46444 Federal Register / Vol. 62, No. 170 / Wednesday, September 3, 1997 / Rules and Regulations

§ 558.485 Pyrantel tartrate.

(a) * * *

(28) To 062240: 48 grams per pound,

paragraph (e)(2) of this section.

* * * * *

Dated: August 22, 1997.

Michael J. Blackwell,

Deputy Director, Center for Veterinary

Medicine.

[FR Doc. 97–23245 Filed 9–2–97; 8:45 am]

BILLING CODE 4160–01–F

DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 344

[Department of the Treasury Circular, Public

Debt Series No. 3–72]

Regulations Governing United States

Treasury Certificates of Indebtedness,

Treasury Notes, and Treasury Bonds—

State and Local Government Series

AGENCY: Bureau of the Public Debt,

Fiscal Service, Treasury.

ACTION: Final rule.

SUMMARY: The Department of the

Treasury (Department or Treasury) is

issuing in final form an amendment to

its regulations governing State and Local

Government Series (SLGS) securities. It

has been brought to the attention of the

Department that the SLGS securities

program can be misused when

subscriptions for SLGS securities are

used as a cost-free interest rate hedge or

option (option) for speculation in open

market securities. This final rule

clarifies that the use of SLGS securities

for option purposes is prohibited. The

purpose of the SLGS securities program

is to assist state and local government

issuers of tax-exempt bonds in meeting

certain Federal tax restrictions, not to

provide a cost-free option.

Treasury is considering first, whether

it would be consistent with the

purposes of the SLGS securities program

to allow SLGS securities to serve as

options if Treasury were appropriately

compensated and second, if the answer

to the first question is affirmative,

whether there is a practical way for the

Department to charge for the use of

SLGS securities as options. Neither

question, however, has yet been

answered. Unless Treasury does

determine that it would be both

advisable and practical to allow SLGS

securities to serve as options if Treasury

is appropriately compensated, the use of

SLGS securities for such purpose will

continue to be an inappropriate use of

SLGS securities.

EFFECTIVE DATE: September 3, 1997.

FOR FURTHER INFORMATION CONTACT:

Howard Stevens, Director, Division of

Special Investments at 304–480–7752,

Jim Kramer-Wilt, Attorney/Adviser,

Office of the Chief Counsel, at 304–480–

5190 or Edward C. Gronseth, Deputy

Chief Counsel, Office of the Chief

Counsel, at 304–480–5192.

SUPPLEMENTARY INFORMATION:

1. Background

The SLGS securities program was

established and is maintained to assist

state and local government issuers in

meeting yield restriction and rebate

requirements applicable to tax-exempt

bonds under the Internal Revenue Code.

On October 28, 1996, the Department

published revised regulations to make

the SLGS securities program a more

flexible and competitive investment

vehicle for issuers. In response to

requests by state and local government

issuers to shorten the minimum time for

subscribing for SLGS securities, the

Treasury revised the regulations to

permit an issuer to subscribe for SLGS

securities up to 60 days prior to their

scheduled issue date and then to cancel

that subscription within five days of

that issue date for subscriptions of $10

million or less and within seven days

for subscriptions of more than $10

million, without penalty. The

regulations also provide that an issuer

canceling a SLGS securities subscription

after that five/seven-day period is not

subject to a monetary penalty, but is

prohibited from subscribing for SLGS

securities for a six month period.

The Department understands that the

ability to cancel a SLGS securities

subscription without a monetary

penalty has led some market

participants to conclude that they can

both subscribe for SLGS securities and

enter into a contract for the purchase of

securities on the open market for the

same defeasance transaction or fund

deposit in order to create a cost-free

option in connection with a defeasance

escrow or fund.

The prices established by the

Treasury for the SLGS securities do not

include the cost of an option. The

Treasury believes it is inappropriate for

government bodies to use the SLGS

securities program to create an option.

Treasury is considering first, whether it

would be consistent with the purposes

of the SLGS securities program to allow

SLGS securities to serve as options if

Treasury were appropriately

compensated and second, if the answer

to the first question is affirmative,

whether there is a practical way for the

Department to charge for the use of

SLGS securities as options. Neither

question, however, has yet been

answered. Unless Treasury does

determine that it would be both

advisable and practical to allow SLGS

securities to serve as options if Treasury

is appropriately compensated, the use of

SLGS securities for options will

continue to be an inappropriate use of

SLGS securities. The Department has

therefore decided to amend the SLGS

securities regulations to clarify that

transactions in which issuers use SLGS

securities to provide a cost-free interest

rate hedge or option are prohibited.

The following examples are

illustrative of certain acceptable and

unacceptable practices:

(1) In order to fund an escrow for an

advance refunding, an issuer

simultaneously enters into a purchase

contract for open market securities and

subscribes for SLGS securities, such that

either purchase is sufficient to pay the

cash flows on the outstanding bonds to

be refunded but together, the purchases

are greatly in excess of the amount

necessary to pay the cash flows. The

issuer plans that, if interest rates decline

during the period between the date of

subscribing for the SLGS securities and

the requested date of issuance of the

SLGS securities, the issuer will enter

into an offsetting agreement to sell the

open market securities and use the bond

proceeds to purchase the SLGS

securities to fund the escrow. If,

however, interest rates do not decline in

that period, the issuer plans to use the

bond proceeds to purchase the open

market securities to fund the escrow and

cancel the SLGS securities subscription.

This arrangement in effect allows the

SLGS securities program to provide a

cost-free option to the issuer, and this

amendment to the regulation clarifies

that such transactions are prohibited.

(2) The existing escrow for an advance

refunding contains open market

securities which produces a negative

arbitrage. In order to reduce or eliminate

this negative arbitrage, the issuer

subscribes for SLGS securities at a yield

higher than the yield on the existing

escrow, but less than the permitted

yield. At the same time, the issuer

agrees to sell the open market securities

in the existing escrow to a third party

and use the proceeds to purchase the

SLGS securities if interest rates decline

between the date of subscribing for the

SLGS securities and the requested date

of issuance of the SLGS securities. The

issuer and the third party further agree

that if interest rates increase during this

period, the issuer will cancel the SLGS

securities subscription. This

arrangement in effect allows the SLGS

securities program to provide a cost-free
Federal Register / Vol. 62, No. 170 / Wednesday, September 3, 1997 / Rules and Regulations 46445

option to the issuer, and this

amendment to the regulation clarifies

that such a transaction is prohibited.

(3) Under the same facts as in

Example 2, except that in this case, the

agreement entered into by the issuer

with a third party to sell the open

market securities in order to obtain

funds to purchase the SLGS securities is

not conditioned upon changes in

interest rates on Treasury securities. No

option is created, and the issuer would

not be prohibited from subscribing for

SLGS securities.

(4) The issuer subscribes for SLGS

securities fifteen days before the

settlement date of its bonds at the

maximum rates on such day, but the

resulting yield in the escrow is less than

the permitted yield. The rates on the

SLGS securities rise over the next few

days, and, within the time periods

permitted for cancellation by these

regulations, the issuer cancels the

earlier subscription and resubscribes at

the higher rates. This transaction is

permissible.

(5) An issuer holds a portfolio of open

market securities in an account that

produces negative arbitrage. In order to

reduce or eliminate this negative

arbitrage, the issuer subscribes for SLGS

securities for purchase in sixty days. At

the same time, the issuer sells an option

to purchase the portfolio of open market

securities. If interest rates increase, the

holder of the option will not exercise its

option and the issuer will cancel the

SLGS securities subscription. On the

other hand, if interest rates decline, the

option holder will exercise the option

and the issuer will use the proceeds to

purchase the SLGS securities. This

arrangement uses the SLGS securities

program to provide the issuer with a

cost-free option and this amendment to

the regulation clarifies that such

transactions are prohibited.

2. Section by Section Summary

Subpart A—General Information

(1) 344.1(f)—This is a new paragraph

titled Impermissible transactions which

applies to all escrows and funds subject

to yield or rebate restrictions. It is

impermissible to subscribe for SLGS

securities for deposit in an escrow or

fund (such as a reserve or construction

fund) if, at any time between the close

of business on the date of subscription

and the close of business on the date of

issue, the amount of SLGS securities

subscribed for, plus the amount of other

securities, if any, already in such escrow

or fund, plus the amount of other

securities the government body has

acquired, or has the right to acquire for

deposit in such escrow or fund, exceeds

the total amount of securities needed for

such escrow or fund. Securities held in

the escrow or fund that are not subject

to an agreement conditioned on changes

in the interest rate on open market

Treasury securities on or prior to the

date of issue of the SLGS securities shall

not be included in such computation.

An adjustment in the initial

subscription amount in accordance with

31 CFR § 344.3(b)(3)(ii) will not in and

of itself make the transaction

impermissible.

(2) 344.1(g)—This is the paragraph

formerly numbered 344.1(f) and is

amended to state that the Secretary may

revoke the issuance of any security and

may declare the subscriber ineligible

thereafter to subscribe for SLGS

securities if the subscriber uses SLGS

securities in an impermissible manner

as described in section 344.1(f), if the

Secretary deems such action in the

public interest.

(3) 344.1 (h), (i) & (j)—These

paragraphs are renumbered 344.1 (i), (j)

and (k) respectively.

(4) 344.3(b)(3)(iii)—This paragraph is

amended to read that an interest rate

cannot e changed to a rate that exceeds

the maximum interest rate in the table

that was in effect for a security of

comparable maturity on the date the

initial subscription was submitted,

unless the issuer obtains a higher rate by

canceling and resubscribing in

compliance with the provisions of

344.3(b)(1).

Procedural Requirements

This final rule is not a significant

regulatory action as defined in

Executive Order 12866. Therefore, an

assessment of anticipated benefits, costs

and regulatory alternatives is not

required.

This final rule relates to matters of

public contract. The notice and public

procedures requirements of the

Administrative Procedure Act are

inapplicable, pursuant to 5 U.S.C.

553(a)(2). Since no notice of proposed

rulemaking was required, the provisions

of the Regulatory Flexibility Act (5

U.S.C. 601 et. seq.) do not apply.

There are no collections of

information required by this final rule,

and, therefore, no approval pursuant to

the Paperwork Reduction Act is

required.

List of Subjects in 31 CFR part 344

Bonds, Government securities,

Securities.

Dated: August 27, 1997.

Gerald Murphy,

Fiscal Assistant Secretary.

For the reasons set forth in the

preamble, part 344 of Title 31 of the

Code of Federal Regulations is revised

to read as follows:

PART 344—REGULATIONS

GOVERNING UNITED STATES

TREASURY CERTIFICATES OF

INDEBTEDNESS, TREASURY NOTES,

AND TREASURY BONDS—STATE AND

LOCAL GOVERNMENT SERIES

1. The authority citation for part 344

continues to read:

Authority: 26 U.S.C. 141 note; 31 U.S.C.

3102.

2. Section 344.1 is amended by

redesignating paragraphs (f) through (j)

as (g) through (k), adding a new

paragraph (f) and amending paragraph

(g)(3) as follows:

§ 344.1 General provisions.

* * * * *

(f) Impermissible Transactions. It is

impermissible to subscribe for SLGS

securities for deposit in a defeasance

escrow or fund if, at any time between

the close of business on the date of

subscription and the close of business

on the date of issue, the amount of SLGS

securities subscribed for, plus the

amount of other securities, if any,

already in such escrow or fund, plus the

amount of other securities the

government body has acquired, or has

the right to acquire for deposit in an

escrow or fund, exceeds the total

amount of securities needed to fund

such escrow or fund. Securities held in

the escrow or fund that are not subject

to an agreement conditioned on changes

in the interest rate on open market

Treasury securities on or prior to the

date of issue of the SLGS securities shall

not be included in such computation.

An adjustment in the subscription

amount in accordance with 31 CFR

344.3(b)(3)(ii) will not in and of itself

make the transaction impermissible.

(g) Reservations.

* * * * *

(3) To revoke the issuance of any

security, and to declare the subscriber

ineligible thereafter to subscribe for

securities under this offering if the

Secretary deems such action in the

public interest and if any security is

issued on the basis of an improper

certification, other misrepresentations

(other than as the result of an

inadvertent error) or in an

impermissible transaction as set forth in

§ 344.1(f).

* * * * *
46446 Federal Register / Vol. 62, No. 170 / Wednesday, September 3, 1997 / Rules and Regulations

3. Section 344.3 is amended by

revising paragraph (b)(3)(iii) to read as

follows:

§ 344.3 Subscription for purchase.

* * * * *

(b) * * *

(3) * * *

(iii) An interest rate cannot be

changed to a rate that exceeds the

maximum interest rate in the table that

was in effect for a security of

comparable maturity on the date the

initial subscription was submitted,

unless the issuer obtains a higher rate by

canceling and resubscribing in

compliance with the provisions of

§ 344.3(b)(1).

* * * * *

[FR Doc. 97–23422 Filed 8–29–97; 12:14 pm]

BILLING CODE 4810–39–U

DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 311

OSD Privacy Program

AGENCY: Office of the Secretary, DOD.

ACTION: Final rule.

SUMMARY: In accordance with the

Privacy Act of 1974, the Office of the

Secretary of Defense (OSD) exempts a

system of records, DFM&P 26, entitled

Vietnamese Commandos Compensation

Files, from certain provisions of 5 U.S.C.

552a. Exemption is needed to comply

with the prohibition against disclosure

of properly classified portions of this

record system.

DATES: Effective: August 25, 1997.

FOR FURTHER INFORMATION CONTACT: Mr.

David Bosworth at (703) 695–0970.

SUPPLEMENTARY INFORMATION:

The proposed rule was published on

June 25, 1997, at 62 FR 34187. No

comments were received, therefore, the

rule is being adopted as published.

Executive Order 12866. It has been

determined that this Privacy Act rule for

the Department of Defense does not

constitute ‘significant regulatory action’.

Analysis of the rule indicates that it

does not have an annual effect on the

economy of $100 million or more; does

not create a serious inconsistency or

otherwise interfere with an action taken

or planned by another agency; does not

materially alter the budgetary impact of

entitlements, grants, user fees, or loan

programs or the rights and obligations of

recipients thereof; does not raise novel

legal or policy issues arising out of legal

mandates, the President’s priorities, or

the principles set forth in Executive

Order 12866.

Regulatory Flexibility Act. It has been

determined that this Privacy Act rule for

the Department of Defense does not

have significant economic impact on a

substantial number of small entities

because it is concerned only with the

administration of Privacy Act systems of

records within the Department of

Defense.

Paperwork Reduction Act. It has been

determined that this Privacy Act rule for

the Department of Defense imposes no

information requirements beyond the

Department of Defense and that the

information collected within the

Department of Defense is necessary and

consistent with 5 U.S.C. 552a, known as

the Privacy Act, and 44 U.S.C. Chapter

35.

The proposed rule was published on

June 25, 1997, at 62 FR 34187. No

comments were received, therefore, the

rule is being adopted as published.

List of Subjects in 32 CFR part 311

Privacy.

Accordingly, 32 CFR part 311 is

amended as follows:

1. The authority citation for 32 CFR

part 311 continues to read as follows:

Authority: Pub.L. 93–579, 88 Stat 1896 (5

U.S.C.552a).

2. Section 311.7 is amended by

adding paragraphs (c)(10)(i) through

(c)(10)(iii) to read as follows:

§ 311.7 Procedures for exemptions.

* * * * *

(c) Specific exemptions. * * *

(10) System identifier and name:

DFMP 26, Vietnamese Commando

Compensation Files.

(i) Exemption: Information classified

under E.O. 12958, as implemented by

DoD 5200.1-R, may be exempt pursuant

to 5 U.S.C. 552a(k)(1).

(ii) Authority: 5 U.S.C. 552a(k)(1).

(iii) Reasons: From subsection 5

U.S.C. 552a(d) because granting access

to information that is properly classified

pursuant to E.O. 12958, as implemented

by DoD 5200.1-R, may cause damage to

the national security.

Dated: August 28, 1997.

L. M. Bynum,

Alternate OSD Federal Register Liaison

Officer, Department of Defense

[FR Doc. 97–23295 Filed 9–2–97; 8:45 am]

BILLING CODE 5000–04–F

DEPARTMENT OF TRANSPORTATION

Coast Guard

33 CFR Part 151

[CGD 97–015]

RIN 2115–AF43

Antarctic Treaty Environmental

Protection Protocol

AGENCY: Coast Guard.

ACTION: Direct final rule; confirmation of

effective date.

SUMMARY: On April 14, 1997, the Coast

Guard published a direct final rule (62

FR 18043; CGD 97–015). This direct

final rule notified the public of the

Coast Guard’s intent to establish

regulations to implement the Antarctic

Science, Tourism, and Conservation Act

of 1996. These regulations should guide

U.S. owned and/or operated vessels to

properly prepare for voyages in the

Antarctic. They also harmonize U.S.

regulations with international

standards, and improve preparedness to

respond to a spill. The Coast Guard has

not received an adverse comment, or

notice of intent to submit an adverse

comment, objecting to this rule as

written. Therefore, this rule will go into

effect as scheduled.

DATES: The effective date of the direct

final rule is confirmed as September 30,

1997.

FOR FURTHER INFORMATION CONTACT:

LCDR Ray Perry, Project Manager, Office

of Environmental Standards (G–MSO),

telephone (202) 267–2714.

Dated: August 22, 1997.

R.C. North,

Rear Admiral, U.S. Coast Guard, Assistant

Commandant for Marine Safety and

Environmental Protection.

[FR Doc. 97–23348 Filed 8–28–97; 3:15 pm]

BILLING CODE 4910–14–M

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 52

[IL117–2; FRL 5886–9]

Approval and Promulgation of

Implementation Plans; Illinois

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Final rule; withdrawal.

SUMMARY: On July 14, 1997 (62 FR

37494), the EPA approved Illinois’ July

14, 1997, submittal of Rate-of-Progress

plans to reduce Volatile Organic

Compounds emissions in the Chicago