Federal Register / Vol. 62, No. 32 / Tuesday, February 18, 1997 / Rules and Regulations 7153

1 15 U.S.C. 78o–5.

2 15 U.S.C. 78o–5(a)(1)(B).

3See 12 CFR Part 12 for national banks, which are

regulated by the Office of the Comptroller of the

Currency (‘‘OCC’’); 12 CFR Part 208 for state

member banks of the Federal Reserve System,

which are regulated by the Board of Governors of

the Federal Reserve System (‘‘Board’’); and 12 CFR

Part 344 for state banks that are not members of the

Federal Reserve System, which are regulated by the

Federal Deposit Insurance Corporation (‘‘FDIC’’).

4 17 CFR 240.17a–3.

5 52 FR 5675 (February 25, 1987).

6 In addition to complying with the recordkeeping

rules of its ARA, a bank broker-dealer is required

to maintain, among other things, records pertaining

to securities positions (17 CFR 404.4(a)(3)(i)(A)).

7See 12 CFR 12.7(a); 12 CFR 208.8(k)(6)(i); and

12 CFR 344.7(a).

§ 39.13 [Amended]

2. Section 39.13 is amended by

adding a new airworthiness directive

(AD) to read as follows:

97–04–11 Air Tractor, Inc.: Amendment

39–9935; Docket No. 96–CE–48–AD.

Applicability: Models AT–802 and AT–

802A airplanes (serial numbers 0001 through

0038), certificated in any category.

Note 1: This AD applies to each airplane

identified in the preceding applicability

provision, regardless of whether it has been

modified, altered, or repaired in the area

subject to the requirements of this AD. For

airplanes that have been modified, altered, or

repaired so that the performance of the

requirements of this AD is affected, the

owner/operator must request approval for an

alternative method of compliance in

accordance with paragraph (d) of this AD.

The request should include an assessment of

the effect of the modification, alteration, or

repair on the unsafe condition addressed by

this AD; and, if the unsafe condition has not

been eliminated, the request should include

specific proposed actions to address it.

Compliance: Required within the next 100

hours time-in-service after the effective date

of this AD, unless already accomplished.

To prevent fatigue failure of a tail landing

gear spring before the life limit of the part is

achieved, which could result in loss of

control of the airplane, accomplish the

following:

(a) Incorporate the revision (dated May 24,

1996) to Section 6, Airworthiness

Limitations, of the Air Tractor AT 802/802A

Maintenance Manual.

(b) Incorporating the maintenance manual

revision as required by paragraph (a) of this

AD may be performed by the airplane owner/

operator holding at least a private pilot

certificate as authorized by section 43.7 of

the Federal Aviation Regulations (14 CFR

43.7), and must be entered into the aircraft

records showing compliance with this AD in

accordance with section 43.11 of the Federal

Aviation Regulations (14 CFR 43.11).

(c) Special flight permits may be issued in

accordance with sections 21.197 and 21.199

of the Federal Aviation Regulations (14 CFR

21.197 and 21.199) to operate the airplane to

a location where the requirements of this AD

can be accomplished.

(d) An alternative method of compliance or

adjustment of the compliance time that

provides an equivalent level of safety may be

approved by the Manager, FAA, Airplane

Certification Office (ACO), 2601 Meacham

Boulevard, Fort Worth, Texas 76193–0150.

The request shall be forwarded through an

appropriate FAA Maintenance Inspector,

who may add comments and then send it to

the Manager, Fort Worth ACO.

Note 2: Information concerning the

existence of approved alternative methods of

compliance with this AD, if any, may be

obtained from the Fort Worth ACO.

(e) All persons affected by this directive

may obtain copies of the maintenance

manual revision referred to herein upon

request to Air Tractor Inc., P. O. Box 485,

Olney, Texas 76374; or may examine this

information at the FAA, Central Region,

Office of the Assistant Chief Counsel, Room

1558, 601 E. 12th Street, Kansas City,

Missouri 64106.

(f) This amendment (39–9935) becomes

effective on April 4, 1997.

Issued in Kansas City, Missouri, on

February 10, 1997.

Henry A. Armstrong,

Acting Manager, Small Airplane Directorate,

Aircraft Certification Service.

[FR Doc. 97–3839 Filed 2–14–97; 8:45 am]

BILLING CODE 4910–13–U

DEPARTMENT OF THE TREASURY

Office of the Under Secretary for

Domestic Finance

17 CFR Part 404

Government Securities Act

Regulations: Recordkeeping

AGENCY: Office of the Under Secretary

for Domestic Finance, Treasury.

ACTION: Final Rule.

SUMMARY: The Department of the

Treasury (‘‘Department’’) is issuing in

final form an amendment to the

recordkeeping rules in § 404.4 of the

regulations issued under the

Government Securities Act of 1986

(‘‘GSA’’). 17 CFR 404.4 of the GSA

regulations requires financial

institutions that are government

securities brokers or dealers to make

and preserve records. Specifically, the

Department is amending § 404.4(a)(1) to

clarify the applicability of the federal

bank regulatory agencies’ rules, as

adopted by the GSA rules, to financial

institutions and to conform with current

recordkeeping rule revisions being

undertaken by the federal bank

regulatory agencies.

EFFECTIVE DATE: This amendment is

effective April 30, 1997.

FOR FURTHER INFORMATION CONTACT:

Kerry Lanham or Kurt Eidemiller,

Government Securities Regulations

Staff, Bureau of the Public Debt,

Department of the Treasury, at (202)

219–3632.

SUPPLEMENTARY INFORMATION:

I. Background

The Government Securities Act of

1986 (‘‘GSA’’), as amended 1 requires,

among other things, that a financial

institution that is a government

securities broker or dealer notify its

appropriate regulatory agency (‘‘ARA’’)

of its status as such, thereby providing

for the regulation of its government

securities business.2 In 1987, when the

Department developed the GSA

regulations affecting financial

institutions that are required to file

notice as government securities brokers

or dealers (‘‘bank broker-dealers’’), it

decided to adopt the existing

recordkeeping regulations of the federal

bank regulatory agencies.3 These rules

are similar to the Securities and

Exchange Commission’s recordkeeping

requirements in Rule 17a–3.4

The reason for relying on existing

bank regulations was that those

financial institutions effecting

government securities broker-dealer

transactions were already subject to a

system of federal regulation and

supervision, which explicitly included

recordkeeping requirements relating to

securities activities. Requiring those

institutions to follow another set of

recordkeeping requirements was viewed

as unduly burdensome and did not

promote the purposes of the GSA.5

Section 404.4 of the GSA regulations

provides that, for bank broker-dealers,

compliance with the recordkeeping

rules of the bank ARAs, together with

additional GSA recordkeeping

provisions,6 constitutes compliance

with the GSA recordkeeping rules.

However, the respective ARAs’

regulations provide for certain

exemptions from, or exceptions to, most

of their recordkeeping rules based on a

stated transaction threshold.

Specifically, the ARAs’ regulations

exempt banks from most of the

respective recordkeeping requirements

if the bank transacts a de minimis

annual average number of transactions.

The regulations state, with minor

variations, the following: ‘‘The

requirements * * * shall not apply to

banks having an average of less than 200

securities transactions per year for

customers over the prior three calendar

year period, exclusive of transactions in

U.S. government and federal agency

obligations.’’ 7 The ARAs have

interpreted this exemption as excluding

government securities transactions,

meaning that government securities

transactions are not included in the
7154 Federal Register / Vol. 62, No. 32 / Tuesday, February 18, 1997 / Rules and Regulations

8See 60 FR 66517 (December 22, 1995) for the

OCC’s proposed revisions and 60 FR 66759

(December 26, 1995) for the Board’s proposed

revisions. It is the Department’s understanding that

the FDIC also intends to address this same rule

modification to ensure consistent application and

interpretation of the rules. The FDIC published an

Advance Notice of Proposed Rulemaking on this

subject on May 24, 1996 (61 FR 26135).

9 60 FR 66518 (December 22, 1995).

10 60 FR 66760 (December 26, 1995).

11The GSA requirements of Part 450 (17 CFR Part

450) concerning custodial holdings of government

securities for customers apply to all financial

institutions.

12The OCC published its final rule on December

2, 1996. See 61 FR 63958 (December 2, 1996). The

Board intends to publish its final rule in January

1997.

13 12 CFR 12.1(c)(2)(ii).

14 12 CFR 208.24(g)(2).

exempted, or de minimis, transaction

count.

However, paragraph 404.4(a)(1) of the

GSA regulations, in adopting the bank

ARAs’ recordkeeping rules for bank

broker-dealers, contains the following

provision: ‘‘* * * provided however,

that the records required to be made and

kept by those regulations shall be made

or kept without regard to the

exemptions for transactions in U.S.

government or Federal agency

obligations provided in 12 CFR 12.7(a),

12 CFR 208.8(k)(6)(i), and 12 CFR

344.7(a).’’ Since implementing the GSA

regulations, the Department has

consistently interpreted this provision

to mean that a bank broker-dealer’s

government securities transactions are

included in the 200 securities

transaction exemption threshold that is

provided by the ARA rules. This

provision was intended to permit bank

broker-dealers that conduct government

securities transactions to take advantage

of the de minimis exemption from the

ARAs’ recordkeeping rules that was

available to them for their other

securities business. Accordingly, the

GSA regulations allow a bank brokerdealer to conduct up to 200 government

securities transactions, or a combination

of up to 200 government and other

securities transactions, per year without

having to comply with most of the bank

ARAs’ recordkeeping rules. It has been

the Department’s view that, for purposes

of this part, a bank broker-dealer falling

within these parameters is exempt from

paragraph 404.4(a)(1) of the GSA

recordkeeping rules.

As a result of the cross-referencing,

there has been some confusion about the

applicability of the ARAs’ exemption

threshold to bank broker-dealers’

government securities transactions. The

interrelationship between the

recordkeeping language of the ARAs’

rules and the GSA regulations often has

been confusing and ambiguous. The

ARAs and the Department are working

together to eliminate this ambiguity and

to provide for a clear, understandable

and consistent interpretation of the

rules.

The ARAs have proposed revisions to

their recordkeeping rules that would

conflict, in part, with the GSA

recordkeeping requirements as they are

presently stated in section 404.4(a).8

This amendment to the GSA regulations

will help to eliminate any ambiguity or

confusion resulting from the interplay of

the respective regulations. This final

rule amendment is intended to be

published within the same timeframe as

those final rules that are being adopted

by the Board and the OCC.

As stated by the OCC in the preamble

section of their proposed rule revisions,

‘‘Consistent with the GSA regulations,

proposed § 12.1(c)(2)(ii) exempts a

national bank that conducts fewer than

500 government securities brokerage

transactions per year from complying

with the recordkeeping requirements

under proposed (and current) § 12.3

* * * This exemption does not apply to

government securities dealer

transactions by national banks,

however.’’ 9

The Board has proposed a similar rule

revision. As stated in the preamble

section to its proposed rules, ‘‘A new

§ 208.24(g)(2) would clarify that State

member banks that effect up to 500

government securities brokerage

transactions and are exempt from

registration under Department of the

Treasury regulation 401.3(a)(2)(i), 17

CFR 401.3(a)(2), also are exempt from

§ 208.24. This exemption would not be

available if a bank has filed notice or is

required to file notice indicating that it

acts as a government securities broker or

dealer.’’ 10

In the rule proposals, both agencies

also stated that they had been advised

by staff at the Bureau of the Public Debt,

which is the organization within the

Department of the Treasury that is

responsible for administering the GSA

regulations, that the staff was

considering amending the GSA

recordkeeping rules. The purpose would

be to clarify any ambiguity with respect

to the recordkeeping requirements for

financial institutions that conduct

government securities transactions

resulting from the interplay of the GSA

regulations with the ARA recordkeeping

requirements.

The final rules being adopted by the

OCC and the Board, which are virtually

unchanged from the proposed rules,

will increase the exemption threshold to

500 government securities brokerage

transactions, which is consistent with

the limited brokerage exemption

provided by the GSA regulations in

§ 401.3 (17 CFR 401.3, Exemption for

financial institutions that are engaged in

limited government securities brokerage

activities). The GSA limited brokerage

exemption provision basically states

that a financial institution is not

regarded as acting as a government

securities broker and is exempt from the

requirement to file notice as a

government securities broker and from

most of the GSA regulations, including

the recordkeeping requirements, if it

effects fewer than 500 government

securities brokerage transactions per

year.11

However, the OCC’s and the Board’s

final rules contain additional language

that we view as contradictory to the

intended applicability of 17 CFR

404.4(a) to bank dealers.12 The final

rules state that the de minimis

exception does not apply to dealer

transactions by national banks (OCC) 13

or noticed financial institution

government securities brokers or dealers

(Board).14 As a result, entities engaging

in government securities dealer

transactions would be subject to the

bank ARA recordkeeping rules

regardless of how many transactions

were conducted. As mentioned earlier,

the Department views 17 CFR 404.4(a)

as meaning that, for purposes of the

GSA, bank broker-dealers are not

required to follow most of the ARAs’

recordkeeping rules if their annual

government securities dealer

transactions, or a combination of their

government and other securities

transactions, are less than 200. Given

this difference in application of the GSA

and ARAs’ rules, section 404.4 of the

GSA regulations is being amended to

conform with the ARAs’ rules and to

make clear its intended applicability.

The Department is therefore

amending paragraph 404.4(a)(1) of the

GSA regulations (17 CFR 404.4, Records

to be made and preserved by

government securities brokers and

dealers that are financial institutions)

with respect to bank broker-dealers that

are subject to bank regulatory agency

recordkeeping rules by deleting the

current provision, ‘‘provided however,

that the records required to be made and

kept by those regulations shall be made

or kept without regard to the

exemptions for transactions in U.S.

government or Federal agency

obligations provided in 12 CFR 12.7(a),

12 CFR 208.8(k)(6)(i), and 12 CFR

344.7(a).’’ As a result, in order to be in

compliance with the GSA recordkeeping

rules at 17 CFR 404.4(a)(1), all bank
Federal Register / Vol. 62, No. 32 / Tuesday, February 18, 1997 / Rules and Regulations 7155

broker-dealers will be required to follow

the ARAs’ recordkeeping rules if even a

single government securities dealer

transaction is conducted.

II. Special Analyses

This final rule amendment does not

meet the criteria for a ‘‘significant

regulatory action’’ pursuant to Executive

Order 12866. The Administrative

Procedure Act (‘‘APA’’) (5 U.S.C. 553)

generally requires that prior notice and

opportunity for comment be afforded

before the adoption of rules by federal

agencies. Inasmuch as this final rule

merely involves changes to conform

with the rule revisions currently being

adopted by the federal banking

regulatory agencies, while not involving

any substantive changes to the

regulations, the notice and comment

provisions of the APA are unnecessary

pursuant to 5 U.S.C. 553(b)(B).

As no notice and public comment are

required for this rulemaking, the

provisions of the Regulatory Flexibility

Act (5 U.S.C. 601, et. seq.), do not apply.

The Paperwork Reduction Act (44

U.S.C. 3504(h)) requires that collections

of information be submitted to the

Office of Management and Budget for

review and approval. Since this rule

revision does not include any new

collection of information given the

ARAs’ current interpretation and

application of their recordkeeping

requirements, the Paperwork Reduction

Act is inapplicable.

List of Subjects in 17 CFR Part 404

Banks, banking, Brokers, Government

securities, Reporting and recordkeeping

requirements.

For the reasons set out in the

preamble, 17 CFR Part 404 is amended

as follows:

PART 404—RECORDKEEPING AND

PRESERVATION OF RECORDS

1. The authority citation for Part 404

continues to read as follows:

Authority: 15 U.S.C. 78o–5 (b)(1)(B),

(b)(1)(C), (b)(2), (b)(4).

2. Section 404.4 is amended by

revising paragraph (a)(1) to read as

follows:

§ 404.4 Records to be made and preserved

by government securities brokers and

dealers that are financial institutions.

(a) * * *

(1) Is subject to 12 CFR part 12

(relating to national banks), 12 CFR part

208 (relating to state member banks of

the Federal Reserve System) or 12 CFR

part 344 (relating to state banks that are

not members of the Federal Reserve

System), or is a United States branch or

agency of a foreign bank and complies

with 12 CFR part 12 (for federally

licensed branches and agencies of

foreign banks) or 12 CFR part 208 (for

uninsured state-licensed branches and

agencies of foreign banks) or 12 CFR

part 344 (for insured state licensed

branches and agencies of foreign banks);

* * * * *

Dated: January 16, 1997.

John D. Hawke, Jr.,

Under Secretary for Domestic Finance.

[FR Doc. 97–3834 Filed 2–14–97; 8:45 am]

BILLING CODE 4810–39–W

Internal Revenue Service

26 CFR Part 1

[TD 8708]

RIN 1545–AL98

Computation of Foreign Taxes Deemed

Paid Under Section 902 Pursuant to a

Pooling Mechanism for Undistributed

Earnings and Foreign Taxes;

Correction

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Correction to final regulations.

SUMMARY: This document contains a

correction to final income tax

regulations which were published in the

Federal Register on Tuesday, January 7,

1997 (62 FR 923) relating to the

computation of foreign taxes deemed

paid under section 902.

EFFECTIVE DATE: January 7, 1997.

FOR FURTHER INFORMATION CONTACT:

Caren S. Shein, (202) 622–3850 (not a

toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations that are the

subject of this correction are under

section 902 of the Internal Revenue

Code.

Need for Correction

As published, the final regulations

contain an error which may prove to be

misleading and is in need of

clarification.

Correction of Publication

Accordingly, the publication of the

final regulations (TD 8708), which are

the subject of FR Doc. 97–153, is

corrected as follows:

§ 1.902–3 [Corrected]

On page 940, column 3, § 1.902–3(l),

the sixth line from the bottom of the

paragraph, the language ‘‘See § 1.902–

1(a)(13)(iii). For’’ is corrected to read

‘‘See § 1.902–1 (a)(13)(i). For’’.

Michael L. Slaughter,

Acting Chief, Regulations Unit, Assistant

Chief Counsel (Corporate).

[FR Doc. 97–3812 Filed 2–14–97; 8:45 am]

BILLING CODE 4830–01–U

26 CFR Part 1

[TD 8701]

RIN 1545–AC06

Treatment of Shareholders of Certain

Passive Foreign Investment

Companies; Correction

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Correction to final regulations.

SUMMARY: This document contains a

correction to final regulations (TD 8701)

which were published in the Federal

Register on Friday, December 27, 1996

(61 FR 68149). The final regulations

provide rules for making a deemed sale

or deemed dividend election to purge a

shareholder’s holding period of stock of

a PFIC of those taxable years during

which the PFIC was not a QEF.

EFFECTIVE DATE: December 27, 1996.

FOR FURTHER INFORMATION CONTACT:

Gayle Novig (202) 622–3880 (not a tollfree number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations that are subject

to this correction is under section 1291

of the Internal Revenue Code.

Need for Correction

As published, the final regulations

(TD 8701) contains an error that may

prove to be misleading and is in need

of clarification.

Correction of Publication

Accordingly, the publication of final

and temporary regulations (TD 8701)

which is the subject of FR Doc. 96–

32246 is corrected as follows:

§ 1.1291–9 [Corrected]

On page 68152, column 3, § 1.1291–

9, paragraph (d)(2)(i), line 9, the

language ‘‘taxable year of inclusion of

each’’ is corrected to read ‘‘taxable year

or years of inclusion of each’’.

Michael L. Slaughter,

Acting Chief, Regulations Unit, Assistant

Chief Counsel (Corporate).

[FR Doc. 97–3950 Filed 2–14–97; 8:45 am]

BILLING CODE 4830–01–U