in compliance with Rule 3520, *Auditor Independence.* 5 As described in the proposing release, the Board intended for these communications to provide the audit committee with sufficient information to understand how a particular relationship might affect independence and to foster a robust discussion between the firm and the audit committee. 3 One commenter recommended the Board provide guidance in situations in which an issuer does not have an audit committee. Under Section 2(a)(3) of the Act, “[t]he term ‘audit committee’ means—(A) a committee (or equivalent body) established by and amongst the board of directors of an issuer for the purpose of overseeing the accounting and financial reporting processes of the issuer and audits of the financial statements of the issuer; and
(B)if no such committee exists with respect to an issuer, the entire board of directors of the issuer.” Accordingly, under Rule 3526, if an audit client does not have an audit committee, the auditor would be required to make the communications to the entire board of directors. Additionally, one commenter recommended that audit committees provide better disclosure, through the proxy, when approving non-audit services performed by the auditor. The commenter stated that providing this type of transparency will permit investors a greater ability to evaluate audit committee's fiduciary performance of shareholders. The Board does not have statutory authority to require disclosure by audit committees. 4 One commenter recommended that the Board adopt a definition of affiliate of the firm. This term is already defined in Rule 3501. 5 Rule 3520 states that a registered public accounting firm and its associated persons must be independent of the firm's audit client throughout the audit and professional engagement period. Commenters generally believed that the scope of the required communications was appropriate. Several commenters noted that, to a large extent, firms are already making the kinds of communications that would be required by proposed Rule 3526. One commenter acknowledged, however, that existing communications between the firm and a potential new audit client do not include the disclosure of tax services to a person in a FROR or his or her immediate family member. Additionally, some registered firms noted that communications regarding the auditor's independence currently vary in content and timing and may, in some instances, occur only orally. Most commenters did not believe that it was necessary for the Board to expand the scope of the required communication to include any additional matters. One commenter, however, recommended requiring the firm to confirm its independence in writing to the audit committee prior to accepting an initial engagement. Another commenter recommended revising Rule 3526(a) to require the firm to make the communications in its initial proposal to the company's audit committee. As discussed above, the Board proposed to require firms to affirm their independence annually but did not propose a similar requirement that would apply before the firm is initially engaged as the company's auditor. Rule 3526(a) requires registered firms to make certain communications about relationships that may reasonably be thought to bear on independence before accepting an initial engagement pursuant to the standards of the PCAOB. Rather than prescribing a particular time before that point when the communications must occur, however, the rule allows registered firms and audit committees the flexibility to make that determination. The Board understands that, in some cases, firms need time before a new engagement begins to resolve any matters that could impair their independence. If a firm were required to affirm its independence prior to accepting a new engagement, it would need to wait until it has resolved any independence issues to make the required communications. These communications are intended to assist the audit committee in fulfilling its responsibility to hire the auditor—their usefulness for that purpose may diminish if they are left until immediately before the engagement begins. Accordingly, the Board does not believe a requirement for auditors to affirm that they are independent before accepting a new engagement is appropriate. Other commenters recommended certain exclusions from the scope of the required communications. For example, one commenter asserted that the auditor cannot be expected to know about all relationships that may reasonably be thought to bear on its independence, and recommended that the written communication to the audit committee state that the auditor's assessment is based on information provided to the auditor by the issuer. The Board does not believe that allowing auditors to include such a limitation in the communication would be appropriate. Complying with the Board's independence requirements is the responsibility of the auditor. 6 To fulfill this responsibility, as well as their related responsibility under the SEC's independence rules, auditors need to ascertain what relationships with the issuer and persons in FRORs at the issuer may reasonably be thought to bear on their independence. Moreover, some of the information the auditor must assess in order to assure its independence and that may need to be communicated under Rule 3526—such as the firm's or its associated persons' financial interests in the audit client—can be more readily obtained by the auditor than its audit client. 6 Another commenter suggested that the audit committee should be able to rely on the firm to determine and resolve any independence issues, and that a requirement for the auditor to discuss these matters with the audit committee would increase the responsibilities of the audit committee with respect to independence. This commenter recommended that the Board not adopt these requirements. As discussed above, the rule is intended to provide audit committees with information to assist them in carrying out their responsibilities to oversee the audit engagement, but auditors remain responsible for complying with the independence requirements. Nothing in the rule adds to, or otherwise modifies, the responsibilities of the audit committee. Another commenter recommended that the Board exclude tax services to a person in a FROR from the required communications because the commenter believed that compliance with Rule 3523, as amended, should adequately address any independence concerns regarding such services. As discussed in the proposing release, Rule 3526 is intended to require disclosure of not only whether the firm provided any specifically prohibited services or maintained any specifically prohibited relationships, but also whether any of the firm's relationships or services may reasonably be thought to bear on independence under the SEC's general standard of auditor independence 7 and AU sec. 220, *Independence* . 8 Because auditors will need to consider the relevant facts and circumstances in order to make such a determination, the Board does not believe that per se exemptions are appropriate. 7 17 CFR 210.2-01(b). Under that standard, an accountant is not independent if “the accountant is not, or a reasonable investor with knowledge of all relevant facts and circumstances would conclude that the accountant is not, capable of exercising objective and impartial judgment on all issues encompassed within the accountant's engagement.” In considering this general standard, the SEC “looks in the first instance to whether a relationship or the provision of service: Creates a mutual or conflicting interest between the accountant and the audit client; places the accountant in the position of auditing his or her own work; results in the accountant acting as management or an employee of the audit client; or places the accountant in a position of being an advocate for the audit client.” 17 CFR 210.2-01, preliminary note. 8 AU sec. 220, *Independence,* requires that “[i]n all matters relating to the assignment, an independence in mental attitude is to be maintained by the auditor * * *” AU sec. 220 notes that “[i]t is of utmost importance to the profession that the general public maintain confidence in the independence of independent auditors” and that public confidence in the auditor's independence “would be impaired by evidence that independence was actually lacking, and it might also be impaired by the existence of circumstances which reasonable people might believe likely to influence independence.” Some commenters suggested that, in certain circumstances, firms would be restricted in the information they could provide to the audit committee about relationships with persons in FRORs due to legal limitations imposed by confidentiality and privacy laws. Specifically, one commenter was concerned that the auditor would not be able to disclose to the audit committee information about tax services rendered to a person in a FROR prior to obtaining a consent from that person. Another commenter recommended that the Board address the need for obtaining such a consent in its final release, while another recommended that the Board provide an exemption in circumstances where applicable legal restrictions impede an auditor's ability to comply fully with the disclosure requirement. Under ISB No. 1, auditors have been required to disclose to the audit committee relationships with the company and its related entities and to discuss the auditor's independence with the audit committee. Accordingly, the required communications could include discussion of tax or other services provided to an entity or person other than the company itself. The Board understands that firms are subject to certain confidentiality requirements in the tax context 9 and that other restrictions could arise outside of that context, depending on the facts and circumstances that a particular relationship presents. The Board is not, however, aware that firms have encountered difficulty in communicating with audit committees, as required by ISB No. 1 or any other professional practice standard, as a result of such privacy requirements. 9 *See* 26 U.S.C. 7216; 26 CFR 301.7216-3 (prohibiting disclosure or use of tax return information without written consent of taxpayer that meets specified requirements); 26 CFR 301.7216-1 (defining “tax return information” to mean “any information, including, but not limited to a taxpayer's name, address, or identifying number, which is furnished in any form or manner for, or in connection with, the preparation of a tax return of the taxpayer”). As described above, Rule 3526 is a general requirement that, like ISB No. 1, requires disclosure of certain relationships that may be relevant to the audit committee's oversight of the engagement. It does not set forth a list of relationships that must always be disclosed or mandate specific information that must be communicated when disclosure is required. Rather, Rule 3526 allows firms significant flexibility to determine how to comply with the requirements to describe a covered relationship and discuss the potential effects of that relationship on the firm's independence. Accordingly, while the Board will monitor the application of the rule in this regard, it does not believe that the recommended exception is necessary or appropriate at this time. The Board also received several comments on its proposal not to include the words “in the auditor's professional judgment” in the rule's description of the scope of the required communications. ISB No. 1 requires disclosure of certain relationships that “in the auditor's professional judgment may reasonably be thought to bear on independence.” In the proposing release, the Board explained that it believed that omitting the reference to the auditor's professional judgment would clarify the requirement by reminding auditors of the need to focus on the perceptions of reasonable third parties when making independence determinations. Some commenters supported the proposed exclusion of the words “in the auditor's professional judgment” from Rule 3526. Other commenters, however, believed that the absence of the reference to judgment could confuse, rather than clarify, the requirement and noted that it is reasonable and appropriate for audit committees to rely on the accounting firm's judgment as to what matters should be disclosed. One of these commenters contended that this aspect of the Board's proposal is inconsistent with the Board's recent focus on the importance of the use of auditor judgment. Conversely, one commenter did not object to the absence of a reference to judgment, provided that the adopting release contain an acknowledgement that the auditor must apply judgment in determining which matters are required to be communicated to the audit committee. 10 10 Additionally, one commenter recommended including the reference to judgment and also referring to the SEC's general standard of auditor independence and the preliminary note to the SEC's independence rules in the proposed rule or the adopting release. Footnote 9 of the Board's adopting release refers to the general standard and the preliminary note. As the Board explained in the proposing release, auditors will need to apply judgment to determine whether a relationship may reasonably be thought to bear on independence. After considering commenters' views, the Board continues to believe that adding specific reference to the auditor's professional judgment is unnecessary and inappropriate in this instance. While the Board agrees that auditors must exercise sound judgment in carrying out their responsibilities, it does not believe that specific reference to judgment in this rule is necessary to encourage auditors to do so. Judgment is called for in applying any reasonableness standard to particular facts and circumstances, and Rule 3526 is no different. Determining what relationships may reasonably be thought to bear on independence requires consideration of how a third party—not the auditor—would view the relationship, which is consistent with the SEC's general standard of auditor independence and AU sec. 220. A reference to “in the auditor's professional judgment” could suggest otherwise, however, and therefore could discourage the necessary analysis. Accordingly, the Board has determined not to add the phrase to Rule 3526. Time Period Covered by Rule 3526(a) In the proposing release, the Board solicited comment on whether the initial communication in Rule 3526(a) should be limited to relationships that existed during a particular period, and, if so, how long that period should be. Commenters provided a wide variety of recommendations in this area. Some commenters stated that the initial communication should not be limited to relationships that existed during a particular period. Some of these commenters noted that establishing a specific period could result in arbitrary exclusion of certain relationships and recommended that the audit committee and auditor be responsible for determining the relevant time frame. Other commenters recommended that the time period be limited to the audit and professional engagement period because, according to these commenters, the relevant relationships are those that exist currently or will continue to exist. One of these commenters stated that requiring communication of relationships that existed prior to this period would cause an unnecessary burden on the firm to identify and communicate these matters and on the audit committee to consider such information, because the firm was not subject to the auditor independence rules with respect to the audit client before the beginning of the audit and professional engagement period. One commenter recommended that the required time period should, at a minimum, be the audit period and that the rule should require auditors to consider communicating relationships that existed before that time. Finally, one commenter recommended that the time period should be no longer than two years prior to the commencement of the audit period, and two commenters recommended that the proposed rule should cover a time period of at least three years. After considering these comments, the Board has determined that the initial communication required by Rule 3526(a) should not be limited to relationships that existed during a particular time period. While the Board agrees that a relationship that existed during the audit and professional engagement period may be more likely to bear on independence than a relationship that ended substantially before that time, it does not believe that the passage of time is the only factor relevant to a determination of whether a relationship may reasonably be thought to bear on independence. The nature of the relationship must also be considered. For example, if the firm customized and implemented the company's financial reporting system, that relationship, depending on the circumstances, might reasonably be thought to bear on independence even if the engagement to design the system was concluded before the beginning of the audit and professional engagement period. Determining whether a particular relationship is covered by Rule 3526(a) will, therefore, depend on the relevant facts and circumstances. The Board is making one modification to the rule in response to a comment recommending that Rule 3526 make clear that the relationships required to be disclosed are those that may reasonably be thought to bear on independence as of the date of the communication. Because the relevant relationships are those that continue to bear on independence at the time of the communication, the Board has modified the rule by adding the words “as of the date of the communication” where appropriate. This clarification should help firms distinguish relationships that are covered by the rule from those that are not. This modification should also clarify that, if a relationship may reasonably be thought to bear on independence as of the date of the communication, it must be disclosed regardless of whether it was disclosed in a prior year. Some commenters suggested that auditors should not be required to repeat a previously made disclosure. The Board believes that an earlier disclosure may reduce the amount of information that needs to be disclosed, but it does not obviate the need for disclosure altogether. If the nature of the relationship and the potential effects of the relationship on independence remain substantially unchanged, a reference to the earlier disclosure will generally be sufficient when disclosure is required. Moreover, as discussed above, after some amount of time, the length of which depends on the nature of the relationship, a relationship may no longer reasonably be thought to bear on independence and, therefore, would no longer need to be disclosed. Timing of the Communications As discussed above, the Board proposed Rule 3526(a) because it believed that auditors should communicate relevant information about independence before becoming the issuer's auditor. A few commenters expressed concern that the proposed rule could cause undue burden on private companies pursuing an initial public offering if the communication were required before the auditor accepts an engagement to assist an existing private company client in going public. According to commenters, a requirement to complete the independence assessment before the auditor could commence work related to the initial public offering might disadvantage the audit client by causing delay. One commenter stated that auditors generally begin work on the initial public offering based upon an initial review of relationships between the accounting firm and the company and complete their independence assessment before the company's registration statement is filed. This commenter suggested that the Board reconsider the required timing of the communications in the context of an initial public offering. After considering these comments, the Board has determined that relieving a firm whose private company audit client is pursuing an initial public offering from compliance with Rule 3526 is not necessary or appropriate. As discussed above, the rule is intended to provide audit committees with the information they need to effectively oversee the audit engagement. When a private company undertakes an initial public offering, it must, for the first time, have its financial statements audited by an auditor that is independent within the meaning of the rules of the SEC and PCAOB. Among other decisions an audit committee must make is whether to engage its existing auditor for the initial public offering or whether to retain a new auditor for that purpose. In this context, the Board believes that the communication about an existing auditor's independence—which is relevant to the existing auditor's ability to continue as the company's auditor through, and after, the initial public offering—should not be delayed until just before the registration statement is filed. Moreover, the Board believes that this evaluation will not cause an unnecessary burden because the private company is already a client of the accounting firm and therefore should already be aware of most of the relationships that would need to be communicated. The Board also received comment on the timing of the annual communication requirement that the Board proposed in Rule 3526(b). Like ISB No. 1, proposed Rule 3526 did not specify when during the year the firm would be required to make the annual communication. 11 One commenter recommended that the Board specify in Rule 3526(b) when the annual communication should take place to make sure that these critical discussions do not take place at the end of the audit engagement. The commenter recommended that the proposed rule be changed to state that firms should apply Rule 3526 as early in the audit process as practicable, preferably during the planning stage of the audit. One commenter recommended that the communication occur before substantial planning procedures commence, while another recommended that the annual communication should take place at the time the engagement letter is signed and then again near the end of the audit. Finally, one commenter recommended adding a section to Rule 3526 requiring an auditor to update the communications when he or she becomes aware of a covered, previously unknown or new relationship. 11 The Board understands that, under ISB No. 1, the communication typically occurs at the end of the audit when the financial statements are issued. After considering these comments, the Board does not believe it is appropriate to mandate specifically when the Rule 3526(b) annual communication takes place. In most cases, the communications will be more useful if they take place near the beginning of the audit process. However, by not prescribing the timing of the communication, Rule 3526(b) will allow the auditor and audit committee to determine the timing that is most appropriate in the circumstances of the particular engagement. Similarly, the Board does not believe that it is necessary for the rule to explicitly address how a firm should correct an incomplete communication. Rule 3523. Tax Services for Persons in Financial Reporting Oversight Roles Amendment to Rule 3523 To Exclude the Portion of the Audit Period That Precedes the Professional Engagement Period Rule 3523, as adopted by the Board, prohibits a registered public accounting firm, or an affiliate of the firm, from providing tax services during the “audit and professional engagement period” to a person in, or an immediate family member of a person in, a FROR at the audit client. Consistent with the SEC's independence rules, 12 the phrase “audit and professional engagement period” is defined to include two discrete periods of time. The “audit period” is the period covered by any financial statements being audited or reviewed. 13 The “professional engagement period” is the period beginning when the firm either signs the initial engagement letter or begins audit procedures, whichever is earlier, and ends when either the company or the firm notifies the SEC that the company is no longer that firm's audit client. 14 12 17 CFR 210.2-01(f)(5). 13 Rule 3501(a)(iii)(1). 14 Rule 3501(a)(iii)(2). In circumstances in which a registered firm has been the auditor for an audit client for more than a year, the “audit period” is a subset of the “professional engagement period.” However, when a registered firm accepts a new audit client, the audit period may cover a period of time before the commencement of the professional engagement period. In such circumstances, Rule 3523, as adopted, provides that the firm is not independent of its audit client if the firm, or an affiliate of the firm, provided tax services to a person covered by Rule 3523 during the audit period but before the beginning of the professional engagement period. This aspect of the rule therefore effectively prevents a firm from accepting a new audit client if the firm, or an affiliate of the firm, provided tax services to such a person during the period covered by any financial statements to be audited or reviewed. In preparing for implementation of the Board's tax services and independence rules, the Board decided to revisit the application of Rule 3523 to tax services provided during the audit period. As discussed above, on April 3, 2007, the Board issued a concept release to solicit comment about the possible effects on a firm's independence of providing tax services to a person covered by Rule 3523 during the portion of the audit period that precedes the beginning of the professional engagement period, and other practical consequences of applying the restrictions imposed by Rule 3523 to that portion of the audit period. After careful consideration of comments received in response to the concept release, the Board, on July 24, 2007, proposed to amend the rule to exclude the portion of the audit period that precedes the beginning of the professional engagement period. 15 15 *See* PCAOB Release No. 2007-008, which includes a discussion of the comments the Board received on the concept release. The Board received 13 comments on the proposed amendment to Rule 3523. Almost all of the commenters supported the Board's recommendation to amend Rule 3523. 16 Many of these commenters reiterated their belief that the firm's independence would not be affected by the provision of tax services to a person in a FROR during the portion of the audit period that precedes the beginning of the professional engagement period. Commenters also reaffirmed their belief that, if Rule 3523 is not amended, it could adversely affect companies' ability to change auditors by limiting the companies' choice of auditors. 16 Only one commenter on the proposed rule objected to the amendment of Rule 3523. This commenter's objection stemmed from the contention that the terms “professional engagement period” and “a person in a financial reporting role” were not defined. Definitions for “professional engagement period” and “financial reporting oversight role” are provided under Rules 3501(a)(iii)(2) and 3501(f)(i), respectively. The same commenter, while not specifically addressing the proposed amendment, also expressed concern with Rule 3523(a), which provides an exception for tax services to a person who is in a FROR only because he or she serves as a member of the Board of Directors, and, referring to the responsibilities of directors, recommended deleting this section in its entirety. This commenter also recommended that the Board eliminate Rule 3523(b), which provides an exception, under certain circumstances, for tax services to a person who is in a FROR only because of the person's relationship to an affiliate of the entity being audited. The Board does not believe that eliminating these exceptions is warranted. The Board has carefully considered these comments, as well as the comments on the concept release, 17 and determined to adopt the amendment to Rule 3523. The Board continues to believe that it is not necessary for the rule to restrict the provision of tax services during the portion of the audit period that precedes the professional engagement period. Rule 3523 relates to services provided to individuals and not the audit client that issues the financial statements subject to audit. Additionally, registered firms would remain responsible for considering the relevant facts and circumstances of a specific tax engagement and determining whether their independence is impaired under the SEC's general standard of auditor independence. 18 17 In response to the concept release, two commenters stated that Rule 3523 should not be amended to exclude the portion of the audit period that precedes the professional engagement period. These commenters believed that providing tax services to a person in a FROR during the audit period impairs independence, and suggested that audit firms may plan for a change of auditors sufficiently in advance to avoid or minimize any problems resulting from the application of the rule to the audit period. 18 17 CFR 210.2-01(b); *see* footnote 7. One commenter objected to the discussion in the proposing release (and included here in the paragraph above) describing the firm's obligation to consider whether the firm's independence is impaired under the SEC's general standard of auditor independence. This commenter stated that the discussion sends a contradictory message by calling for firms to assess whether their independence is impaired despite the Board's conclusion that restrictions are unnecessary to preserve independence. The Board disagrees. As a result of the Board's amendment, firms will not be specifically prohibited by Rule 3523 from providing tax services to persons in a FROR during the portion of the audit period that precedes the professional engagement period. That does not mean, however, that such services are categorically permitted. Rather, as discussed in the proposing release, the amendment reflects the Board's belief that a more tailored approach, based on facts and circumstances and measured against the general standard of auditor independence, is preferable to a *per se* prohibition. Accordingly, as with any other service or relationship that is not specifically prohibited by the independence rules, firms must determine whether the service or relationship impairs independence under the SEC's general standard of auditor independence. Application of Rule 3523 to New Issuers The Board proposed adding a note to Rule 3523 concerning the application of Rule 3523 in the context of an initial public offering in light of comments received on the concept release. The proposed note stated that, in the context of an initial public offering, the provision of tax services to a person covered by Rule 3523 before the earlier of the date that a registered firm:
(1)Signed an initial engagement letter or other agreement to perform an audit pursuant to the standards of the PCAOB, or
(2)began procedures to do so, does not impair a firm's independence under Rule 3523. Commenters generally recommended that the Board adopt the note and encouraged the Board to consider expanding it to include other corporate life events, noting that corporate life events other than an initial public offering may also result in the need for an audit client's financial statements to be audited pursuant to the standards of the PCAOB for the first time. 19 19 Commenters suggested the following as examples of when an audit client's financial statements would, for the first time, need to be audited pursuant to the standards of the PCAOB—mergers, reverse mergers in which a privately-held entity merges with a public company and succeeds to the public company's reporting obligations under the Securities Exchange Act of 1934, issuance of publicly traded debt, issuance of partnership or other units, inclusion of a public company's securities in an employee benefit plan, decision by a foreign private issuer to list its securities in the United States, and companies that have greater than 500 U.S. shareholders and total assets exceeding $10 million as of the latest fiscal year-end. In response to these comments, the Board determined to revise the note to Rule 3523 to describe events, other than just initial public offerings, pursuant to which a company's financial statements must be audited in accordance with the standards of the PCAOB for the first time. Specifically, the Board replaced the words “[i]n the context of an initial public offering” with “[i]n an engagement for an audit client whose financial statements for the first time will be required to be audited pursuant to the standards of the PCAOB.” This situation may occur when a company decides to conduct an initial public offering of its securities, 20 which would require the company to file, for the first time, a registration statement under the Securities Act of 1933. Additionally, this situation may occur when a foreign private issuer decides to list its securities on a national securities exchange, which would require the company to register its securities, for the first time, under the Securities Exchange Act of 1934. In both cases, the company's audited financial statements would be required, for the first time, to be audited pursuant to the standards of the PCAOB. 21 20 The company may offer equity securities, debt securities, limited partnership interests, trust interests, or another type of securities in the initial public offering. 21 The Board intends the note to Rule 3523 to describe all circumstances in which a company that was not an “issuer,” as defined by the Act, becomes an issuer as a result of a corporate life event or otherwise. These circumstances include those in which a private company that was once an issuer becomes an issuer again. As long as the company was not required to have its financial statements audited pursuant to the standards of the PCAOB prior to being required to do so, the Board will consider the requirement to be a “first-time” requirement for purposes of the note. The Board does not believe it is appropriate to list in the note the various corporate life events identified by commenters, such as mergers or acquisitions, reverse mergers or other similar transactions. The relevant factor is not the name given to a transaction or event but whether the transaction or event triggers the initial requirement for an audit pursuant to the standards of the PCAOB. For example, the surviving company in a merger or acquisition transaction may be an issuer that is already filing with the SEC financial statements required to be audited pursuant to the standards of the PCAOB. The Board did not intend the note to Rule 3523 to describe such a scenario. 22 By focusing on the need for a first-time audit pursuant to the standards of the PCAOB, the company and its auditors are better able to determine whether a proposed transaction or corporate life event is described by the note. 22 Another example is a private operating company becoming a reporting company through a reverse merger with a reporting shell company. In this scenario, even though the operating company assumes the reporting obligations of the former shell company, the surviving reporting company is the former shell company whose financial statements already were required to be audited pursuant to the standards of the PCAOB. Therefore, the note to Rule 3523 does not describe this situation. One commenter stated that, while it is easy to identify the date on which the initial engagement letter to perform an audit pursuant to the standards of the PCAOB is signed, it would be very difficult to apply the second prong of the note, which requires identification of the date that the auditor began procedures to perform an audit pursuant to the standards of the PCAOB, especially if the registered firm audited the company's prior years' financial statements. 23 Another commenter similarly questioned whether this period begins when the auditor begins planning for the audit. The Board recognizes that, in certain circumstances, it may be difficult to identify when a continuing auditor began procedures pursuant to the standards of the PCAOB. An auditor begins procedures for purposes of Rule 3523 when he or she begins procedures, including required audit planning procedures, to update its earlier audits to conform them to the standards of the PCAOB or begins procedures on a new audit pursuant to those standards. This point in time will depend on the facts and circumstances of the particular engagement and corporate life event, rather than on any more specific triggering event that the Board could establish by rule. 23 The commenter noted that, when a company undertakes an initial public offering, it is required to include in the registration statement audited financial statements for its past three completed fiscal years. These financial statements may have previously been audited pursuant to generally accepted auditing standards (“GAAS”). The commenter was concerned that if the company does not retain a new auditor for its initial public offering, there may be a question as to whether the auditor should consider its audits of the prior years in assessing when it “began procedures” as provided under the note to Rule 3523. An auditor should not consider work already performed on previously completed GAAS audits for determining when the auditor “began procedures” because those audits were not performed pursuant to the standards of the PCAOB. Transition Periods Rule 3523 prohibits the provision of tax services to covered persons once the professional engagement period begins. Some commenters on the concept release recommended that the Board amend Rule 3523 to allow a transition period after a company changes auditors so that the new auditor may complete any tax services in progress to any persons in FRORs affected by the issuer's change of auditors. 24 Other commenters stated that tax services to persons in FRORs should, as is currently required, cease before the professional engagement period begins. The Board decided to seek further feedback on this topic in the proposing release. Specifically, the Board asked commenters to specify why they believed any transition period was necessary and how long any such transition period should be. 25 24 Rule 3523(c) provides a time-limited transition period for an auditor to complete in-progress tax services to a person that becomes a FROR at the audit client through a hiring, promotion, or other change in employment event. That transition period is unaffected by the proposed rules changes. 25 *See* PCAOB Release 2007-008 (July 24, 2007), at 12. The majority of commenters on this topic recommended that the Board provide for a 180-day transition period to allow an accounting firm to complete covered tax services once the professional engagement period begins. Most of these commenters stated that, since the Board has previously determined that a 180-day transition is appropriate when a person is hired or promoted into a FROR, 26 the Board should provide the same transition when an issuer changes its auditor. The commenters stated that, without a transition period, the person in a FROR could experience undue hardship because he or she may have to switch tax preparers in the middle of the personal tax services engagement. Additionally, some commenters stated that some accounting firms may not be able to terminate the in-process personal tax services engagements within a timeframe that would also allow them to submit their proposal for the new audit engagement. Conversely, some commenters stated that they believed that the Board should not provide a transition period and that it is appropriate for the firm to cease the personal tax services before the professional engagement period begins or that a transition period should only be available on a case-by-case basis where cessation of services would cause significant hardship. 27 26 *See* Rule 3523(c). 27 Another commenter stated that Rule 3523 should be effective immediately for issuers with fiscal years ending on or after December 15, 2007, that all personal tax services in process should be allowed to continue until the filing of the applicable tax return, and that such services, along with the related fees, should be disclosed in the issuer's filings with the SEC and documented in the minutes of meetings of the audit committee. After considering these comments, the Board does not believe that a transition period is necessary when a company changes its auditor and has determined not to amend Rule 3523 to include one. The Board adopted Rule 3523 because the provision of tax services to a person in a FROR after the accounting firm is hired as the auditor creates an unacceptable appearance that the firm lacks independence. While the Board believed a time-limited exception was warranted to accommodate persons who, through a hiring or promotion event, abruptly become covered by the rule, it does not believe that such a transition period is similarly necessary after an auditor change. In the former situation, the firm already is the issuer's auditor and has no control over whether or when the person is promoted or otherwise moved into a FROR. In contrast, the firm controls whether and when it begins a new engagement. The Board therefore believes that the firm is able to conclude, or transition to another provider, any tax services to persons in FRORs at a new audit client before beginning the engagement. 28 28 Nothing in Rule 3523 requires a firm to complete or terminate tax services to persons in FRORs at a potential audit client before submitting a proposal for a new audit engagement. Rather, the rule requires the accounting firm to complete or terminate those services by the beginning of the professional engagement period. Some commenters also encouraged the Board to consider providing a transition period for firms to complete tax services to persons who become covered by Rule 3523 as a result of a corporate life event, such as a merger, acquisition, or initial public offering. Commenters suggested that such corporate life events present conceptually similar transition issues to those related to the hiring or promotion of a person into a FROR and that Rule 3523(c) should therefore be expanded to accommodate them. Commenters also stated that the absence of transitional relief may cause unnecessary hardship for persons in FRORs whose tax return preparation work was well underway at the point of the initial public offering, merger, or acquisition. 29 29 The commenters further stated that, because persons in FRORs may receive tax services from a number of accounting firms, the application of the rule to the audit period may unreasonably restrict a company's ability to either continue or change auditors after a corporate life event. As discussed above, the Board has amended the rule to exclude the portion of the audit period that precedes the professional engagement period. As discussed above, in the context of an initial public offering, the rule, as amended, makes clear that tax services provided to a person in a FROR do not impair independence as long as those tax services are concluded before the earlier of the date that the firm:
(1)Signed an initial engagement letter or other agreement to perform an audit pursuant to the standards of the PCAOB, or
(2)began procedures to do so. Auditors should have sufficient time before that date to conclude any tax services to persons that would be covered by the rule. Accordingly, the Board does not believe that the recommended transition period is necessary in the context of an initial public offering. The Board also considered whether a transition period is necessary to allow a firm to conclude tax services to persons who become covered by the rule after a merger or acquisition. As discussed above, Rule 3523(c) already provides a transition period for a firm to conclude tax services to a person who was not in a FROR before a hiring, promotion, or other change in employment event. If a business combination results in a change of employer for a person in a FROR—from, for example, the acquired company to the acquiring company—the existing transition period in Rule 3523 would apply. 30 For example, if Company A acquires Company B, a person who was in a FROR at Company B would experience an “other change in employment event” if he or she became an employee of Company A in a FROR as a result of the acquisition. If such a person had been receiving tax services from Company A's registered public accounting firm pursuant to an engagement in process before the acquisition, the time-limited exception in Rule 3523(c) would apply. 31 30 *See* also *Staff Questions and Answers, Ethics and Independence Rules Concerning Independence, Tax Services and Contingent Fees* (April 3, 2007), Question and Answer No. 6, at 4-5. 31 *Id.* In the example above, persons in FRORs at Company A would not experience a change in employment event because they were employed by Company A both before and after the acquisition, and Rule 3523(c) would, therefore, not apply. If Company B's auditor became Company A's auditor after the acquisition (replacing Company A's auditor), Company B's auditor would have to conclude any tax services to persons in FRORs (and their immediate family members) at Company A before the start of the professional engagement period. The Board believes this is appropriate because, as discussed above, the Board does not believe that a transition period is necessary to allow a newly engaged auditor to conclude in-progress tax services to persons in FRORs at the new audit client. Accordingly, the Board has determined not to expand the existing transition period in Rule 3523(c). Effective Date Rule 3526 establishes new requirements for registered public accounting firms. The Board believes it is appropriate to allow a reasonable period of time for such firms to prepare internal policies and procedures and train their employees to ensure compliance with these new requirements. Accordingly, Rule 3526 will become effective, and ISB No. 1 and the related interpretations superseded, on the later of September 30, 2008, or 30 days after the date that the SEC approves the rule. The amendment to Rule 3523 would have the effect of making permanent the Board's delay in implementing the rule as it applies to tax services provided during the period subject to audit but before the professional engagement period. Accordingly, no transition period is necessary, and the amended rule will become effective immediately upon approval by the SEC. 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 Board 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 requirements of Title I of 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/pcaob.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number PCAOB 2008-03 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number PCAOB 2008-03. 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/pcaob/shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule changes that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 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 PCAOB. All comments received will be posted without change; we do 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 PCAOB-2008-03 and should be submitted on or before August 4, 2008. By the Commission. Florence E. Harmon, Acting Secretary. [FR Doc. E8-15928 Filed 7-11-08; 8:45 am] BILLING CODE 8010-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #11308] Illinois Disaster Number IL-00016 AGENCY: U.S. Small Business Administration. ACTION: Amendment 1. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for the State of Illinois (FEMA-1771-DR), dated 06/24/2008. *Incident:* Severe Storms and Flooding. *Incident Period:* 06/01/2008 and continuing. *Effective Date:* 07/03/2008. *Physical Loan Application Deadline Date:* 08/25/2008. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the President's major disaster declaration for Private Non-Profit organizations in the State of Illinois, dated 06/24/2008, is hereby amended to include the following areas as adversely affected by the disaster. *Primary Counties:* Douglas, Edgar, Jersey, Winnebago. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Number 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E8-15970 Filed 7-11-08; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #11306 and #11307] Illinois Disaster Number IL-00015 AGENCY: U.S. Small Business Administration. ACTION: Amendment 1. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for the State of Illinois (FEMA-1771-DR), dated 06/25/2008. *Incident:* Severe Storms, and Flooding. *Incident Period:* 06/01/2008 and continuing. *Effective Date:* 07/03/2008. *Physical Loan Application Deadline Date:* 08/25/2008. *EIDL Loan Application Deadline Date:* 03/23/2009. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the Presidential disaster declaration for the State of Illinois, dated 06/25/2008 is hereby amended to include the following areas as adversely affected by the disaster: *Primary Counties: (Physical Damage and Economic Injury Loans):* Calhoun, Jersey, Rock Island, Whiteside. *Contiguous Counties: (Economic Injury Loans Only):* Illinois: Bureau, Carroll, Greene, Lee, Macoupin, Madison. Iowa: Clinton, Muscatine, Scott. Missouri: Lincoln, Pike, Saint Charles. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E8-15979 Filed 7-11-08; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #11264 and #11265] Iowa Disaster Number IA-00015 AGENCY: U.S. Small Business Administration. ACTION: Amendment 7. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for the State of Iowa (FEMA-1763-DR), dated 05/27/2008. *Incident:* Severe Storms, Tornadoes, and Flooding. *Incident Period:* 05/25/2008 and continuing. *Effective Date:* 07/07/2008. *Physical Loan Application Deadline Date:* 07/28/2008. *EIDL Loan Application Deadline Date:* 02/27/2009. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the Presidential disaster declaration for the State of Iowa, dated 05/27/2008 is hereby amended to include the following areas as adversely affected by the disaster: *Primary Counties: (Physical Damage and Economic Injury Loans):* Clinton, Decatur, Dubuque, Greene, Keokuk, Pottawattamie, Van Buren, Washington. *Contiguous Counties:* ( *Economic Injury Loans Only* ): Illinois: Carroll, Jo Daviess, Whiteside. Missouri: Harrison, Mercer. Nebraska: Douglas. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E8-15983 Filed 7-11-08; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #11272] Iowa Disaster Number IA-00016 AGENCY: U.S. Small Business Administration. ACTION: Amendment 4. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for the State of Iowa (FEMA-1763-DR), dated 05/27/2008. *Incident:* Severe Storms, Tornadoes, and Flooding. *Incident Period:* 05/25/2008 and continuing. *Effective Date:* 06/27/2008. *Physical Loan Application Deadline Date:* 07/28/2008. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the President's major disaster declaration for Private Non-Profit organizations in the State of Iowa, dated 05/27/2008, is hereby amended to include the following areas as adversely affected by the disaster. *Primary Counties:* Cerro Gordo, Crawford, Dallas, Dubuque, Floyd, Davis, Des Moines, Henry, Lee, Lyon, Muscatine, Palo Alto, Harrison, Marion, Story, Tama, Union. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Number 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E8-15990 Filed 7-11-08; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #11255] Kentucky Disaster Number KY-00016 AGENCY: U.S. Small Business Administration. ACTION: Amendment 1. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for the Commonwealth of Kentucky (FEMA-1757-DR), dated 05/19/2008. *Incident:* Severe Storms, Tornadoes, Flooding, Mudslides, and Landslides. *Incident Period:* 04/03/2008 through 04/04/2008. *Effective Date:* 07/01/2008. *Physical Loan Application Deadline Date:* 07/18/2008. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the President's major disaster declaration for Private Non-Profit organizations in the Commonwealth of Kentucky, dated 05/19/2008, is hereby amended to include the following areas as adversely affected by the disaster. *Primary Counties:* Ballard, Hickman. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Number 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E8-15967 Filed 7-11-08; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #11310] Minnesota Disaster Number MN-00015 AGENCY: U.S. Small Business Administration. ACTION: Amendment 1. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for the State of Minnesota (FEMA-1772-DR), dated 06/25/2008. *Incident:* Severe Storms and Flooding. *Incident Period:* 06/07/2008 through 06/12/2008. *Effective Date:* 06/12/2008. *Physical Loan Application Deadline Date:* 08/25/2008. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the President's major disaster declaration for Private Non-Profit organizations in the State of Minnesota, dated 06/25/2008, is hereby amended to establish the incident period for this disaster as beginning 06/07/2008 and continuing through 06/12/2008. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Number 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E8-15992 Filed 7-11-08; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #11318 and #11319] Missouri Disaster #MO-00027 AGENCY: U.S. Small Business Administration. ACTION: Notice. SUMMARY: This is a notice of an Administrative declaration of a disaster for the State of Missouri dated 07/03/2008. *Incident:* Severe Storms and Tornadoes. *Incident Period:* 05/01/2008 through 05/03/2008. *Effective Date:* 07/03/2008. *Physical Loan Application Deadline Date:* 09/02/2008. *Economic Injury
(EIDL)Loan Application Deadline Date:* 04/03/2009. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the Administrator's disaster declaration, applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: *Primary Counties:* Clay. *Contiguous Counties:* Missouri: Clinton, Jackson, Platte, Ray. Kansas: Wyandotte. The Interest Rates are: Percent Homeowners with credit available elsewhere 5.375 Homeowners without credit available elsewhere 2.687 Businesses with credit available elsewhere 8.000 Businesses & small agricultural cooperatives without credit available elsewhere 4.000 Other (Including non-profit organizations) with credit available elsewhere 5.250 Businesses and non-profit organizations without credit available elsewhere 4.000 The number assigned to this disaster for physical damage is 11318 C and for economic injury is 11319 0. The States which received an EIDL Declaration Number are Missouri, Kansas. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Dated: July 3, 2008. Jovita Carranza, Acting Administrator. [FR Doc. E8-15968 Filed 7-11-08; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #11299] Nebraska Disaster Number NE-00021 AGENCY: U.S. Small Business Administration. ACTION: Amendment 2. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for the State of Nebraska (FEMA-1770-DR), dated 06/20/2008. *Incident:* Severe Storms, Tornadoes, and Flooding. *Incident Period:* 05/22/2008 through 06/24/2008. *Effective Date:* 07/03/2008. *Physical Loan Application Deadline Date:* 08/19/2008. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the President's major disaster declaration for Private Non-Profit organizations in the State of Nebraska, dated 06/20/2008, is hereby amended to include the following areas as adversely affected by the disaster. *Primary Counties:* Cherry, Dundy, Greeley, Johnson, Morrill, Nemaha, Valley. All other information in the original declaration remains unchanged. Catalog of Federal Domestic Assistance Number 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E8-15973 Filed 7-11-08; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #11297 and #11298] Nebraska Disaster Number NE-00020 AGENCY: U.S. Small Business Administration. ACTION: Amendment 2. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for the State of Nebraska (FEMA-1770-DR), dated 06/20/2008. *Incident:* Severe Storms, Tornadoes, and Flooding. *Incident Period:* 05/22/2008 through 06/24/2008. *Effective Date:* 07/03/2008. *Physical Loan Application Deadline Date:* 08/19/2008. *EIDL Loan Application Deadline Date:* 03/20/2009. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the Presidential disaster declaration for the State of Nebraska, dated 06/20/2008 is hereby amended to include the following areas as adversely affected by the disaster: *Primary Counties: (Physical Damage and Economic Injury Loans):* Custer, Lancaster. *Contiguous Counties: (Economic Injury Loans Only):* Nebraska: Blaine, Garfield, Logan, Loup, Valley All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E8-15985 Filed 7-11-08; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 11320] Wisconsin Disaster # WI-00014 AGENCY: U.S. Small Business Administration. ACTION: Notice SUMMARY: This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of Wisconsin (FEMA-1768-DR), dated 06/14/2008. *Incident:* Severe Storms, Tornadoes, and Flooding. *Incident Period:* 06/05/2008 and continuing. *Effective Date:* 06/14/2008. *Physical Loan Application Deadline Date:* 08/13/2008. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the President's major disaster declaration on 06/14/2008, Private Non-Profit organizations that provide essential services of a governmental nature may file disaster loan applications at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: *Primary Counties:* Adams, Columbia, Crawford, Dane, Dodge, Grant, Iowa, Lafayette, Milwaukee, Monroe, Richland, Sauk, Vernon, Winnebago. The Interest Rates are: Percent Other (Including non-profit organizations) with credit available elsewhere 5.250 Businesses and non-profit organizations without credit available elsewhere 4.000 The number assigned to this disaster for physical damage is 11320. (Catalog of Federal Domestic Assistance Number 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E8-15965 Filed 7-11-08; 8:45 am] BILLING CODE 8025-01-P DEPARTMENT OF STATE [Public Notice 6287] Culturally Significant Objects Imported for Exhibition Determinations: “Projects 88: Lucy McKenzie” 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 “Projects 88: Lucy McKenzie”, 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 Museum of Modern Art, New York, NY, from on or about September 10, 2008, until on or about December 1, 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: July 7, 2008. C. Miller Crouch, Principal Deputy Assistant Secretary for Educational and Cultural Affairs, Department of State. [FR Doc. E8-16005 Filed 7-11-08; 8:45 am] BILLING CODE 4710-05-P DEPARTMENT OF STATE [Public Notice 6288] Culturally Significant Objects Imported for Exhibition; Determinations: “The Dead Sea Scrolls” ACTION: Notice, Correction. SUMMARY: On June 20, 2008, notice was published on page 35189 of the **Federal Register** (volume 73, number 120) of determinations made by the Department of State pertaining to the exhibit, “The Dead Sea Scrolls.” The referenced notice is corrected as to an additional object to be included in the exhibition. 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 additional object to be included in the exhibition “The Dead Sea Scrolls”, imported from abroad for temporary exhibition within the United States, is of cultural significance. The additional object is imported pursuant to a loan agreement with the foreign owners or custodians. I also determine that the exhibition or display of the exhibit object at The Jewish Museum, New York, New York, from on or about September 21, 2008, until on or about January 4, 2009, 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: July 7, 2008. C. Miller Crouch, Principal Deputy Assistant Secretary for Educational and Cultural Affairs, Department of State. [FR Doc. E8-16004 Filed 7-11-08; 8:45 am] BILLING CODE 4710-05-P DEPARTMENT OF TRANSPORTATION Office of the Secretary; Federal Aviation Administration [Docket No. FAA-2008-0036] RIN 2120-AF90 Policy Regarding Airport Rates and Charges AGENCY: Department of Transportation, Office of the Secretary and Federal Aviation Administration. ACTION: Notice of amendment to policy statement. SUMMARY: This action amends the Department of Transportation (“Department”) “Policy Regarding the Establishment of Airport Rates and Charges” published in the **Federal Register** on June 21, 1996 (“1996 Rates and Charges Policy”). This action adopts three amendments to the 1996 Rates and Charges Policy (two modifications and one clarification). These amendments are intended to provide greater flexibility to operators of congested airports to use landing fees to provide incentives to air carriers to use the airport at less congested times or to use alternate airports to meet regional air service needs. Any charges imposed on international operations must also comply with the international obligations of the United States. DATES: This policy statement is effective July 14, 2008. ADDRESSES: *Docket:* To read background documents or comments received, go to *http://www.regulations.gov* at any time or to Room W12-140 on the ground floor 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. FOR FURTHER INFORMATION CONTACT: Charles Erhard, Manager, Airport Compliance Division, AAS-400, Federal Aviation Administration, 800 Independence Avenue, SW., Washington, DC 20591, telephone
(202)267-3187; facsimile:
(202)267-5769; e-mail: *charles.erhard@faa.gov.* SUPPLEMENTARY INFORMATION: Availability of Documents You can get an electronic copy of this notice and all other documents in this docket using the Internet by:
(1)Searching the Federal eRulemaking portal *(http://www.regulations.gov/search);*
(2)Visiting the FAA's Regulations and Policies Web page at *http://www.faa.gov/regulations_policies;* or
(3)Accessing the Government Printing Office's Web page at *http://www.access.gpo.gov/su_docs/aces/aces140.html* . You can also get a copy by sending a request to the Federal Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence Avenue, SW., Washington, DC 20591, or by calling
(202)267-9680. Make sure to identify the docket number, notice number, or amendment number of this proceeding. Authority for This Proceeding This notice is published under the authority described in Subtitle VII, Part B, Chapter 471, section 47129 of Title 49 United States Code. Under subsection
(b)of this section, the Secretary of Transportation is required to publish policy statements establishing standards or guidelines the Secretary will use in determining the reasonableness of airport fees charged to airlines under section 47129. Background On January 17, 2008, the Department of Transportation published a notice in the **Federal Register** proposing to amend the Department of Transportation (“Department”) “Policy Regarding the Establishment of Airport Rates and Charges” published in the **Federal Register** on June 21, 1996, (“1996 Rates and Charges Policy” or “1996 Policy”). (73 FR 3310, January 17, 2008). The comment period on the notice was extended to April 3, 2008. (73 FR 7626, February 8, 2008). The notice proposed three amendments to the 1996 Policy (technically two modifications and one clarification). These amendments were intended to provide greater flexibility to operators of congested airports to use landing fees to provide incentives to air carriers to use the airport at less congested times or to use alternate airports to meet regional air service needs. The notice noted that any charges imposed on international operations must also comply with the international obligations of the United States. Specifically, the notice first proposed to clarify the 1996 Policy by explicitly acknowledging that airport operators are authorized to establish a two-part landing fee structure consisting of both an operation charge and a weight-based charge, in lieu of the standard weight-based charge. Such a two-part fee would serve as an incentive for carriers to use larger aircraft and increase the number of passengers served with the same or fewer operations. Second, the notice proposed to expand the ability of the operator of a congested airport to include in the airfield fees of a congested airport a portion of the airfield costs of other, underutilized airports owned and operated by the same proprietor. Third, the notice proposed to permit the operator of a congested airport to charge users of a congested airport a portion of the cost of airfield projects under construction. Under the existing policy, costs of new or reconstructed airfield facilities could be included in airfield charges only when the new or reconstructed facilities are completed and in use, unless carriers at the airport agree otherwise. This notice proposed two alternatives for charges for projects under construction. The first would permit the costs to be included in the rate base only during periods when the airport experiences congestion. At some airports, such as Chicago O'Hare or New York LaGuardia, this could occur throughout the normal operating day. The second would permit these costs to be included in the rate base of the congested airport at all times of the day. Because the latter two proposed amendments would apply only at congested airports, the notice proposed to add a definition of “congested airport” in the Applicability section of the 1996 Policy based upon 49 U.S.C. 47175(2). Legal Requirements for Airport Rates and Charges All commercial service airports operating in the United States and most other airports that are open to the public have accepted grants for airport development under the Airport Improvement Program, authorized in Title 49 of the United States Code, Subtitle VII, Part B, Chapter 471. Under § 47107, in exchange for receiving grant funds, airport operators must give a variety of assurances regarding the operation of their airports and the implementation of grant funded projects. Among other things, airport operators pledge to make the airport “available for public use on reasonable conditions and without unjust discrimination.” 49 U.S.C. 47107(a)(1). This obligation encompasses the obligation to establish reasonable and not unjustly discriminatory fees and charges for aeronautical use of the airfield. The Department's rules of practice and procedure for enforcement proceedings involving Federally assisted airports are set forth in 14 CFR Part 16. Section 47129 authorizes the Department to review the reasonableness of airport fees charged to air carriers, upon a complaint or request for determination and a finding of a significant dispute, and directs the publication of policies or guidelines for determining reasonable fees and development of expedited hearing procedures to resolve airport fee disputes. The Department's procedures applicable to a proceeding concerning airport fees are contained in Subpart F, Title 14 CFR 302.601-302.609. The Policy Regarding Airport Rates and Charges The Department published the 1996 Rates and Charges Policy in the **Federal Register** at 61 FR 31994 on June 21, 1996. The statement of policy was required by section 113 of the Federal Aviation Administration Authorization Act of 1994, Public Law 103-305 (August 23, 1994), now codified at 49 U.S.C. 47129. The publication of the 1996 Rates and Charges Policy followed publication of a notice of proposed policy (59 FR 29874, June 9, 1994). That proposal predated enactment of section 47129. After enactment of section 47129, the Department published a supplemental notice of proposed policy (59 FR 51836, October 12, 1994); an Interim Policy (60 FR 6906, February 3, 1995); and a further supplemental notice of proposed policy (60 FR 47012, September 8, 1995). The Air Transport Association of America (ATA), on behalf of its member airlines, and the City of Los Angeles, operator of Los Angeles International Airport, both challenged elements of the 1996 Rates and Charges Policy in the United States Court of Appeals for the District of Columbia. The court vacated portions of the 1996 Rates and Charges Policy in *Air Transport Ass'n of America* v. *DOT,* 119 F.3d 38, amended by 129 F.3d 625 (D.C. Cir. 1997). The 1996 Rates and Charges Policy specified that, unless otherwise agreed to by an airport user, fees for airfield use must be based on costs calculated using the historic cost accounting
(HCA)methodology. However, under paragraphs 2.2, 2.4, and 2.5.1, for other airport facilities and services the airport proprietor was free to use any reasonable methodology to determine fees, if justified and applied on a consistent basis. 1996 Rates and Charges Policy, para. 2.6. Petitioners in the court case challenged the disparate treatment of airfield fees and other fees. The court determined that this distinction had not been adequately justified. *Air Transport* , 119 F.3d at 44. At the Department's request, the Court vacated only the specific provisions of the 1996 Rates and Charges Policy that petitioners challenged as implementing that distinction. *Air Transport,* 129 F.3d at 625. Since the court's ruling, the Department has addressed significant airport-airline fee disputes through case-by-case adjudication. The Department's decisions are informed by the statutory limitations imposed on airport fees. One limitation derives from requirements of the Airport Improvement Program
(AIP)grant assurances, 49 U.S.C. 47107. In particular, a federally assisted airport sponsor must give the Secretary of Transportation and the Federal Aviation Administration
(FAA)certain assurances, including the assurance that the airport will be available for public use on fair and reasonable terms and without unjust discrimination. The other limitation arises from the proprietor's exception to the Anti-Head Tax Act, 49 U.S.C. 40116, which allows the airport proprietor to collect only reasonable rental charges, landing fees, and other service charges from aircraft operators for the use of airport facilities. Our past cases have established some guidelines for our analysis of fees challenged by airlines. Our cases have examined fees and fee methodologies that we considered reasonable as well as those we considered not to be reasonable. See *Miami International Airport Rates Proceeding,* Order 97-3-26 (March 19, 1997), *aff'd sub nom., Air Canada* v. *DOT,* 148 F.3d 1142 (D.C. Cir. 1998); *Alaska Airlines, Inc., et al.* v. *Los Angeles World Airports,* Order 2007-6-8 (June 15, 2007) (LAX III), on appeal to the United States Court of Appeals for the District of Columbia Circuit). Additionally, we have established some guidance on unreasonable airline fees. *Second Los Angeles Int'l Airport Rates Proceeding,* Order 95-9-24 (Sept. 22, 1995, (LAX II), *aff'd sub nom, City of Los Angeles* v. *DOT,* 165 F.3d 972 (D.C. Cir. 1999); *Brendan Airways, LLC* v. *Port Authority of New York and New Jersey,* Order 2005-6-11 (June 14, 2005), *aff'd in part, Port. Auth. of New York and New Jersey* v. *DOT,* 479 F.3d 21 (D.C. Cir. 2007). The Secretary has also determined whether or not certain disputed fees were unjustly discriminatory. *Brendan Airways,* op cit., Order 2005-6-11; LAX III. Rationale for the Proposal The January 17 notice offered a two-part justification for the proposed policy changes: First, the increasing congestion and operating delays at major airports in the U.S., and second, the potential that peak period pricing has to address that congestion. Excess demand has already resulted in congestion at certain airports to the point that the FAA has taken action to limit access. These airports include LaGuardia, JFK International, O'Hare International, and Newark Liberty International. A recent study, *Capacity Needs in the National Airspace System 2007-2025: An Analysis of Airports and Metropolitan Area Demand and Operational Capacity in the Future,* conducted by the Federal Aviation Administration as part of the Future Airport Capacity Task
(FACT)2, indicates metropolitan areas and regions along the East and West Coasts are experiencing large amounts of growth in population and economic activity that cause chronic congestion. Based on studies and analyses associated with FACT 2, conditions are projected to worsen in the future in these coastal regions, primarily concentrated at Operational Evolution Partnership
(OEP)airports. Fourteen of the 35 OEP airports and eight metropolitan areas are forecasted to be capacity-constrained in 2025. Of the fourteen airports identified as capacity-constrained in the study, several are further constrained by conditions, either physical (New York LaGuardia) or environmental (Long Beach-Daugherty Field), that prevent additional runway capacity from being built. The January 17 notice noted that one way of addressing congestion of an airport's airside facilities is by the pricing of those facilities. By raising the cost of operating a flight during congested periods, an airport owner/operator can increase the efficient utilization of the airport in a number of ways. First, by charging higher landing fees during periods of peak congestion, the airport proprietor gives aircraft operators the incentive to reschedule their flights to less congested periods or to use secondary airports. The degree to which aircraft operators reschedule will in large part depend on their network structure and access to secondary airports. Second, if airports structure their airfield charges to reflect scarcity by combining per-operation charges with weight-based charges, they will provide an incentive for air carriers to use congested airfield facilities more efficiently by increasing the size of aircraft operating during periods of congestion. Third, even where expansion is not feasible, the industry and users benefit if adjustment of prices during congested periods increases the efficiency with which congested airfield facilities are used. The January 17 notice made clear that the proposed actions did not represent true congestion pricing because they did not authorize airport proprietors to set fees to balance demand with capacity without regard to allowable costs of airfield facilities and services. However, enabling proprietors at congested airports to assign additional, but still appropriate, costs to the airfield could encourage more efficient use of these airports. Airport sponsors would still need to assure that the airport is available to the public on reasonable terms and without unjust discrimination and that fees charged for international operations comply with the international obligations of the United States. Comments on the Proposals, FAA Docket 2008-0036 The Department received more than 70 substantive comments on the proposals, from U.S. and foreign air carriers, foreign governments and airport operators, U.S. airport operators, general aviation aircraft operators, local government agencies, trade and nonprofit associations, private citizens, an aircraft manufacturer, and a university. The comments covered a broad range of subjects, but tended to fall within five general issue areas: 1. Legal authority to adopt the proposed policies. 2. Adequacy of the guidance contained in the notice. 3. Effectiveness of the proposals to achieve the stated goals. 4. Whether the proposed policies are unjustly discriminatory toward particular categories of operators and particular markets. 5. Whether the notice properly acknowledged the discretionary authority of airport operators to set rates. This summary of comments reflects the major issues raised and does not restate each comment received. The Department considered all comments received even if not specifically identified and responded to here. 1. Legal Authority Several airlines argued that the proposed policy is preempted by the Airline Deregulation Act's preemption provision, which prohibits States or localities from regulating airline rates, routes, or services. They contended that airports are thereby preempted from pricing airfield access in order to modify airline conduct and that the Department accordingly lacks the authority to permit an airport to price landing areas to affect airline behavior. They disputed the premise that the “proprietor's exception” to the preemption provision allowed an airport to take congestion into account in formulating its charges. They also argued that the Anti-Head Tax Act constrains an airport's ability to implement market-based congestion pricing or slot auctions. *Comment: The proposals are in essence congestion pricing, and neither the Department nor airport operators are authorized to use congestion pricing in establishing airfield charges.* Many of the carrier comments equated the proposals to market-based congestion pricing. One association submitted a legal opinion concluding that neither the Department nor airports have the authority to impose such congestion pricing. *Response:* The notice made clear that the purpose of the proposed policies was to provide an airport operator with greater flexibility to allocate new categories of cost to peak hour landing fees, thereby providing an additional means to address peak hour congestion. The financing of airfield projects under construction and inclusion of airfield costs of secondary airports would use new and non-traditional cost allocations to achieve some of the effects of congestion pricing. The proposals allow an airport proprietor to assign certain costs to airfield charges, but not to charge fees that exceed those costs. Thus, the proposals represent pricing based upon costs of providing facilities and services rather than use of market-clearing rates to set prices. Although the intent of applying those costs to peak hours at a congested airport is to encourage changes in airline scheduling or use of larger aircraft, the fees utilized are cost-based, and therefore are not congestion pricing. *Comment: Even if cost-based, the proposals depart from established ratemaking in two general ways: charging carriers for facilities they are not using, because the facilities are at another airport or are not yet built; and charging fees higher than direct costs for the express purpose of achieving the airport operator's goals relating to airline scheduling and fleet mix.* Some commenters argued that the assignment of future costs or the costs of another airport to carriers at a congested airport goes beyond the established principles of cost-based ratemaking, and the Department cannot, therefore, consider the proposals to reflect cost recovery. *Response:* The proposed policies depart from past practice only in expanding the ability of an airport proprietor to rate-base certain costs in the landing fee and to expressly permit congested airports to include a greater portion of those costs in landing fees during congested periods. The result is not additional revenue to the airport, because fees remain limited to actual, aggregate costs. Clearly, the Department has the authority to amend its policy on airport-airline fee reasonableness. The Supreme Court has recognized that the Secretary of Transportation is responsible for administering the aviation laws and in *County of Kent,* made clear that the Department could adopt policies that would change the rules under which the court was deciding that case. *Northwest Airlines* v. *County of Kent,* 510 U.S. 355, 366-367 (1994): The Secretary of Transportation is charged with administering the federal aviation laws, including the AHTA. His Department is equipped, as courts are not, to survey the field nationwide, and to regulate based on a full view of the relevant facts and circumstances. If we had the benefit of the Secretary's reasoned decision concerning the AHTA's permission for the charges in question, we would accord that decision substantial deference. See *Chevron U.S.A. Inc.* v. *Natural Resources Defense Council, Inc.,* 467 U.S. 837, 842-845, 104 S. Ct. 2778, 2781-2783, 81 L. Ed.2d 694 (1984). The Supreme Court has also called the Department of Transportation the “superintending agency” for purposes of applying the Airline Deregulation Act's preemption provision over state and municipal regulation of airline rates, routes and services. *American Airlines, Inc.* v. *Wolens,* 513 U.S. 219, 229, fn.6 (1995). Lower courts have recognized the superintending role of the Secretary of Transportation in administering the Anti-Head Tax Act, particularly with respect to fees imposed by airports on airlines. See, *Port Authority of New York and New Jersey* v. *U.S. Department of Transportation,* 479 F.3d 21, 27 (D.C. Cir., 2007); *Southwest Air Ambulance, Inc.* v. *City of Las Cruces* 268 F.3d 1162, 1170 (10th Cir. 2001); *City of Los Angeles* v. *U.S. Dept. of Transp.,* 165 F.3d 972, 978 (D.C. Cir. 1999); *Air Canada* v. *U.S. Dept. of Transp.,* 148 F.3d 1142, 1150-1151; (D.C. Cir. 1998); and *New England Legal Foundation* v. *Massachusetts Port Authority,* 883 F.2d 157, 172 (1st Cir. 1989). Commenters also argued that the *purpose* of the proposed charges—which they identify as approximating the effect of congestion pricing at congested airports—was beyond the proprietary authority of airport operators. This is based on judicial opinions— e.g., *Massport* —holding that local governments may charge fees to defray their airport costs but not to regulate air traffic. The Anti-Head Tax Act gives airport proprietors clear and express authority to charge airline users landing fees and other charges for use of their airport. 49 U.S.C. 40116(e)(2). *County of Kent* , 510 U.S. at 365; *Wardair Canada, Inc.* v. *Florida Department of Revenue* , 477 U.S. 1, 15-16 (1986). The proposals would change the way costs are allocated but would not depart from a system in which the airport operator charged for actual costs. Under our policy, an airport proprietor may establish peak period landing fees, for the purpose of reducing congestion, provided the fees are properly structured and revenue-neutral. ( Note: While the terms “peak period” and “congested hours” are used interchangeably on an informal basis in this preamble and in responding to comments, the final policy defines and uses only the term “congested hours.”) The Department has permitted such fees to be charged when they do not exceed the aggregate costs of airfield facilities. The *Massport* case upheld the Department Decision finding that “while it may be appropriate to raise fees in order to invoke market responses during periods when the airport is congested, to do this during times when there is no shortage of runway capacity penalizes smaller aircraft users when they are not imposing congestion related costs on other users.” *Investigation into Massport's Landing Fees* , Opinion and Order, FAA Docket 13-88-2 (December 22, 1988). The *Massport* case stands for the proposition that a properly structured peak period pricing system could be found reasonable and not unjustly discriminatory. Reasonable peak period fees would not be preempted under 49 U.S.C. 41713 notwithstanding some impact on air carrier rates, routes or services. Opinion and Order at 11; *New England Legal Foundation* at 165. The Airline Deregulation Act does not prevent an airport proprietor from charging users for use of the airport facilities and services, including peak-period charges. The Deregulation Act's preemption provision contains a savings clause permitting an airport proprietor to exercise its proprietary powers and rights. An airport may use its proprietary powers in a manner that is reasonable, is nondiscriminatory, is not an undue burden on interstate commerce, and is designed not to conflict with the Airline Deregulation Act and its policies. *Arapahoe County Public Airport Authority* v. *FAA* , 242 F.3d 1213, 1221-1222 (10th Cir. 2001). The policy defines congested airports and contains other safeguards to assure that these fees fulfill the Department's priorities for alleviating congestion in the national air transportation system. Any fees adopted by an airport pursuant to the Department's Policy would have to be consistent with the goals of that Policy. Several recent rules and policies issued by the Department show that it has consistently interpreted Federal law to authorize properly structured peak period pricing programs. First, in promulgating regulations to implement the 1990 Airport Noise and Capacity Act
(ANCA)(49 U.S.C. 47521, *et seq.* ), the Department determined that a peak-period pricing program, where the objective is to align the number of aircraft operations with airport capacity, does not constitute an airport noise or access restriction subject to FAA review and approval. 14 CFR 161.5, definition of “noise or access restriction.” Second, the current Policy on Airport Rates and Charges provides that a properly structured peak pricing program that allocates limited resources using price during periods of congestion will not be considered to be unjustly discriminatory. An airport proprietor may, consistent with the policies expressed in the policy statement, establish fees that enhance the efficient utilization of the airport. 61 FR 31994, 32021, § 3 (1996). The Airline Deregulation Act's preemption provision does not bar airports from taking reasonable, nondiscriminatory measures for a purpose within their proprietary authority merely because those measures would influence airline behavior. Reasonable, not unjustly discriminatory measures taken by an airport operator to align capacity and demand consistent with the Department's policy and in order to alleviate congestion in the national air transportation system are in accordance with Federal policy and are not prohibited because those measures have the purpose and effect of influencing airlines to change aircraft scheduling practices. *See Massport* , 883 F.2d at 165, 173-174. One commenter cited *San Diego Unified Port District* v. *Gianturco* (651 F.2d 1306, 9th Cir. (1981)); cert. den. 455 U.S. 1000
(1982)for the proposition that an airport's proprietary functions are limited to measures designed to insulate an airport proprietor from liability. We disagree. *Gianturco* stands for the proposition that a non-airport proprietor (in that case, the State of California) may not direct an airport proprietor ( *i.e.* , the San Diego Unified Port District) to impose a curfew on aircraft flights. The decision acknowledged that because an airport proprietor bears the monetary liability for excessive aircraft noise, it has the proprietary powers to adopt reasonable noise regulations. *Gianturco* did not hold that an airport proprietor's powers were limited to the adoption of noise- based measures only; similarly, it did not hold that an airport proprietor was limited to adopting measures solely designed to insulate itself from liability. Airport proprietors of course have powers in addition to noise controls, including setting fees for the use of the airfield. The Anti-Head Tax Act provides that authority. 49 U.S.C. 40116(e)(2). See, *County of Kent* , 510 U.S. 355. Commenters also claimed that airport-airline charges must relate to the costs imposed and benefits received from the charged carrier, citing *Evansville-Vanderburgh Airport Auth. Dis.* v. *Delta Airlines,* 405 U.S. 707
(1972)and *County of Kent* . This test of reasonableness was based on the Commerce Clause, and the Supreme Court expressly acknowledged that it was within the Department's powers to adopt another test of reasonableness, under the Anti-Head Tax Act. The *Evansville-Vanderburgh* court pointed out that the charges did not conflict with any federal policies on uniform regulation of air transportation, and noted: No federal statute or specific congressional action or declaration evidences a congressional purpose to deny or pre-empt state and local power to levy charges designed to help defray the costs of airport construction and maintenance. * * * At least until Congress chooses to enact a nation-wide rule, the power [to have interstate commerce share a fair share of airport costs] will not be denied to the States. 405 U.S. at 721. The United States Court of Appeals for the District of Columbia Circuit explained, in the *Air Canada* case, that the Department was not obligated to apply a cost-benefit formula for purposes of deciding the reasonableness of Miami International Airport's fee allocation methodology. Referring to the *County of Kent* decision, the DC Circuit stated: [T]he Court made clear that it was not establishing a standard for reasonableness under the Anti-Head Tax Act, and that the Secretary could establish another standard, whether more or less stringent than the standard the Court adopted in *Northwest Airlines* , so long as it was a permissible construction of the statute. We need not delve into whether *Northwest Airlines* requires a cost-benefit analysis or any other particular study, nor whether the Department's reasonableness standards are consistent with those applied by the Supreme Court in *Northwest Airlines* , because the Department was not bound to the standards in that case. [fn. omitted] 148 F.3d 1142 at 1151-52. *Comment: The proposals are inconsistent with International Civil Aviation Organization
(ICAO)standards for airport pricing and violate standard provisions in bilateral agreements.* Every foreign airline that commented on the notice, 34 embassies, the Washington delegation of the European Commission, U.S. carriers and others argued that the proposals were not consistent with ICAO pricing guidelines or provisions in U.S. bilateral agreements (although several foreign carriers expressed a preference for per-operation fees over weight-based fees). Some U.S. carriers assumed the charges could not apply to foreign carriers due to bilateral agreements, and that the charges would, therefore, discriminate against U.S. carriers. One association filed comments refuting the assertion that *ICAO* and bilateral provisions prohibit the proposed charges. *Response:* For the reasons discussed in part above under *Legal Authority* , the Department believes the proposed charges can be applied to U.S. and foreign air carriers alike, consistent with ICAO guidance and with U.S. bilateral agreement obligations. First, those documents contain provisions for charges like those proposed, as described below. Second, the United States Government maintains a formal and comprehensive system for regulation of airport charges, including administrative and legal forums in which both foreign and U.S. parties may challenge the reasonableness of any airport charge. *See* 14 CFR part 16 and 49 U.S.C. 47129. The United States Government is fully committed to compliance with its international obligations regarding airport charges, and the final policy, as adopted by this action, includes in its basic statement of principles a clear reminder of the requirement that U.S. airport charges comply with those obligations. *Two-part landing fee.* The two-part landing fee will be based on the same long-unchallenged rate base as a weight-based fee, so it is clearly cost-based. Some foreign carriers argued the fee would disproportionately affect foreign carriers by reducing small-aircraft feed traffic in peak hours, but that effect would apply to both U.S. and foreign carriers, and to both international and domestic long-haul flights. Accordingly, we do not find that a two-part landing fee would have a disproportionate effect on foreign carriers. Moreover, the proposal is consistent with ICAO guidance, which expressly states, “Landing charges should be based on the weight formula. * * * However, allowance should be made for the use of a fixed charge per aircraft or a combination of a fixed charge with a weight-related element, in certain circumstances, such as at congested airports and during peak periods.” ICAO's Policies on Charges for Airports and Air Navigation Services, Doc 9082/7 (7th Ed. 2004), ¶; 26 (i). It also is consistent with ICAO guidance on airport charging systems, which provides that charges “should be determined on the basis of sound accounting principles and may reflect, as required, other economic principles, provided that these are in conformity with Article 15 of the *Convention on International Civil Aviation* and other principles in the present Policies.” *Id.,* ¶ 23(iii). *Charges for facilities under construction.* ICAO guidance expressly allows for pre-funding of airport projects particularly those that are long-term and of a large-scale. ICAO's Policies on Charges for Airports and Air Navigation Services, Doc 9082/7 (7th Ed. 2004), ¶ 24 states: * * * notwithstanding the principles of cost-relatedness for charges and of the protection of users from being charged for facilities that do not exist or are not provided * * *, prefunding of projects may be accepted in specific circumstances where this is the most appropriate means of financing long-term, large-scale investment, provided that strict safeguards are in place, including the following:
(i)Effective and transparent economic regulation of user charges and the related provision of services, including performance auditing and “benchmarking” (comparison of productivity criteria against other similar enterprises);
(ii)Comprehensive and transparent accounting, with assurances that all aviation user charges are, and will remain, earmarked for civil aviation services or projects;
(iii)Advance, transparent and substantive consultation by providers and, to the greatest extent possible, agreement with users regarding significant projects;
(iv)Application for a limited period of time with users benefiting from lower charges and from smoother transition in changes to charges than would otherwise have been the case once new facilities or infrastructure in place. The Department believes that charging for the costs of airfield projects under construction as those costs are incurred, exclusively at congested airports for the primary purpose of relieving current congestion, can be a “most appropriate means of financing long term large scale projects” because it can address current congestion without increasing total charges to users over time. In fact, financing airfield projects under construction through peak hour charges will ultimately result in lower charges to carriers, by reducing interest costs that would otherwise be capitalized and added to project debt charged to airlines through landing fees after the project is completed. We note that the proposal adopted by this action to allow recovery of construction costs before a project is in use is not “pre-funding” or “pre-financing,” as those terms are used in ICAO guidance and elsewhere. The adopted policy does not allow the accumulation of funds before a project begins, to be used later. Rather, the policy requires that costs be incurred for construction before the charges can be assessed, and limits the charges to a reasonable annual amortized amount for the costs actually incurred. Moreover, the U.S. system of regulation of airport fees, through the grant assurances and 49 U.S.C. 40116, provides the safeguards recommended by ICAO. U.S. obligations under bilateral air services agreements and FAA's AIP program provide the means by which user fees can be regulated and transparent accounting can be assured. As noted in the proposed policy, “[t]he Department strongly encourages all airports to comply with the obligations * * * to engage in meaningful consultation with carriers * * * to justify their fees and to exchange appropriate financial information to enable carriers to fully evaluate * * * proposed fees.” The Department also strongly encourages substantive consultations between airports and users. Finally, the provisions in proposed section 2.5.3(a) are consistent with ICAO safeguard (iv), above. As to the requirement of U.S. air services agreements, the majority of U.S. air services agreements specifically recognize that user charges may reflect but not exceed the full cost to the competent charging authorities of providing the appropriate airport services. (Others simply require that charges be just, reasonable and non-discriminatory.) These provisions do not preclude funding facilities that are still under construction if the charging authority is already incurring costs. We note also that the policy requires that all planning and environmental approvals have been obtained, that financing has been obtained, and that construction has actually commenced, all of which go to assure that the airfield facilities charged for will actually be provided. Some foreign airlines complained that the provision allowing charges for facilities under construction would permit an airport to build facilities that would not ease congestion, such as terminal facilities. Airfield charges are limited to airfield facilities, however, and this applies to facilities under construction as well as those in use. *Charges for a secondary airport.* Bilateral air services agreements recognize that user charges may reflect but not exceed the full cost to the competent charging authorities of providing the appropriate airport services “at the airport or within the airport system.” This language clearly indicates that these agreements contemplate charges at one airport for costs at another, as long as the charges are justified and in compliance with the other standards of the agreement, including equitable apportionment. 2. Adequacy of Guidance Several airline commenters stated that the proposals were too vague to provide useful guidance on implementation, and would simply lead to litigation. Airport commenters that generally supported the proposals asked for additional guidance about how the costs of projects under construction would actually be allowed in current charges, and what airports would be eligible to use the proposed fees. *Comment: Revise the definition of congested airport.* Several commenters found the definitions of congested airport and congested hours incomplete or unsatisfactory. A carrier association commented that the definition included many airports that did not have a congestion problem justifying extraordinary pricing increases, and some airports with no congestion at all, such as St. Louis and Pittsburgh. The commenter also questioned the policy of defining airports as congested based on their contribution of one percent or more of the national delay total, on the basis that many factors could contribute to delay other than airfield infrastructure capacity. In contrast, some commenters representing airports argued for an expansion of the definition, to include airports with congestion issues as defined by the airport operator, and airports with local congestion but no role in national system delays at all. *Response:* The Department understands why the definition proposed in the January 17 notice was not considered sufficiently precise to identify an appropriate list of airports eligible for the proposed charges. The Department is clarifying here that it interprets 49 U.S.C. 47175(2) to refer to the most recent 2004 Airport Capacity Benchmark Report, which has replaced the 2001 report. The 2004 report includes 35 airports while the 2001 report examined 31. We expect to update section 47175(2) as part of the agency's reauthorization legislation. In response to these comments, particularly given the status of the reauthorization legislation, the Department has revised the definition of congested airports. The final policy adopts a definition that contains two criteria, one relating to existing congestion and the other to future congestion. An airport qualifies as currently congested if it accounts for at least one percent of system delays nationally or is listed in table 1 of the FAA's Airport Capacity Benchmark Report 2004. Whether these criteria are met should be determined using the most recent year for which delay data are available and the most recent Airport Capacity Benchmark Report available. An airport is considered congested in the future if it is forecasted to meet a defined threshold level of congestion in the FACT 2 study or the most recent update of that study. The two criteria produce lists of specific airports, current versions of which have been placed in the public docket. The group of airports produced by the definition is finite, identifiable, and a relatively small portion of the several hundred commercial airports in the U.S. However, the list includes not only airports that are now congested, but airports that have a real expectation of becoming congested in the foreseeable future and would have an interest in planning to prevent a congested condition before it occurs. We note that two of the fourteen additional airports that qualify as congested based upon the 2004 report do not currently have congested hours. On balance, it is reasonable to adopt the same definition here that Congress used to define congested airports for purposes of environmental streamlining in the Vision 100—Century of Aviation Reauthorization Act. First, the policy amendments, like the environmental streamlining provisions in Vision 100, are intended to help reduce airport congestion and delays. Use of a narrower definition would reduce the utility of this policy in achieving these goals. Second, any viable definition of a congested airport has to reflect the dynamic nature of the aviation industry. This means any definition adopted by the Department should, like 49 U.S.C. 47175(2), consider not only which airports account for the most current delays in any given year, but also which airports are the largest in terms of size and activity level and have historically played a significant role in the national air transportation system. The FAA took these latter factors into account in identifying the 35 airports in the 2004 report. There is no other comparable list. Third, the FAA currently uses this list of airports, known as the operational evolution partnership
(OEP)airports, to monitor progress in adding capacity as part of its strategic planning. Finally, the overall list remains viable in terms of identifying the largest airports that handle the vast majority of operations. The OEP airports include all of the large hub airports, which have 1% or more of the total annual passenger enplanements in the country, and 5 medium hub airports, which have at least .25% but less than 1% of passenger enplanements. All but two of the airports that qualify as congested airports only because they are OEP, Pittsburgh and San Diego, ranked among the 50 busiest in the country in 2006, according to FAA OPSNET data ( *http://www.aspm.faa.gov/opsnet/sys/main.asp* ). St. Louis and Pittsburgh simply illustrate the point that there is a twofold test for using the new fees. The new fees may not be imposed at an airport that does not have congested hours, even if it is on the list of “congested airports” developed by the FAA for planning purposes. In response to comments, the Department is also adding a definition for congested hours. A congested hour is an hour during which demand approaches or exceeds average runway capacity resulting in volume-related delays. This will typically occur during the most desirable peak hours of operation at a congested airport, although some like LaGuardia Airport experience congestion throughout the operating day. We continue to believe the threshold of one percent of national delays is a reliable indicator of an airport's ability to accommodate demand. While factors other than the airfield may contribute to performance—an example offered was typical low visibility in morning hours at San Francisco International Airport—those factors can have a direct effect on efficiency and be beyond the ability of the airport proprietor or the FAA to change. Accordingly, it is appropriate to use a performance measure that takes into account all factors that contribute to airfield performance, and the percentage of national delays is a reliable indicator of airfield performance. The Department is not adopting the recommendation to delegate to airport operators the responsibility to determine whether there is sufficient congestion to justify the proposed charges. Because the policies will increase fees for some users at peak hours, the Department believes they should be applied only where objectively justified as effective in reducing or preventing congestion that would have a significant effect on delays in the national system. The FAA is in the best position to make determinations on this effect, and believes the definition of congested airport for this purpose should remain a responsibility of the Department. The Department also declines to extend the proposed pricing options to general aviation airports and other commercial airports with little or no national impact. This expansion of the pricing policies would have no effect on the primary issues the Department is trying to address: congestion and delays experienced at peak periods at the most heavily used airports, and the ripple effect of those delays throughout the national system. *Comment: The notice did not make clear or place sufficient limits on the kinds of costs at a secondary airport in the local system that could be included in the rate base at a congested airport.* *Response:* The Department agrees that the proposed policy will be more useful if it contains more specific guidance about what costs could be included in the proposed peak hour charges. Paragraph 2.4 of the 1996 Rates and Charges Policy listed specific costs that could be charged to the airfield, but that paragraph was vacated by the *Air Transport Association* decision. Clearly only the airfield costs at a secondary airport could be included in landing fees at the congested airport airfield, as a matter of reasonableness in a cost-based system of charges. Within that limitation, the airfield costs that may be recovered in the landing fee at the congested airport would be the same types of costs that are recoverable from operators at the primary airport. Accordingly, as clarification, the final policy adopted notes only that costs of the second airport that may be included in the rate base of the first airport are limited to customary airfield cost center charges for the first airport. If the airfield costs rated-based at the first (congested) airport are reasonable, they are reasonable for the airfield at the secondary airport as well. If carriers had agreed in a lease and use agreement to include other, non-airfield costs in a landing fee, those costs at the secondary airport could not be included in the fee at the primary airport (unless the carriers agree), because they are not costs of the airfield itself. *Comment: The proposed policy lacks guidance on how principal and interest costs of projects under construction could be rate-based in current charges, and how much of the project cost could be included.* *Response:* First, we would expect airports to conform as closely as possible to current commercial practice in recovering project costs after a project is completed and in use. Typically a project under construction would be financed by interim financing until the project is completed, at which time the total costs would be capitalized and financed through a long-term bond issue. When the project is completed, carriers would be charged the annual debt service over the amortization period of the bonds. For charges imposed on carriers while the project is under construction, the final policy states that the amount of project costs included in charges during the construction period cannot exceed an amount corresponding to debt service calculated in accordance with a commercially reasonable amortization period, which would consider the expected period of the permanent financing and not simply the time required for construction. The policy continues to make clear that project costs paid for during the construction period will be deducted from total costs financed later. We believe this guidance is sufficient to prevent excessive annual charges for project costs during construction. *Comment: It is not clear whether the three proposed charges can be used in combination.* *Response:* The preamble to the notice noted that the three proposals are not intended to be mutually exclusive. In other words, if the circumstances justify doing so, an airport proprietor might use a combination of two, or even all three, proposals in setting landing fees during periods of congestion. 3. Effectiveness Many air carriers and carrier associations commented that at least some of the proposals would not have any effect on congestion, but would simply increase costs. Some airports and airport associations, even though supportive of the additional flexibility in addressing peak hour congestion, expressed concern about the effectiveness of the proposals in influencing carrier scheduling in peak hours. *Comment: Charging for facilities under construction and costs of a secondary airport would still not produce landing fees high enough to induce carriers to move flights out of peak hours* . The basic comment on effectiveness of two of the proposals—forward financing and support of secondary airports—is that the increased costs of peak period operation would still not be enough to induce carriers to schedule fewer flights in those hours, or to move flights to a secondary airport. As long as the fees must remain revenue-neutral, even with added costs in the peak hours, they cannot be set at an effective market- clearing rate. Reasons offered in support of this conclusion included: • There are too many negative consequences for carriers of not maintaining flights at peak hours, including coordination with schedules throughout the system, and marketing considerations of how flights appear in reservation systems; • Landing fees are only a portion of carrier costs for a flight; • Carriers have investment in facilities at the airport that must be productively used; • The costs of higher landing fees at one airport would be absorbed by carriers on a system-wide basis, and would not directly affect the calculation of benefits of the targeted flights at that airport; • Increased landing fees for carriers have no disincentive effect on passengers, who are the actual drivers of demand for service in peak hours; • Even if fees are passed on directly to passengers, those passengers are still likely to absorb the additional cost for the convenience of traveling at desired times. *Response:* Other commenters argued that the increased fees did not have to have an effect on all operators or flights to be effective. Rather, a decision by carriers to cancel or reschedule just a few marginally profitable operations would be sufficient to achieve some beneficial effect on congestion in peak hours. We agree. The notice did not claim that the proposed policies would have the exact effect of real congestion pricing, because they would not result in setting rates at the perfect market-clearing price. Without any differentiation between peak and off-peak fees, which is the almost universal case at present, there is no incentive for airlines to reschedule even the most marginally profitable operation to avoid peak hours. If an increase in fees adversely affected the cost-effectiveness of even a few of these operations, there would be a positive effect on congestion and a reduction in delays during peak hours. *Comment: The proposal to allow a 2-part landing fee does not require that the airport be congested, which would permit a landing fee that discriminates against smaller aircraft when there is no justification related to congestion.* *Response:* The existing policy does not expressly limit the forms in which airport fees can be imposed, as long as they are reasonable, not unjustly discriminatory, and limited to recovery of appropriate airport costs. Conventional weight-based fees meet these tests. The policy amendments make clear that a 2-part fee can be justified in a situation where demand exceeds capacity in peak hours, and smaller aircraft serving relatively fewer passengers contribute to the peak hour congestion. In this case a 2-part fee could be justified by its beneficial effect on peak hour congestion without significantly affecting the number of passengers able to travel at peak hours. The amendments do not limit the use of a 2-part fee to congested hours, but it is not clear what other circumstances might justify such a fee. In any event, the fee should be justified based upon meaningful consultation with carriers, including exchange of appropriate financial information. The fee, if challenged, would require evidence that it is reasonable, not unjustly discriminatory, and based upon legitimate objectives. *Comment: If the proposed charges are adopted as final policy, the Department should adopt Option 1, limiting charges for secondary airports to peak hours, to avoid unfairly penalizing carriers already operating outside of peak hours.* Carriers that already operate outside of peak hours noted that imposing the costs of secondary airports and projects under construction in all hours, rather than just congested hours, would increase costs for operators that have no operations in peak hours. Thus the proposed policy would simply increase costs for these operators with no incentive effect on peak hour congestion. *Response:* We agree. This comment argues for limiting the additional proposed charges to flights in congested hours, Option 1. Otherwise, cargo operators and other operators that are already avoiding congested time periods would be penalized without any related incentive effect. Charging the additional costs in all hours would also result in the off-peak operators subsidizing operations during peak hours, actually reducing the intended disincentive for operation during those peak hours. Limiting charges for secondary airports, as well as facilities under construction, to peak hours maximizes the potential differentiation between peak and off-peak charges within a revenue-neutral system, and best serves the purpose for which these charges are authorized. *Comment: The Department did not conduct any analysis of the effects of the proposal showing that it would have the intended effect on airport congestion.* *Response:* This comment is technically correct but presumes that the Department needed quantitative analysis before it could conclude that the proposals would reduce congestion. The premise of the proposal that added costs would result in fewer operations is based on general pricing theory, and on the reliable conclusion that at some level of cost and unprofitability, a carrier will discontinue or reschedule an operation. The Department did not attempt a study of the proposals, because a conclusion on the effectiveness at an airport would depend entirely on the circumstances at each airport and the details of the charges imposed. A simulation of the effect of pricing at an airport was conducted by the FAA Center of Excellence for Operations Research (NEXTOR) in 2004. This research was done in cooperation with a number of stakeholders, including airline participants. While the simulation was necessarily a simplification of an actual airport situation, the results did indicate that peak period pricing would affect carrier use of peak hours. The Department agrees with commenters that the proposed policies should not be used to increase costs to operators at a particular airport unless there is reason to believe they would have an actual positive effect on congestion. That effect could be either to relieve existing congestion and reduce delays to an acceptable level, or to prevent that level of congestion if it would otherwise occur. The final policy language adopted incorporates two changes to reinforce that policy. Both charges for facilities under construction and charges for a secondary airport are authorized only if they would have the effect of reducing or preventing a level of congestion serious enough for the airport to be identified on an FAA list of airports that either have or are forecasted to have among the highest level of operating delays at U.S. airports. The fact alone that an airport is congested within the definition of the policy is not in itself sufficient to justify imposing the fees; the airport proprietor must have reason to believe that the added fees in peak periods would have an actual effect in reducing or preventing that congestion. The airport proprietor may implement the added fees as it would any other fee change. We expect the airport proprietor to engage in meaningful consultation with airport users before implementing new or increased fees, particularly by using a new fee methodology. As we discussed in the Notice of Proposed Amendment, the airport proprietor should provide adequate information to enable the airlines to evaluate the proprietor's justification for the new charges and to assess their reasonableness. Each side should thoroughly consider the views of the other. As we indicated in the 1996 Rates and Charges Policy, at paragraph 1.1.1, and in Appendix 1 to that Policy, we encourage the airport operator to provide certain historic financial information for the airport, economic, financial, and/or legal justification for change in fee methodology or level of fees, traffic information, and planning and forecasting information. In determining the reasonableness of any new fee instituted under this policy, we will consider the effectiveness of the fee in addressing congestion. Even in the absence of a complaint, the FAA may request a report on the effectiveness of a fee imposed under these amendments, under the FAA's authority in 49 U.S.C. 47107(a)(15) and the AIP grant assurances. The policy amendments adopted here include new language emphasizing the importance of providing this information to carriers in proposing higher peak period fees, including justification for the fees. While the airport proprietor's objective justification of the peak period fee is not technically required by regulation, it may serve to rebut a *prima facie* case of unreasonableness if the fee is challenged by a carrier in a proceeding before the Department under 49 U.S.C. 47129, or in an FAA grant assurance investigation under 14 CFR part 16. We note that one commenter observed that the Department had in fact found that revenue-neutral peak period pricing would not work, in an analysis of peak period pricing in connection with the environmental impact statement for a proposed runway extension project at Philadelphia International Airport. However, that analysis determined not that such pricing would not work at all, but rather that it would not reduce delays so as to meet the purpose and need of the proposed runway project. Specifically, the analysis showed that peak period pricing would reduce general aviation and turboprop operations on the shorter runways but would have no impact on congestion on the primary air carrier runways and therefore would not reduce delays at the airport. That example is not pertinent to the policies adopted here. As discussed below in more detail, runway development projects are the preferred response to demand. Pricing should only be used when new runways cannot be made available in time to prevent significant delays that would adversely affect the national air transportation system. Moreover, that analysis assumed charges only for traditional current airfield costs at the congested airport itself, and not the additional costs of projects under construction and secondary airports under consideration here. So, the Philadelphia analysis does not have any relevance for the policies adopted here, and certainly does not indicate they would not have an effect on congestion at PHL or any other airport. An airline employee involved in scheduling noted the complexities of airline scheduling and suggested that a carrier's response would not necessarily be what the airport intends. The Department recognizes that airline scheduling is indeed complex, and that carriers take a number of factors into account in deciding where and when to use a certain aircraft. However, we continue to believe that the cost of operating at a particular airport at a particular time will become a factor at some price point. If the proposed policies allow an airport operator to reach that price point for even a small number of marginally efficient operations in peak hours, the purpose of the policies will have been served. A carrier association noted that because landing fees work as an incentive only on landings, departures in peak hours would be unaffected and actually subsidized by operators with more arrivals in a congested period. The Department believes that there will typically be enough of a balance between arrivals and departures that an incentive that works only on arrivals would still work in most cases. Presumably this issue would be addressed in an airport operator's consideration of the fees before they were adopted. We note that the Massport peak period pricing rule applies congestion fees to both arrivals and departures, which is permitted under the Department Rates and Charges Policy as long as total fees do not exceed aggregate airfield costs. Commenters who concluded that the proposals would not reduce congestion had different views about what that meant. Many carriers argued that because the proposed policy changes would not achieve their stated purpose and would simply increase costs to industry and travelers, the Department should not adopt the changes. Some airports and associations reached the opposite conclusion—that because a revenue-neutral pricing system could not raise fees enough to affect scheduling, the Department should abandon the requirement for revenue neutrality and allow airports to set fees high enough to be effective. The Department is required to provide guidance on reasonable fees based on our survey of the nationwide aviation field, and we have found that airfield fees nationwide typically are based on capital costs plus recurring costs associated with maintenance, upgrading, repaving, and installation of safety and security systems. The cost-based system of user fees also conforms to U.S. international obligations. As mentioned above, the Department believes that the newly allowed charges that may be incorporated in peak fees can have an effect on enough operations to affect congestion, at least at some airports, and should be available to the operator of a congested airport where that effect can be reasonably predicted and ultimately demonstrated. *Comment: The two-part landing fee would simply impose additional costs without resulting in schedule changes for smaller aircraft as intended.* The effectiveness of the two-part landing fee is a somewhat different issue from the two facilities charges. Most commenters seemed to accept that a 2-part landing fee would have the effect of discouraging use of smaller aircraft in peak hours, as intended, although they did not agree on the fairness or benefits of that effect (discussed under 4. *Unjust discrimination* below). However, carriers providing international service argued that it is not realistic to expect feeder flights that use smaller aircraft to move out of peak hours, because of the inconvenience to international and long-haul passengers. So, they argued, it is not clear that the increased fees per seat for smaller aircraft would have the intended effect, at least for some small aircraft operators at international airports. *Response:* The Department cannot anticipate the reaction of each carrier to a change in landing fees at peak periods, because of the many different factors each carrier would need to consider in evaluating the costs and benefits of a schedule change. The Department continues to believe that higher peak period fees will affect scheduling for some flights of smaller aircraft, even if not all, and the effect on some can be sufficient to have a positive effect on congestion. *Comment: If airfield costs at a secondary airport are charged to carriers at a congested airport, the resulting below-cost fees at the secondary airport might attract new service at the secondary airport, rather than promoting relocation of flights from the congested airport as intended. This new service would be in competition with carriers at the primary airport, as well as being subsidized by them.* *Response:* This result is theoretically possible but is not a reason not to permit the charges as proposed, if those charges would be effective in relieving congestion at the main airport in the system, to the benefit of the carriers operating there. *Comment: The ability of airport proprietors to raise landing fees to control congestion, as proposed, acts as a disincentive for airport proprietors to invest in new capacity, which should be the primary solution for congestion.* *Response:* First, the airport proprietor will not actually receive more funds over time and across the airport system under the policies adopted, although current fees at the congested airport may be greater than before. The Department does agree that building new runways and otherwise generating new capacity is the preferred response to demand, and that pricing should be used only where airport development projects cannot be built and made available in time to prevent congestion. The policies adopted should not undercut an airport operator's incentives to add runways and expand capacity, because they will not allow the airport operator to increase system revenue over time. The adopted policy is designed to augment tools available to local governments who operate airports to resolve capacity issues. 73 FR at 3312. *Comment: The January 17 notice stated that generation of additional revenue for capacity enhancement was a stated objective, or at least a benefit, of the proposed policies. Airports are fully able to recover costs and fund new projects now, and do not need additional revenue to support capacity expansion projects.* *Response:* The notice observed that an airport proprietor would have additional revenue for development, as a result of the ability to charge for facilities under construction. The notice did not claim that result as a purpose of the proposals, but did suggest that it was a corollary benefit. We agree with the comment that generation of revenue is not the purpose of the proposals. The final policy amendments adopted are intended to relieve congestion at peak periods at congested airports, not generate additional revenue for airports. The new charges, if adopted, would increase costs for some carriers for peak hour operations, but would not increase aggregate carrier costs for airfield facilities and services in a local airport system over time. 4. Unjust Discrimination Many of the comments that criticized the proposals cited the unfair and disproportionate burden on some operators, concluding that the proposed landing fees, if adopted by an airport, would be unjustly discriminatory toward one or more categories of operators. As some commenters noted, the proposed fees are in part actually *intended* to be discriminatory, so their legality depends on whether or not the discrimination is sufficiently justified to be “justly discriminatory.” A corollary issue is whether an otherwise justified discriminatory fee has unintended adverse effects on operators that do not contribute to the congestion problem being addressed. Typical comments claiming discrimination were: *Comment: The proposed fee increases would not induce any movement out of the congested hours, so they would unfairly raise carrier costs for no reason.* *Response:* The fees authorized under this policy may be justified in terms of having the potential to reduce delays in congested hours, including by encouraging use of larger aircraft, as well as being supported by actual costs. As noted above, however, the policy changes are adopted based on the Department's belief that the charges can have some beneficial effect, because some carriers will decide not to pay the higher charges to operate in peak hours. This conclusion is reinforced by our strongly urging airport operators to justify and explain to carriers the methodology for any fee increase before imposing it at a particular airport. *Comment: The proposed fee increases would force some operators to move out of the peak hours, even though their customers want to travel then.* *Response:* This comment is partially correct although we add that operators scheduling several flights during peak periods with smaller aircraft may decide to consolidate some flights with larger aircraft and thereby not inconvenience passengers. The Department understands that moving flights out of peak hours means moving some passenger trips out of peak hours. The flights and passengers that are able to continue to use peak hours will experience less delay, and whether or not their fares are increased will be determined by the competition, the gauge of aircraft used, and other factors. *Comment: Some operators can move flights and others cannot, and the higher pricing in peak hours unfairly impacts categories of operation that cannot move flights out of peak hours or to secondary airports.* *Response:* From a market standpoint, this is essentially another way of saying that operation in peak hours has a higher value for some operators than for others. Charging a higher price in peak hours results in the allocation of peak hour flights to the carriers that value operation in those hours the most. This is the market working, not an indiscriminate side-effect of higher charges. It is true that there are some operations that may not be able to reschedule or operate at an alternative secondary airport However, those operations receive the same benefit as all other operations from a reduction in peak hour congestion at the congested airport. *Comment: If costs for facilities under construction and secondary airport airfields are included in the proposed charges applied to all operations throughout the day, some categories of operation will be penalized by higher fees even though they have no role in the current congestion or the intended solution.* *Response:* We agree. Accordingly, the final policy permits charges for facilities under construction and the costs of a secondary airport only in peak hours at the congested airport, i.e., hours in which that airport experiences delays that qualify it as a congested airport (Option 1 for the proposed charge for facilities under construction). *Comment: Under a 2-part landing fee, some carriers and categories of operation will have no ability to upgauge, and will simply have to absorb higher fees or cease operation in the market.* *Response:* This may be true for some operators. The effect is mitigated with respect to markets subsidized under the Essential Air Service
(EAS)Program, because the final policy allows an airport operator to exempt those markets from the three new policies (although such operations would still be subject to conventional landing charges). However, for other operations, carriers will need to assess the feasibility of each flight with a particular aircraft type, taking into consideration the effect of the per-operation component of the landing fee at the airport. Commenters also offered specific examples of how the proposed charges would result in a discriminatory effect for some operators. Some examples cited in the comments are: *Comment: Raising costs to encourage use of larger aircraft unfairly targets operators of regional jets and the markets they serve.* One association and carriers operating regional jets argued that segments of the national air service market depend on that size aircraft, and that efforts to eliminate small jet operations are inconsistent with § 40101(a)(16), which establishes a policy of ensuring that residents of small and rural communities have full access to the national air transportation system. Several small U.S. airports and communities complained that the pricing incentive to upgauge from regional jets to larger aircraft, if effective, would jeopardize their connections to hub airports, because the market and sometimes the airport would not accommodate larger jets. Some airport representatives commented that the Department should develop a list of criteria for small communities to be eligible for exemption from higher landing fees, and allow airport operators to incorporate those exemptions in their fees to protect small community access. Some commenters argued that carriers and passengers want to have regional jet service, and that the Department, therefore, should “let the market work” by not allowing airports to create a disincentive to that service. *Response:* The notice did not directly address the potential impact on small community service. We agree that higher peak period charges, or a higher per-operation landing fee, could be a disincentive to operation of smaller aircraft types in peak hours—that is one purpose of the proposed policy. While it is not the Department's intention to adopt a policy that would adversely affect service in any particular market, we understand the possibility that higher peak period landing fees could result in a reduction or even loss of service in marginally profitable markets. The final policy adopted permits an airport operator to exempt flights from the added peak period charges, if the flights are being subsidized under the EAS Program. The ability of an airport operator to exempt EAS-subsidized flights from peak period pricing has been recognized by the Department previously. Not all of the markets served by regional jets and smaller aircraft will be eligible for this exemption, however, and airport proprietors may not extend the exemption to non-EAS markets, because that action would be considered local regulation of air carrier rates, routes and services. Accordingly, it is possible that service in some markets could be adversely affected as described in the comments. As a result, actually “letting the market work” may well not provide the broadest or most uniform distribution of service to all markets from the congested airport. It will, however, come closer to providing the most economically efficient use of the congested airport for the greatest number of travelers. Arguably, open access for all to the scarce resource of a congested hub airport at peak hours, when demand for access exceeds airport capacity, is itself a distortion of the market. Conversely, a requirement to pay more for that resource during periods of congestion is actually closer to letting the market work. *Comment: Foreign carriers will be disproportionately affected by the proposed charges, because they cannot avoid them or absorb costs across a larger domestic system.* Foreign carriers and governments commented that these carriers could not use off-peak hours because of the restrictions on operation in European and Asian airport markets, and could not operate at secondary airports because those airports would not be U.S. ports of entry. Accordingly, these carriers would bear the full effect of the increased landing fees, with no ability to avoid the costs or to spread the costs across other flights as U.S. competitors could do. *Response:* We agree that there may be limits on foreign carriers' ability to avoid the fees, although they are not unique in that regard. International flights by U.S. carriers will be affected in exactly the same way. To the extent that higher charges at peak periods reduce congestion, carriers operating international service will benefit from the resulting reduction in operating delays and greater scheduling reliability. The policy allowing airport operators to charge higher fees in peak congested hours recognizes that many operators will choose to pay the higher fees to retain access to peak hours, for a variety of business reasons; the need for international flights to operate in those hours is one such reason. Those carriers get something in return for the higher fees: a reduction in operating delays. U.S. carriers claimed that the increased fees would unfairly fall on U.S. carriers, because foreign carriers would necessarily be exempted from the fees in order to comply with ICAO standards and air service agreements. As discussed in part in this notice under *Legal Authority* , we do not believe ICAO guidance or air service agreements require exemption of any operators from the proposed charges, so there would be no difference in the fees charged to U.S. and foreign carriers. *Comment: The proposed policies would adversely affect transborder Canadian service disproportionately, because many flights between Canada and major U.S. airports use regional jets.* This is similar to the complaints by U.S. carriers that use regional jets and cities those carriers serve, but with the additional consideration of provisions in the bilateral agreement with Canada. Canadian carriers, airports, and a carrier association argued that the U.S.-Canada bilateral agreement would prohibit the application of some or all of the three proposed policies to transborder flights. *Response:* The U.S.-Canada bilateral agreement is similar to other U.S. air service agreements. For the reasons discussed above under *Legal Authority,* the Department does not believe the terms of those agreements prohibit the proposed charges, and reaches the same conclusion with respect to the U.S.-Canada bilateral agreement. There is no language in the agreement that specifically requires weight-based landing fees or prohibits other methodologies for landing fees. The agreement contains the standard requirement that fees be equitably apportioned among categories, but that in itself does not prohibit a per-operation component in the landing fee with justification based on the circumstances existing at the airport. With respect to charges for facilities under construction, the agreement provides only that charges may not exceed the costs of providing appropriate airport services. We believe the policy allowing an operator of a congested airport to impose the costs of airfield facilities already under construction is not inconsistent with this language. Finally, we note that the agreement permits charges for services “at the airport or within the airport system,” and thus does not prohibit appropriate charges for a secondary airport in a system where the primary airport is congested due to excess demand. We recognize that the proposed policies could have some effect on carrier decisions regarding transborder service, as with service in U.S. markets at congested airports. However, the policies would apply to Canadian markets and Canadian carriers in exactly the same way as they would to U.S. markets and carriers, and would not be prohibited by antidiscrimination or other provisions in the U.S.-Canada bilateral agreement. One commenter expressed concern about the effect on access by Canadian carriers to Reagan Washington National and LaGuardia Airports, which is expressly guaranteed by the agreement. Both airports are included on the list of congested airports. However, as Reagan Washington National does not currently have any congested hours, these policies would not be used there at this time. . Any peak hour charges adopted by the Port Authority of New York and New Jersey at LaGuardia would need to take into consideration the terms of our bilateral aviation agreement with Canada. *Comment: Carriers that operate a single aircraft type have no opportunity to up-gauge, and would simply pay higher fees for the same operation, or cancel some operations.* *Response:* The policy allowing airport operators to charge higher fees in peak periods is not directed toward any particular operator, but will have an effect on any operator using aircraft that are not economically feasible with those fees in effect. The fact that an operator's entire fleet will be affected to some degree is not a persuasive reason to guarantee that operator lower-cost access to peak hours at a congested airport by exempting it from the general effect of the pricing regime. Some operators will find it beneficial to pay the higher peak fees to continue peak hour operations, along with a reduction in operating delays in those hours, but others may not. The Department does not consider that possibility a reason to deny airport operators the use of the proposed policies to enhance the effect of peak period pricing at their airports, when justified by peak hour congestion. *Comment: If the costs of future projects and secondary airports are added to charges throughout the day at the primary airport, rather than just during peak hours, then the burden falls unfairly on operators that do not contribute to the problem. Cargo operators operate largely in night hours when there is no issue of congestion.* *Response:* As discussed under *Effectiveness above,* the final policy avoids this result by limiting the application of the additional costs to operations in peak hours. *Comment: The fees would make operations in peak hours far more expensive for general aviation and on-demand air taxi operators, even though those operators make no significant contribution to the current congestion.* *Response:* The policy adopted, like the 1996 Rates and Charges Policy as a whole, does not include any general exception for general aviation. However, airfield charges must be reasonable and not unjustly discriminatory. Presumably an analysis of a proposed peak period fee by the airport proprietor would reach some conclusion about whether general aviation flights are contributing to peak hour congestion at the airport or not, and support a corresponding pricing policy for general aviation flights. Proposed charges on general aviation could reflect, for example, whether general aviation flights at the airport compete with air carrier aircraft for use of the same runways. For this reason it is more appropriate to consider general aviation charges through actual, case-by-case analyses of their activity and impacts on congestion at each airport, rather than define a separate policy for general aviation in this policy statement. 5. Comments That the Proposals Should Define an Airport Proprietor's Authority More Broadly Operators of large airports and associations representing airports generally commented favorably on the intent of the proposed policy to clarify and expand the ability of airport operators to impose higher fees in peak hours at a congested airport. However, some commenters requested that a final policy be revised to avoid actually limiting an airport operator's existing proprietary authority. Some commenters further requested that the final policy contain language expressly expanding the airport operator's flexibility to impose fees beyond what the Department proposed. *Comment: The policy should clarify that an airport operator may use a “limitless” variety of methods to set landing fees, including a purely per-operation fee. Specifically allowing a 2-part fee suggests airports cannot impose other kinds of fees besides weight-based and 2-part weight-based and per-operation fees. Also, the policy should not rule out innovative fees such as negative landing fees at off-peak hours.* *Response:* The policy does not define the universe of kinds of landing fee an airport operator may impose, but only clarifies that a 2-part landing fee may be used at peak hours to relieve congestion, without necessarily being considered to be unjustly discriminatory. Other kinds of landing fees are possible, but any such fee would need to be both reasonable and not unjustly discriminatory. “Negative landing fees” would necessarily involve cash subsidies to carriers operating in off-peak hours, generated by fees on other operations in peak hours. Such subsidies, even if considered nondiscriminatory, could be inconsistent with requirements for use of airport revenue and would be likely to raise issues under U.S. international obligations. Negative landing fees were not proposed in the notice, and are not included in the final policy. *Comment: Clarify that airport operators are not preempted from using landing fees to create economic incentives for carriers to alter schedules at peak times, up-gauge aircraft types, or shift service to less congested airports. A landing fee can affect carrier business and marketing decisions not only indirectly, but also with the stated purpose of having a direct effect on carrier decisions.* *Response:* As discussed under *Legal Authority* above, an airport operator pursuing a legitimate objective in the exercise of its proprietary authority consistent with its other responsibilities under Federal law has some ability to influence carrier decisions. So, an airport proprietor can charge a higher landing fee in peak hours to influence carriers to use less congested hours, because reducing excess demand that results in a high level of operating delays on the airfield at peak hours is a legitimate objective of the Department and the airport proprietor. However, that authority is not unlimited, given the prohibition on airport regulation of airline rates, routes, and services in 49 U.S.C. 41713(b). A landing fee designed to implement a preference for certain aircraft types, but not justified by any condition or purpose related to the functioning of the airfield itself would be preempted under § 41713(b). *Comment: The Department should abandon the limitation on airfield fees to historic cost valuation and revenue-neutral airfield fees, and allow airports to use market pricing.* *Response:* The policies proposed were intended to permit airport proprietors some flexibility to use pricing to manage conditions of serious peak hour congestion, without deviating from the policy of cost-recovery, revenue-neutral charges. See 1996 Policy, ¶ 2.2. Moreover, the requested authority would be unnecessary to implement the policies proposed in the notice. *Comment: In allowing charges for facilities under construction, the Department should Adopt Option 2 for financing future construction, to permit the higher fees to be imposed throughout the day. Also, the policy should extend future financing to include new airports, not just new facilities.* *Response:* The final policy adopts Option 1, which provides that the added charges will be considered reasonable only in hours of peak congestion. The purpose of the policy is not cost recovery or revenue generation; rather the purpose is to allow for increased differentiation between peak and non-peak period pricing at the airport. Adding the charges of future facilities in off-peak hours works against this goal, and against the incentive for encouraging off-peak operation. It also penalizes operators already operating outside congested hours, by imposing unnecessary costs on those operators with no possible incentive effect on scheduling. As airports typically adjust their fees regularly and can capitalize the project costs remaining after construction, limiting the charges to hours of peak congestion is not expected to be difficult or increase administrative burdens on airports. With respect to allowing charges for the costs of future airports under construction, we do not see the need for a statement of general policy on this issue. Cases in which the policy might be applied would rarely occur, and any decision on the reasonableness of the charges might be highly dependent on the facts of a particular case. The final policy adopts the provision on charges for facilities under construction as proposed—limited to facilities at the airport where the charges are imposed. *Comment: In allowing charges for the costs of secondary airports in the region, the Department should extend the list of secondary airports eligible for cross-subsidy to regional airports not owned by the same sponsor as the primary, congested airport. The final policy should allow airport operators to enter into agreements, approved by the Department, for support of one airport with fees from another.* *Response:* The FAA has traditionally not allowed airports with different owners to enter into agreements that affect access to the airports, primarily because one airport sponsor cannot delegate its responsibility for reasonable access under its grant assurances to another airport operator, or guarantee access at an airport it does not control. This new request is similar in that an airport operator would be charging its carriers for the access benefits at another airport, and the costs of operation of that airport, when it had no control over the access to or costs at that second airport. The final policy adopts the provision as proposed, limiting charges to the costs of airports owned or operated by the same airport proprietor that operates the congested airport. *Comment: The Department should clarify that the proposed fees could be implemented outside the airport's existing lease and use agreements.* *Response:* The Department assumes that airport proprietors would take into account any existing agreements with carriers before imposing any new charges, and could only impose those charges as the agreements provided or when they expired. Accordingly, the final policy amendment does not include the requested language. *Comment: The notice stated that an airport proprietor “may consider the presence of congestion at the [congested] airport when determining the portion of the airfield costs of the other airport to be paid by the users of the first airport during periods of congestion.” This can be understood to mean that the airport can impose the opportunity costs of congestion in its landing fees.* *Response:* This statement in the notice was intended merely to refer to a determination of the portion of the second airport's costs that could be included in fees at the congested airport. Nothing in the proposed amendments would authorize an airport proprietor to charge airfield fees that include any amount in excess of the airport proprietor's actual system costs. Other commenters expressed confusion about the intended meaning of this same language, and it is not included in the final amendment. The Policy Amendments Adopted After review of the public comments, the Office of the Secretary of Transportation and the FAA have determined that the proposed amendments to the 1996 Rates and Charges Policy should be adopted, with revisions to address concerns and suggestions raised in the comments. The amendments do not alter one of the fundamental principles of the 1996 Rates and Charges Policy: That reasonable airfield fees must be based on the capital and operating costs of the facilities for which the fees are assessed. None of the amendments will permit an airport to generate revenues in excess of the allowable costs of providing airfield facilities and services at the congested airport and its related airport system, as defined in accordance with the 1996 Rates and Charges Policy. The effect of each of these modifications is to allow the airport operator to increase the cost of landing at a congested airport during periods of congestion, even if congestion lasts through much of the day. By raising the costs of using the congested facilities at peak times, the airport operator would provide an incentive for current or potential aircraft operators to
(1)adjust schedules to operate at less congested times (if they exist);
(2)use less congested secondary or reliever airports to meet regional air service needs; or
(3)use the congested airport more efficiently by up-gauging aircraft. The three amendments are not intended to be mutually exclusive. In other words, if the circumstances justify doing so, an airport proprietor might use a combination of two, or even all three, charges in setting landing fees during periods of congestion. Any charges imposed on international operations, whether using this proposed flexibility or not, would also have to comply with the international obligations of the United States, including requirements that the charges be just, reasonable, and equitably apportioned among categories of users. The Department continues to consider airport development and expansion of airport capacity to be the most appropriate and the preferred long-term action to address airport congestion and delay. However, at airports that meet the definition of congested airports when development projects are planned but will not be available in time to prevent increasing delays, and at those congested airports where capacity expansion is simply not feasible, the amendments adopted in this action will provide the airport proprietor additional tools to manage available capacity. Principles Applicable to Airport Rates and Charges The amendments adopted include a new paragraph 6 in the statement of basic principles applicable to airport rates and charges. The new paragraph affirms the requirement that all airport charges imposed on international air transportation in the United States comply with the international obligations of the United States. This is not a change in policy, because this requirement has always applied. However, in view of the many comments expressing concern that the proposed charges would not comply with international agreements and other authority, the Department is revising the amendments to include provisions affirming the strong commitment of the United States to meet its international obligations in the oversight of airport charges in the U.S. The amendments adopted, therefore, include an express statement of the requirement for fees at U.S. airport to meet all U.S. international obligations regarding airport charges, in the same terms used in U.S. bilateral air service agreements. These obligations, of course, apply to the entire Rates and Charges Policy and not just the amendments adopted in this action. Special Provisions Applicable to Congested Airports The amendment adds a new section 6, *Congested Airports.* Paragraph 6 defines a congested airport for the purposes of the Rates and Charges Policy according to two criteria, one relating to existing congestion and the other to future congestion. An airport qualifies as currently congested if it accounts for at least one percent of system delays nationally or is listed in table 1 of the FAA's Airport Capacity Benchmark Report 2004. Whether these criteria are met should be determined using the most recent year for which delay data are available and the most recent Airport Capacity Benchmark Report available. An airport is considered congested in the future if it is forecast to meet a defined threshold level of congestion in the FACT 2 study or the most recent update of that study. This revised definition responds, in part, to comments that the proposed definition included some airports that were not congested. Note that while the definition defines an eligible category of airport for use of fees to control congestion, there must be a congestion problem and those fees must still be reasonable. The new fees may not at this time be imposed at airports like Reagan Washington National, St. Louis, and Pittsburgh that do not currently have congested hours. An airport could not impose fees today based on a forecast that it will become congested years in the future. It could, however, put in place measures to address future congestion that would become effective when it met the definition of congested or was about to do so. Section 6 also defines “congested hour” as an hour during which demand exceeds average runway capacity resulting in volume-related delays or is anticipated to do so. New paragraph 6.1 emphasizes the importance of providing operators an explanation or justification for any use of the peak period fees authorized in this policy change and of consultations with carriers as already provided in the Rates and Charges Policy. The paragraph expressly references Appendix 1 to the Policy, containing a list of the information the Department would expect the airport proprietor to provide to carriers and other operators. New paragraph 6.2 clarifies that an airport proprietor may adopt measures to address congestion even before conditions would justify peak period pricing, as long as that pricing does not take effect until the conditions described in that paragraph are met. Such a measure would include a specified condition, such as number and severity of chronic operating delays, that triggered the implementation of the pricing. Advance consideration of the need for peak period pricing not only allows full time for consultation with users, but also allows users to adjust schedules well in advance to avoid congestion that would trigger the peak period pricing. New paragraph 6.3 provides that an airport operator that imposes peak period charges for facilities under construction, or for the costs of a secondary airport in the system, can exempt from those charges any flights operated under an Essential Air Service
(EAS)Program subsidy, in accordance with 49 U.S.C. 41731-41735. The Department has previously acknowledged that an airport proprietor may exempt EAS subsidized flights from general fee increases that would jeopardize that service. That determination is based on the Supremacy Clause of the U.S. Constitution and the interpretation that the proprietary exception to Federal preemption only permits an airport proprietor to take actions consistent with the implementation of a Federal program, and not to make its own decision about preferences for certain markets. As discussed in the response to comments above, the Department sees no authority for an exemption beyond the EAS Program eligible airports. Two-Part Landing Fee Paragraph 2.1 is amended by adding a new paragraph 2.1.4 as proposed, to clarify that an airport proprietor may impose a landing fee that incorporates both weight-based and per-operation elements. There are conditions on the use of a two-part fee: It must reasonably allocate costs to users on a rational and economically justified basis, and it may not generate fees in excess of allowable airfield costs. New subparagraph 2.1.4(a) notes that a positive effect on congestion reduction, such as enhancing the number of passengers accommodated during congested hours, may justify a fee incorporating a substantial per-operation component, such as the two-part landing fee. The policy does not limit the use of two-part landing fees to congested airports, although the Department does not currently see any alternative justification for such fees. New subparagraph 2.1.4(b) provides for the exemption of EAS-subsidized markets from the application of a two-part landing fee, and provides guidance on how such flights would otherwise be charged for their share of airfield costs. Exemption from the two-part fee would not be a waiver of all fees, but rather an exemption from the fee increase due to the per-operation component of the two-part fee. The assumption is that under an exemption, an EAS operator would continue to pay the weight-based charge in effect before adoption of the two-part fee (or that would have been in effect if all carriers were paying a weight-based charge). The paragraph also makes clear that where an exemption results in lower charges for EAS operators, the resulting loss in revenue cannot be made up by an increase in the landing fees charged to other operators. Charges for Facilities Under Construction The policy as amended would replace paragraph 2.5.3, which was vacated by the court of appeals, with a new paragraph addressing charges for facilities under construction, as proposed in the notice. For the reasons explained in the notice, the replacement language is consistent with the court's opinion that vacated the original paragraph 2.5.3. The final policy adopts Option 1 in the notice, limiting the added charges for facilities under construction to hours when peak hour pricing would be justified. The paragraph as adopted includes the three conditions in the proposal that serve to limit the charges to facilities that are approved and under construction. This effectively limits additional landing fees to projects for which the airport operator is already incurring construction costs, and which will be in use in the relatively near future. In response to comments, paragraph 2.5.3 as adopted also includes a new fourth condition not in the notice: That the added costs for current operators would have the effect of reducing or preventing congestion and operating delays at the airport. While the notice limited this charge to congested airports, it did not contain an express condition that the charge actually have a positive effect on congestion, although that condition was implied. This new language adds an express statement of that condition. For a new charge, the effect could be predicted using information available. For a charge that had been in effect for some time, there would be actual performance data available for review of the effectiveness of the charge. New paragraph 2.5.3(a) is adopted as proposed, simply requiring that any construction costs reimbursed during the construction period not be included in the final project cost when completed. The final policy deletes the proposed paragraph 2.5.3(b), which suggested that an airport proprietor consult the ICAO *Airport Economics Manual* . The Department strongly urges that charges be constructed in accordance with this Manual; however, the new paragraph 6 of the *Principles* , stating clearly the broad obligation to comply with all U.S. international obligations, makes the reference to one ICAO manual too limiting. The policy adopted includes a new paragraph 2.5.3(b) clarifying that a charge for a facility under construction cannot exceed the actual costs as incurred by the airport proprietor. It indicates that the costs can be recovered as they are incurred, but the airport proprietor could not accumulate funds in advance of requirements. Second, charges are limited to the debt service over a conventional amortization period which takes into account the expected term of the permanent financing. Some air carriers commented that the policy did not prevent an airport proprietor from charging all costs of construction as incurred, even though the finished project would normally be financed and paid off through debt service over a period of years. While the policy does not prescribe in detail any particular methodology, it does limit the added charge in any year to a commercially reasonable amount for debt service on the financing for the particular project amount involved. The final policy as adopted includes a conforming amendment to paragraph 2.4.4 not included in the notice. Paragraph 2.4.4, relating to recovery of costs for debt service, contains a parenthetical “(for facilities in use),” which states the general policy limiting charges to facilities that are completed and in use by the operators being charged. To assure internal consistency of the amendments, the final policy amends the parenthetical to read, “(for facilities in use or in accordance with paragraph 2.5.3),” to provide for the limited exception for facilities under construction at congested airports. Charges for the Costs of a Secondary Airport As stated in the notice, paragraph 2.5.4 of the 1996 Rates and Charges Policy permits the operator of an airport to include in the rate base of that airport costs of another airport currently in use if three conditions are met:
(1)The two airports have the same proprietor;
(2)the second airport is currently in use; and
(3)the costs of the second airport to be included in the first airport's rate-base are reasonably related to the aviation benefits that the second airport provides or is expected to provide to the aeronautical users of the first airport. Subparagraph
(a)further provides that the third condition will be presumed to be satisfied if the second airport is designated as a reliever airport to the first in the FAA's National Plan of Integrated Airport Systems (NPIAS). The notice proposed to amend subparagraph 2.5.4(a) to add another category of airports to the presumption—those that the FAA has designated as secondary airports serving cities, metropolitan areas, or regions served by congested airports. The three conditions in paragraph 2.5.4 continue to apply to this new presumption. The final policy includes the proposed amendments with one change: To satisfy the presumption that the secondary commercial airport benefits users of the congested airport, the policy as adopted provides that the added costs in peak hour charges at the congested airport must also have the effect of reducing or preventing further congestion and operating delays at that airport. The notice assumed that the proposed charges would have the effect of relieving congestion at the congested airport, but did not actually make that effect a requirement for the use of the charges by the operator of a congested airport. As with the charges for facilities under construction, for a new charge the effect could be predicted using information available. For a charge that had been in effect for some time, there would be actual performance data available for review of the effectiveness of the charge. FAA has identified the secondary airports that would meet the first two criteria for the presumption in paragraph 2.5.4(a)(2) (i.e., the first airport is congested, and the secondary airport serves the same community or region), and monitors development projects at these airports in the FAA strategic plan or “Flight Plan.” The current list of secondary airports has been placed in the public docket. The FAA has also posted the current list of designated secondary airports on its Web site, and will keep it up to date. The notice also proposed to add a new subparagraph 2.5.4(e) stating, first, that the proprietor of a congested airport may consider the presence of congestion when determining the share of the airfield costs of the secondary airport to be included in the rate base of the congested airport during periods of congestion, and second, that in no event would the airport operator be allowed to generate more revenue from airfield charges imposed at the two airports than the costs of operating the two airfields. Commenters were confused by the first part of that sentence, and some commenters entirely misunderstood its intended meaning. In lieu of the language as proposed, the final policy adopted contains a more direct statement in paragraph 2.5.4(a)(2) that charges for a secondary commercial airport may be used only when they have an actual effect in relieving or preventing congestion. The final policy includes a new paragraph 2.5.4(e), which includes a slight revision of the second part of proposed paragraph
(e)to expressly limit total charges to the allowable costs of the congested and secondary airport combined. New paragraph
(e)adds new language clarifying that the allowable charges for a secondary airport are limited to customary airfield cost center charges. Some commenters expressed concern at the lack of guidance on costs of the secondary airport that could be charged to operators at the congested airport. The Department has not attempted to prescribe detailed guidance, in consideration of the variation in local rate methodologies at airports. In lieu of detailed guidance, the policy limits charges to airfield costs, and to those airfield costs which would be customary for the methodology in effect in that airport system. We believe that guidance will be sufficient to evaluate the reasonableness of a proposed peak hour charge that includes costs at a secondary airport. Finally, the final policy adopted includes a conforming amendment to paragraph 2.2 of the Rates and Charges Policy. Existing paragraph 2.2 states the general rule that airfield charges cannot exceed the costs to the airport proprietor of providing airfield services and assets currently in use unless users agree otherwise. The final policy makes the carrier approval paragraph 2.2(a), and adds a paragraph 2.2(b) with an alternate exception: if the charge is imposed in accordance with paragraph 2.5.3, for facilities under construction, or paragraph 2.5.4(a), for the costs of a secondary airport. With these limited exceptions, the general rule limiting charges to facilities currently in use continues to apply. Amendment of the Rates and Charges Policy In consideration of the foregoing, the Department of Transportation amends the Policy Regarding Airport Rates and Charges, published at 61 FR 31994 (June 21, 1996) as follows: Policy Regarding Airport Rates and Charges Principles Applicable to Airport Rates and Charges 1. In *Principles Applicable to Airport Rates and Charges* , add a new paragraph 6 to read as follows: 6. Fees imposed on international operations must also comply with the international obligations of the United States, which include the requirements that the fees be just, reasonable, not unjustly discriminatory, equitably apportioned among categories of users, no less favorable to foreign airlines than to U.S. airlines, and not in excess of the full cost to the competent charging authorities of providing the facilities and services efficiently and economically at the airport or within the airport system. Fair and Reasonable Fees 2. Amend subsection 2.1 by adding a new paragraph 2.1.4 as follows: 2.1.4 An airport proprietor may impose a two-part landing fee consisting of a combination of a per-operation charge and a weight-based charge provided that
(1)the two-part fee reasonably allocates costs to users on a rational and economically justified basis; and
(2)the total revenues from the two-part landing fee do not exceed the allowable costs of the airfield.
(a)The proportionately higher costs per passenger for aircraft with fewer seats that will result from the per-operation component of a two-part fee may be justified by the effect of the fee on congestion and operating delays and the total number of passengers accommodated during congested hours.
(b)An airport proprietor may exempt flights subsidized under the Essential Air Service Program from the general application of a 2-part landing fee, and instead charge those flights a landing fee that would have been charged if a conventional weight-based fee was in effect. To the extent an exemption reduces total airfield fees recovered, the difference may not be recovered by increasing charges to other operators currently operating at the airport. 3. Revise paragraph 2.2 to read: Revenues from fees imposed for use of the airfield (“airfield revenues”) may not exceed the costs to the airport proprietor of providing airfield services and airfield assets currently in aeronautical use unless:
(a)Otherwise agreed to by the affected aeronautical users; or
(b)The fee includes charges in accordance with paragraph 2.5.3 or paragraph 2.5.4(a), and there is a corresponding reduction in fees for users that would otherwise have paid those charges. 4. Amend paragraph 2.4.4 by revising the parenthetical phrase to read: “ * * * (for facilities in use or in accordance with paragraph 2.5.3) * * * ” 5. Add a new paragraph 2.5.3 to read as: 2.5.3. The proprietor of a congested airport may include in the rate-base used to determine airfield charges during congested hours a portion of the costs of an airfield project under construction so long as
(1)all planning and environmental approvals have been obtained for the project;
(2)the proprietor has obtained financing for the project;
(3)construction has commenced on the project; and
(4)the added costs for current operators would have the effect of reducing or preventing congestion and operating delays at that airport.
(a)The airport proprietor must deduct from the total costs of the projects any principal and interest collected during the period of construction in determining the amount of project costs to be capitalized and amortized once the project is commissioned and put in service.
(b)The amount of project costs included in current charges may not exceed an amount corresponding to costs actually incurred during the construction period, calculated in accordance with a commercially reasonable amortization period based on the expected term for the permanent financing of the project. 6. Amend paragraph 2.5.4(a) to read as follows:
(a)Element no. 3 above will be presumed to be satisfied if:
(1)The other airport is designated as a reliever airport for the first airport in the FAA's National Plan of Integrated Airport Systems (“NPIAS”); or
(2)The first airport is a congested airport; the other airport has been designated by the FAA as a secondary airport serving the community, metropolitan area or region served by the first airport; and adding airfield costs of the second airport to the rate base of the first airport during congested hours would have the effect of reducing or preventing congestion and operating delays at that airport in those hours. 7. Add a new subparagraph 2.5.4(e) to read as follows:
(e)Costs of the second airport that may be included in the rate base of the first airport are limited to customary airfield cost center charges. The total airfield revenue recovered from the users of both airports cannot exceed the total allowable costs of the two airports combined. 8. Add a new Section 6, Congested Airports to read as follows: Congested Airports 6. Congested Airports
(a)The Department considers a currently congested airport to be—
(1)An airport at which the number of operating delays is one per cent or more of the total operating delays at the 55 airports with the highest number of operating delays; or
(2)An airport identified as congested by the Federal Aviation Administration listed in table 1 of the FAA's Airport Capacity Benchmark Report 2004, or the most recent version of the Airport Capacity Benchmark Report.
(b)The Department considers an airport to be a future congested airport if an airport is forecasted to meet a defined threshold level of congestion reported in the Future Airport Capacity Task 2 study entitled *Capacity Needs in the National Airspace System 2007-2025: An analysis of Airports and Metropolitan Area Demand and Operational Capacity in the Future* (FACT 2 Report), or any update to that report that the FAA may publish from time-to-time.
(c)A congested hour is an hour during which demand exceeds average runway capacity resulting in volume-related delays, or is anticipated to do so. 6.1. Because charges provided in paragraphs 2.1.4, 2.5.3 and 2.5.4 to address congestion can result in higher fees for some or all operators, it is especially important for airport operators proposing such charges to provide carriers in advance the information listed in Appendix 1, with special emphasis on data, analysis and forecasts used to justify the charges. 6.2. The proprietor of a future congested airport may adopt measures to address congestion in accordance with paragraphs 2.1.4, 2.5.3 and 2.5.4 of this policy, if the measures will not take effect or have any effect on airfield charges until a time when the airport meets the definition of a congested airport in paragraph 6
(a)or is anticipated to do so. This kind of measure would typically identify the specific condition, *e.g.* , operating delays that regularly exceed a certain level at the airport that would trigger the implementation of the special charges to address congestion. 6.3 An airport proprietor may exempt flights subsidized under the Essential Air Service Program from charges imposed under paragraphs 2.5.3 and 2.5.4 of this policy. Issued in Washington, DC on July 8, 2008. Mary E. Peters, Secretary of Transportation. Robert A. Sturgell, Acting Administrator, Federal Aviation Administration. [FR Doc. 08-1430 Filed 7-10-08; 8:45 am]
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  • 26 USC 2813
  • 29 CFR 90.18(c)
  • 37 CFR 262.6(c)
  • 45 CFR 671
  • Pub. L. 95-541
  • 48 CFR 20
  • 10 CFR 52
  • 10 CFR 2
  • 17 CFR 240.17
  • 17 CFR 240.19
  • 17 CFR 240.10
  • 79 Stat. 985
  • 14 CFR 16
  • 14 CFR 302.601-302
  • Pub. L. 103-305
  • 119 F.3d 38
  • 129 F.3d 625
  • 148 F.3d 1142
  • 165 F.3d 972
  • 479 F.3d 21
  • 510 U.S. 355
  • 467 U.S. 837
  • 513 U.S. 219
  • 268 F.3d 1162
  • 883 F.2d 157
  • 477 U.S. 1
  • 242 F.3d 1213
  • 651 F.2d 1306
  • 455 U.S. 1000
  • 405 U.S. 707
  • 49 USC 41731-41735
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C.F.R.§ 380.6
C.F.R.§ 2.104
C.F.R.§ 50.91
C.F.R.§ 50.92
C.F.R.§ 2.309
C.F.R.§ 2.302
F. App'x119 F.3d 38
F. App'x129 F.3d 625
F. App'x148 F.3d 1142
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