Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Proposed Rules 21057 

temperature measurement point (TMP) on 

the LED source shall be such that it has the 

highest temperature in the LED lamp. In 

general, the individual LED in the middle of 

symmetric arrays is the hottest. For square, 

rectangular, or circular arrays, the LED 

closest to the center is typically the hottest. 

For other configurations, manufacturers shall 

sample several LEDs within the lamp to 

identify the source with highest temperature. 

The temporary hole for inserting the 

thermocouple shall be tightly resealed during 

testing with putty or other flexible sealant. 

The temperature probes shall be in contact 

with the TMP and permanently adhered. The 

steady-state temperature shall be recorded 

after the test has been running for at least 

three hours, and three successive readings 

taken at 15 minute intervals are within 1 °C 

of one another and are still not rising. The 

temperature measured during the ISTMT 

should be the temperature at which lumen 

maintenance data of the LED source is 

obtained. 

4.3.2. The lumen maintenance of the LED 

sources shall be determined as specified in 

section 7.0 of IES LM–80 (incorporated by 

reference; see § 430.3) and section 4.3 of IES 

TM–21 (incorporated by reference; see 

§ 430.3). Additionally, the following 

conditions shall be adhered to: 

4.3.2.1. All case temperature (Ts) subsets of 

the sample used for IES LM–80 (incorporated 

by reference; see § 430.3) testing shall be of 

the same CCT. 

4.3.2.2. The drive current flowing through 

the LED source during IES LM–80 

(incorporated by reference; see § 430.3) 

testing shall be greater than or equal to the 

subcomponent drive current employed in the 

LED lamp. 

4.3.2.3. For an LED lamp employing both 

phosphor-converted white and single-color 

LED packages, the lumen maintenance shall 

be measured for a sample of LED arrays 

incorporating both types of LED packages. 

4.3.2.4. For LED arrays constructed as an 

assembly of LED dies on a printed circuit 

board or substrate (a.k.a. chip-on-board) with 

one common phosphor layer overlaying all 

dies, or with phosphor layers overlaying 

individual dies with or without single-color 

dies incorporated, a single IES LM–80 

(incorporated by reference; see § 430.3) test 

shall represent the performance of a range of 

LED array sizes, if all of the following are 

satisfied: 

4.3.2.4.1. IES LM–80 (incorporated by 

reference; see § 430.3) testing has been 

conducted on the largest LED array that the 

manufacturer believes will be used in a 

qualified product; and, 

4.3.2.4.2. The average calculated currentper-die in the tested LED array is greater than 

or equal to the average calculated currentper-die employed in the LED lamp. 

4.3.2.5. For LED arrays constructed as an 

assembly of LED packages on a printed 

circuit board, each with their own phosphor 

layer, the TMP temperature of the hottest 

package in the array shall be used for lumen 

maintenance projection purposes. 

[FR Doc. 2012–8469 Filed 4–6–12; 8:45 am] 

BILLING CODE 6450–01–P 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

12 CFR Part 9 

[Docket No. OCC–2011–0023] 

RIN 1557–AD37 

Short-Term Investment Funds 

AGENCY: Office of the Comptroller of the 

Currency, Treasury (OCC). 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The OCC is requesting 

comment on a proposal that would 

revise the requirements imposed on 

banks pursuant to 12 CFR 

9.18(b)(4)(ii)(B), the short-term 

investment fund (STIF) rule (STIF Rule). 

The proposal would add safeguards 

designed to address the risk of loss to a 

STIF’s principal, including measures 

governing the nature of a STIF’s 

investments, ongoing monitoring of its 

mark-to-market value and forecasting of 

potential changes in its mark-to-market 

value under adverse market conditions, 

greater transparency and regulatory 

reporting about a STIF’s holdings, and 

procedures to protect fiduciary accounts 

from undue dilution of their 

participating interests in the event that 

the STIF loses the ability to maintain a 

stable net asset value (NAV). 

DATES: Comments should be received on 

or before June 8, 2012. 

ADDRESSES: Because paper mail in the 

Washington, DC area and at the OCC is 

subject to delay, commenters are 

encouraged to submit comments by the 

Federal eRulemaking Portal or email, if 

possible. Please use the title ‘‘ShortTerm Investment Funds’’ to facilitate 

the organization and distribution of the 

comments. You may submit comments 

by any of the following methods: 

• Federal eRulemaking Portal— 

‘‘regulations.gov’’: Go to http:// 

www.regulations.gov. Click ‘‘Advanced 

Search’’. Select ‘‘Document Type’’ of 

‘‘Proposed Rule’’, and in ‘‘By Keyword 

or ID’’ box, enter Docket ID ‘‘OCC– 

2011–0023’’, and click ‘‘Search’’. If 

proposed rules for more than one 

agency are listed, in the ‘‘Agency’’ 

column, locate the notice of proposed 

rulemaking for the OCC. Comments can 

be filtered by Agency using the filtering 

tools on the left side of the screen. In the 

‘‘Actions’’ column, click on ‘‘Submit a 

Comment’’ or ‘‘Open Docket Folder’’ to 

submit or view public comments and to 

view supporting and related materials 

for this rulemaking action. 

• Click on the ‘‘Help’’ tab on the 

Regulations.gov home page to get 

information on using Regulations.gov, 

including instructions for submitting or 

viewing public comments, viewing 

other supporting and related materials, 

and viewing the docket after the close 

of the comment period. 

• Email: 

regs.comments@occ.treas.gov. 

• Mail: Office of the Comptroller of 

the Currency, 250 E Street SW., Mail 

Stop 2–3, Washington, DC 20219. 

• Fax: (202) 874–5274. 

• Hand Delivery/Courier: 250 E Street 

SW., Mail Stop 2–3, Washington, DC 

20219. 

Instructions: You must include 

‘‘OCC’’ as the agency name and ‘‘Docket 

ID OCC–2011–0023’’ in your comment. 

In general, OCC will enter all comments 

received into the docket and publish 

them on the Regulations.gov Web site 

without change, including any business 

or personal information that you 

provide such as name and address 

information, email addresses, or phone 

numbers. Comments received, including 

attachments and other supporting 

materials, are part of the public record 

and subject to public disclosure. Do not 

enclose any information in your 

comment or supporting materials that 

you consider confidential or 

inappropriate for public disclosure. 

You may review comments and other 

related materials that pertain to this 

notice of proposed rulemaking by any of 

the following methods: 

• Viewing Comments Electronically: 

Go to http://www.regulations.gov. Click 

‘‘Advanced Search’’. Select ‘‘Document 

Type’’ of ‘‘Public Submission’’, and in 

‘‘By Keyword or ID’’ box enter Docket ID 

‘‘OCC–2011–0023’’, and click ‘‘Search’’. 

If comments from more than one agency 

are listed, the ‘‘Agency’’ column will 

indicate which comments were received 

by the OCC. Comments can be filtered 

by Agency using the filtering tools on 

the left side of the screen. 

• Viewing Comments Personally: You 

may personally inspect and photocopy 

comments at the OCC, 250 E Street SW., 

Washington, DC. For security reasons, 

the OCC requires that visitors make an 

appointment to inspect comments. You 

may do so by calling (202) 874–4700. 

Upon arrival, visitors will be required to 

present valid government-issued photo 

identification and to submit to security 

screening in order to inspect and 

photocopy comments. 

• Docket: You may also view or 

request available background 

documents and project summaries using 

the methods described above. 

FOR FURTHER INFORMATION CONTACT: 

OCC: Joel Miller, Group Leader, Asset 

Management (202) 874–4493, David 


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21058 Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Proposed Rules 

1 12 CFR 9.18. 

2 12 CFR 9.18(b)(5)(i). If the bank cannot readily 

ascertain market value as of the valuation date, the 

bank generally must use a fair value for the asset, 

determined in good faith. 12 CFR 9.18(b)(4)(ii)(A). 

3 12 CFR 9.18(b)(4)(ii)(B). 

4 76 FR 48950 (2011). 

5 12 CFR 150.260. 

6Fifteen national banks collectively reported 

STIF investments that they administer. Based on 

thrift financial report data, federal savings 

associations administered no STIFs as of December 

31, 2011. Other types of institutions managing 

certain types of CIFs may also observe the 

requirements of the OCC’s STIF Rule. For example, 

New York state law provides that all investments 

in short-term investment common trust funds may 

be valued at cost, if the plan of operation requires 

that: (i) The type or category of investments of the 

fund shall comply with the rules and regulations of 

the Comptroller of the Currency pertaining to shortterm investment funds and (ii) in computing 

income, the difference between cost of investment 

and anticipated receipt on maturity of investment 

shall be accrued on a straight-line basis. See N.Y. 

Comp. Codes R. & Regs. Tit. 3, § 22.23 (2010). 

Additionally, in order to retain their tax-exempt 

status, common trust funds must operate in 

compliance with § 9.18 as well as the federal tax 

laws. See 26 U.S.C. 584. The OCC does not have 

access to comprehensive data quantifying 

investments held by STIF funds administered by 

other types of institutions pursuant to legal 

requirements incorporating the OCC’s STIF Rule. 

Although the direct scope of the STIF Rule 

provisions in section 9.18 of the OCC’s regulations 

is national banks and Federal branches and 

agencies of foreign banks acting in a fiduciary 

capacity (12 CFR 9.1(c)), the nomenclature of the 

STIF Rule refers simply to ‘‘banks.’’ For the sake of 

convenience, the OCC proposes to continue this 

approach and also applies the same convention to 

the discussion of the STIF Rule in this Notice of 

Proposed Rulemaking. 7 15 U.S.C. 80a; 17 CFR 270.2a–7. Because STIFs 

are a form of collective investment fund, they are 

generally exempt from the SEC’s rules under the 

Investment Company Act. STIFs used exclusively 

for (1) the collective investment of money by a bank 

in its fiduciary capacity as trustee, executor, 

Barfield, NBE, Market Risk (202) 874– 

1829, Patrick T. Tierney, Counsel, 

Legislative and Regulatory Activities 

Division (202) 874–5090, or Adam 

Trost, Senior Attorney, Securities and 

Corporate Practices Division (202) 874– 

5210, Office of the Comptroller of the 

Currency, 250 E Street SW., 

Washington, DC 20219. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Short-Term Investment Funds (STIFs) 

A Collective Investment Fund (CIF) is 

a bank-managed fund that holds pooled 

fiduciary assets that meet specific 

criteria established by the OCC fiduciary 

activities regulation at 12 CFR 9.18. 

Each CIF is established under a ‘‘Plan’’ 

that details the terms under which the 

bank manages and administers the 

fund’s assets. The bank acts as a 

fiduciary for the CIF and holds legal 

title to the fund’s assets. Participants in 

a CIF are the beneficial owners of the 

fund’s assets. Each participant owns an 

undivided interest in the aggregate 

assets of a CIF; a participant does not 

directly own any specific asset held by 

a CIF.1

CIFs are designed to enhance 

investment management capabilities by 

combining assets from different 

accounts into a single fund with a 

specific investment strategy. By pooling 

fiduciary assets, a bank may lower the 

operational and administrative expenses 

associated with investing fiduciary 

assets and enhance risk management 

and investment performance for the 

participating accounts. 

A fiduciary account’s investment in a 

CIF is called a ‘‘participating interest.’’ 

Participating interests in a CIF are not 

FDIC-insured and are not subject to 

potential claims by a bank’s creditors. In 

addition, a participating interest in a 

CIF cannot be pledged or otherwise 

encumbered in favor of a third party. 

The general rule for valuation of a 

CIF’s assets specifies that a CIF 

admitting a fiduciary account (that is, 

allowing the fiduciary account, in effect, 

to purchase its proportionate interest in 

the assets of the CIF) or withdrawing the 

fiduciary account (that is, allowing the 

fiduciary account, in effect, to redeem 

the value of its proportionate interest in 

the CIF) may only do so on the basis of 

a valuation of the CIF’s assets, as of the 

admission or withdrawal date, based on 

the mark-to-market value of the CIF’s 

assets.2 This general valuation rule is 

designed to protect all fiduciary 

accounts participating in the CIF from 

the risk that other accounts will be 

admitted or withdrawn at valuations 

that dilute the value of existing 

participating interests in the CIF. 

A STIF is a type of CIF that permits 

a bank to value the STIF’s assets on an 

amortized cost basis, rather than at 

mark-to-market value, for purposes of 

admissions and withdrawals. This is an 

exception to the general rule of market 

valuation. In order to qualify for this 

exception, a STIF’s Plan must require 

the bank to: (1) Maintain a dollarweighted average portfolio maturity of 

90 days or less; (2) accrue on a straightline or amortized basis the difference 

between the cost and anticipated 

principal receipt on maturity; and (3) 

hold the fund’s assets until maturity 

under usual circumstances.3 These 

conditions are designed to protect 

fiduciary accounts from the risk of 

dilution of the value of their 

participating interests. In particular, by 

limiting the STIF’s investments to 

shorter-term assets and generally 

requiring those assets to be held to 

maturity, realized differences between 

the amortized cost and mark-to-market 

value of the assets will be rare, absent 

atypical market conditions or an 

impaired asset. As further discussed in 

this SUPPLEMENTARY INFORMATION

section, the amortized cost approach is 

beneficial for many fiduciary accounts, 

because some participants require that a 

certain percentage of the assets held in 

these accounts be in a liquid, low risk 

investment. 

The OCC’s STIF Rule governs STIFs 

managed by national banks. In addition, 

regulations adopted by the Office of 

Thrift Supervision, now recodified as 

OCC rules pursuant to Title III of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act,4 have long 

required federal savings associations 

(FSAs) to comply with the requirements 

of the OCC’s STIF Rule.5 Thus, the 

proposed revisions to the national bank 

STIFs Rule would apply to a federal 

savings association that establishes and 

administers a STIF fund. As of 

December 31, 2011, there was 

approximately $112 billion invested in 

STIFs administered by national banks 

and there were no STIFs administered 

by FSAs reported.6

The OCC is proposing to revise the 

requirements of the STIF Rule. While 

fiduciary accounts participating in a 

STIF have an interest in the fund 

maintaining a stable net asset value 

(NAV), ultimately the participating 

interests remain subject to the risk of 

loss to a STIF’s principal. The OCC is 

proposing additional safeguards 

designed to address this risk in several 

ways. These include measures 

governing the nature of a STIF’s 

investments, ongoing monitoring of the 

STIF’s mark-to-market value and 

assessment of potential changes in its 

mark-to-market value under adverse 

market conditions, greater transparency 

and regulatory reporting about the 

STIF’s holdings, and procedures to 

protect fiduciary accounts from undue 

dilution of their participating interests 

in the event that the STIF loses the 

ability to maintain a stable NAV. 

B. Comparison to Other Products That 

Seek To Maintain a Stable NAV 

There are other types of funds that 

seek to maintain a stable NAV. By far, 

the most significant of these from a 

financial market presence standpoint 

are ‘‘money market mutual funds’’ 

(MMMFs). These funds are organized as 

open-ended management investment 

companies and are regulated by the U.S. 

Securities and Exchange Commission 

(‘‘SEC’’) pursuant to the Investment 

Company Act of 1940, particularly 

pursuant to the provisions of SEC Rule 

2a–7 thereunder (‘‘Rule 2a–7’’).7


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Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Proposed Rules 21059 

administrator, or guardian and (2) the collective 

investment of assets of certain employee benefit 

plans are exempt from the Investment Company Act 

under 15 U.S.C. 80a–3(c)(3) and (c)(11), 

respectively. MMMFs are not subject to comparable 

restrictions as to the type of participant who may 

invest in the fund or the purpose of such 

investment. 

8See http://www.ici.org/info/mm_data_2011.xls. 

9The PWG is comprised of the Secretary of the 

Treasury, the Chairman of the Board of Governors 

of the Federal Reserve System, the Chairman of the 

Securities and Exchange Commission, and the 

Chairman of the Commodity Futures Trading 

Commission. 

10Report of the President’s Working Group on 

Financial Markets, Money Market Fund Reform 

Options, p. 35 (Oct. 2010), see http:// 

www.treasury.gov/press-center/press-releases/ 

Documents/ 

10.21%20PWG%20Report%20Final.pdf. See also 

Financial Stability Oversight Council 2011 Annual 

Report, p. 13 (July 2011) available at http:// 

www.treasury.gov/initiatives/fsoc/Documents/ 

FSOCAR2011.pdf. 

11See Money Market Fund Reform, 75 FR 10060 

(Mar. 4, 2010). 

12 12 CFR 9.2(b). 

13 12 CFR 9.5. 

14 12 CFR 9.6(c). 

15For example, many STIF plan participants (e.g., 

pensions) have policies, procedures, and 

operational systems that presume a stable NAV. 

16The OCC would expect banks to normalize and 

treat stable NAVs operating at a multiple of a $1.00 

(e.g., $10 NAV) or fraction of $1.00 (e.g., $0.5) as 

operating with a NAV of $1.00 per participating 

interest. 

17The current STIF Rule incorporates this and 

other measures through requirements that the Plan 

include provisions requiring the bank administering 

the STIF to effectuate the measures with respect to 

the STIF. The revisions proposed herein 

incorporate additional measures through 

requirements that the Plan include provisions 

requiring the STIF to observe certain restrictions 

and adopt certain procedures. In either case, it is 

effectively the bank administering the STIF that 

generally performs these measures, and for 

convenience purposes, the Supplementary 

Information section herein will describe it that way. 

MMMFs seek to maintain a stable share 

price, typically $1.00 a share. In this 

regard, they are similar to STIFs. 

However, there are a number of 

important differences between MMMFs 

and STIFs; most significantly, MMMFs 

are open to retail investors, whereas, 

STIFs only are available to authorized 

fiduciary accounts. MMMFs may be 

offered to the investing public and have 

become a popular product with retail 

investors, corporate money managers, 

and institutional investors seeking 

returns equivalent to current short-term 

interest rates in exchange for high 

liquidity and the prospect of protection 

against the loss of principal. In contrast 

to the approximately $112 billion 

currently held in STIFs administered by 

national banks, MMMFs, as of December 

2011, held approximately $2.7 trillion 

dollars of investor assets.8

During the recent period of financial 

market stress, beginning in 2007 and 

stretching into 2009, certain types of 

short-term debt securities frequently 

held by MMMFs experienced unusually 

high volatility. Concerns by investors 

that their MMMFs could not maintain a 

stable NAV eventually led to investor 

redemptions out of those funds, and 

some funds needed to liquidate sizeable 

portions of their securities to meet 

investor redemption requests. This flood 

of redemption requests depressed 

market prices for short-term debt 

instruments, exacerbating the problem 

for all types of stable NAV funds. 

The President’s Working Group on 

Financial Markets (‘‘PWG’’),9 after 

reviewing the market turmoil during the 

period 2007 through 2009, 

recommended that the SEC strengthen 

the regulation and monitoring of 

MMMFs and also recommended that 

bank regulators consider strengthening 

the regulation and monitoring of other 

types of products that seek to maintain 

a stable NAV. The October 2010 report 

from the PWG states: ‘‘[b]anking and 

state insurance regulators might 

consider additional restrictions to 

mitigate systemic risk for bank common 

and collective funds and other 

investment pools that seek a stable NAV 

but that are exempt from registration 

under sections 3(c)(3) and 3(c)(11) of the 

ICA.’’ 10

Based on the market turmoil from 

2007 through 2009 and the work done 

by the PWG, among others, the SEC 

adopted amendments to Rule 2a–7 to 

strengthen the resilience of MMMFs.11

The OCC’s proposed changes to the 

STIF Rule are informed by the SEC’s 

revisions to Rule 2a–7, but differ in 

certain respects in light of the 

differences between the money market 

mutual fund as an investment product 

and the STIF, e.g., a bank’s fiduciary 

responsibility to a STIF and 

requirements limiting STIF 

participation to eligible accounts under 

the OCC’s fiduciary account regulation 

at 12 CFR part 9. 

II. Description of Proposed Changes to 

the STIF Rule 

The proposed changes to the STIF 

Rule would enhance protections 

provided to STIF participants and 

reduce risks to banks that administer 

STIFs. The proposed changes add new 

requirements or amend existing 

requirements that a CIF must meet to be 

considered a STIF and value assets on 

an amortized cost basis. The OCC 

believes many banks that offer STIFs are 

already engaged in the risk mitigation 

efforts set forth in this proposed rule. 

The proposed changes do not affect 

the obligation that STIFs meet the CIF 

requirements described in 12 CFR part 

9, which allows national banks to 

maintain and invest fiduciary assets, 

consistent with applicable law. 

Applicable law is defined as the law of 

a state or other jurisdiction governing a 

national bank’s fiduciary relationships, 

any applicable Federal law governing 

those relationships (e.g., ERISA, federal 

tax, and securities laws), the terms of 

the instrument governing a fiduciary 

relationship, or any court order 

pertaining to the relationship.12 Also, 

national banks managing CIFs are 

required to adopt and follow written 

policies and procedures that are 

adequate to maintain their fiduciary 

activities in compliance with applicable 

law.13 Additionally, the STIF Rule 

requires a STIF’s bank manager, at least 

once during each calendar year, to 

conduct a review of all assets of each 

fiduciary account for which the bank 

has investment discretion to evaluate 

whether they are appropriate, 

individually and collectively, for the 

account.14 These examples of CIF 

requirements applicable to STIFs are not 

exclusive. Other requirements apply, 

and a bank must comply will all 

applicable requirements of 12 CFR part 

9 when acting as a fiduciary for a CIF. 

Banks administering a STIF would 

need to revise the written plan required 

by 12 CFR 9.18(b)(1) if this proposal is 

adopted as a final rule. 

A. Section 9.18(b)(4)(iii)(A) 

STIFs typically maintain stable NAVs 

in order to meet the expectations of the 

fund’s bank managers and participating 

fiduciary accounts.15 To the extent a 

bank fiduciary offers a STIF with a fund 

objective of maintaining a stable NAV, 

participating accounts and the OCC 

expect those STIFs to maintain a stable 

NAV using amortized cost. The proposal 

would require a Plan to have as a 

primary objective that the STIF operate 

with a stable NAV of $1.00 per 

participating interest.16

B. Section 9.18(b)(4)(iii)(B) 

The current STIF Rule requires the 

bank managing the STIF 17 to maintain 

a dollar-weighted average portfolio 

maturity of 90 days or less. The current 

STIF Rule restricts the weighted average 

maturity of the STIF’s portfolio in order 

to limit the exposure of participating 

fiduciary accounts to certain risks, 

including interest rate risk. The 

proposed rule would change the 

maturity limits to further reduce such 

risks. First, the proposal would reduce 

the maximum weighted average 

portfolio maturity permitted by the rule 

from 90 days or less to 60 days or less. 

Second, it would establish a new 


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18 Generally, ‘‘dollar-weighted average portfolio 

maturity’’ means the average time it takes for 

securities in a portfolio to mature, weighted in 

proportion to the dollar amount that is invested in 

the portfolio. Dollar-weighted average portfolio 

maturity measures the price sensitivity of fixedincome portfolios to interest rate changes. 

19 12 CFR 9.18(b)(4)(ii)(B)(1). 20See infra note 22 and accompanying text. 

maturity test that would limit the 

portion of a STIF’s portfolio that could 

be held in longer term variable- or 

floating-rate securities. 

1. Dollar-Weighted Average Portfolio 

Maturity 

The proposal would amend the 

‘‘dollar-weighted average portfolio 

maturity’’ 18 requirement of the STIF 

Rule to 60 days or less. Currently, banks 

managing STIFs must maintain a dollarweighted average portfolio maturity of 

90 days or less.19 Securities that have 

shorter periods remaining until maturity 

generally exhibit a lower level of price 

volatility in response to interest rate and 

credit spread fluctuations and, thus, 

provide a greater assurance that the 

STIF will continue to maintain a stable 

value. 

Having a portfolio weighted towards 

securities with longer maturities poses 

greater risks to participating accounts in 

a STIF. For example, a longer dollarweighted average maturity period 

increases a STIF’s exposure to interest 

rate risk. Additionally, longer maturity 

periods amplify the effect of widening 

credit spreads on a STIF. Finally, a STIF 

holding securities with longer maturity 

periods generally is exposed to greater 

liquidity risk because: (1) Fewer 

securities mature and return principal 

on a daily or weekly basis to be 

available for possible fiduciary account 

withdrawals, and (2) the fund may 

experience greater difficulty in 

liquidating these securities in a short 

period of time at a reasonable price. 

STIFs with a shorter portfolio 

maturity period would be better able to 

withstand increases in interest rates and 

credit spreads without material 

deviation from amortized cost. 

Furthermore, in the event distress in the 

short-term instrument market triggers 

increasing rates of withdrawals from 

STIFs, the STIFs would be better 

positioned to withstand such 

withdrawals as a greater portion of their 

portfolios mature and return principal 

on a daily or weekly basis and would 

have greater ability to liquidate a 

portion of their portfolio at a reasonable 

price. 

Question 1: What are the estimates of 

the effects, if any, on STIF portfolios 

and participating accounts from 

reducing the maximum dollar-weighted 

average portfolio maturity permitted by 

the rule from 90 to 60 days? The OCC 

seeks commenters’ specific information 

about the risk sensitivities associated 

with current STIF portfolios, including 

the current and month-end dollarweighted average maturity of these 

funds since 2008. 

2. Weighted Average Portfolio Life 

Maturity 

The proposal would add a new 

maturity requirement for STIFs, which 

would limit the dollar-weighted average 

portfolio life maturity to 120 days or 

less. The dollar-weighted average 

portfolio life maturity would be 

measured without regard to a security’s 

interest rate reset dates and, thus, would 

limit the extent to which a STIF could 

invest in longer term securities that may 

expose it to increased liquidity and 

credit risk. 

To determine compliance with the 

dollar-weighted average portfolio 

maturity requirement of the current 

STIF Rule, banks generally treat the 

maturity of a portfolio security as the 

period remaining until the date on 

which the principal must 

unconditionally be repaid according to 

its terms (its final ‘‘legal’’ maturity) or, 

in the case of a security called for 

redemption, the date on which the 

redemption payment must be made. 

However, banks treat certain types of 

securities, such as certain floating or 

adjustable-rate securities, as having 

shorter maturities equal to the time 

remaining to the next interest rate reset 

date.20 As a result, STIFs may treat 

longer term adjustable-rate securities as 

short-term securities. While adjustablerate securities held in these funds do 

tend to protect a STIF against changes 

in interest rates, they do not fully 

protect against credit and liquidity risk 

to the portfolio. 

The traditional dollar-weighted 

average portfolio maturity measurement 

in the current STIF Rule does not 

require a STIF to limit these risks. For 

this reason, the proposal would impose 

a new dollar-weighted average portfolio 

life maturity limitation on the structure 

of a STIF to capture credit and liquidity 

risk not encompassed by the dollarweighted average portfolio maturity 

restriction. The proposal would require 

that STIFs maintain a dollar-weighted 

average portfolio life maturity of 120 

days or less, which would provide a 

reasonable balance between 

strengthening the resilience of STIFs to 

credit and liquidity risk while not 

unduly restricting the bank’s ability to 

invest the STIF’s fiduciary assets in a 

diversified portfolio of short-term, high 

quality debt securities. 

The impact of a limit on the dollarweighted average life of a portfolio 

would be on those STIFs that hold 

certain longer term floating-rate 

securities. For example, under the 

current STIF Rule, a STIF with a 

portfolio comprising 50 percent of 

overnight repurchase agreements and 50 

percent of two-year government agency 

floating-rate obligations that reset daily 

based on the federal funds rate would 

have a dollar-weighted average portfolio 

maturity of one day. In contrast, by 

applying a measurement that does not 

recognize resets, the portfolio would 

have a dollar-weighted average portfolio 

life maturity of 365.5 days (i.e., half of 

the portfolio has a one day maturity and 

half has a two-year maturity), which 

would be considerably longer than the 

120-day limit of the proposal. Thus, the 

dollar-weighted average portfolio life 

maturity limitation would provide an 

extra layer of protection for qualified 

account participants against credit and 

liquidity risk, particularly in volatile 

markets. 

Question 2: What are the effects, if 

any, on STIF portfolios and 

participating accounts of limiting the 

portion of a fund’s portfolio that may be 

held in longer term variable- or floatingrate securities? The OCC seeks 

commenters’ specific information about 

the risk sensitivities associated with the 

current dollar-weighted average life 

maturity of these funds. 

3. Determination of Maturity Limits 

In determining the dollar-weighted 

average portfolio maturity of STIFs 

under the current rule, national banks 

generally apply the same methodology 

as required by the SEC for MMMFs 

pursuant to Rule 2a–7. Dollar-weighted 

average maturity under Rule 2a–7 is 

calculated, as a general rule, by treating 

each security’s maturity as the period 

remaining until the date on which, in 

accordance with the terms of the 

security, the principal amount must be 

unconditionally paid or, in the case of 

a security called for redemption, the 

date on which the redemption payment 

must be made. Rule 2a–7 also provides 

eight exceptions to this general rule. For 

example, for certain types of variablerate securities, the date of maturity may 

be the earlier of the date of the next 

interest rate reset or the period 

remaining until the principal can be 

recovered through demand. For 

repurchase agreements, the maturity is 

the date on which the repurchase is 

scheduled to occur, unless the repo is 

subject to demand for repurchase, in 

which case the maturity is the notice 


pmangrum on DSK3VPTVN1PROD with PROPOSALS-1
Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Proposed Rules 21061 

21See 17 CFR 270.2a–7(d)(1)–(8). 

22The SEC’s Rule 2a–7 adopting release describes 

the new weighted average life maturity calculation 

as being based on the same methodology as the 

weighted average maturity determination, but made 

without reference to the set of maturity exceptions 

the rule permits for certain interest rate 

readjustments for specified types of assets under the 

rule. 17 CFR 270.2a–7(c)(2)(iii). The OCC is 

proposing the same maturity calculation, referring 

to it as the dollar-weighted average portfolio life 

maturity. The calculation bases a security’s 

maturity on its stated final maturity date or, when 

relevant, the date of the next demand feature when 

the fund may receive payment of principal and 

interest (such as a put feature). See 75 FR 10072 

(Mar. 4, 2010) at footnote 154 and accompanying 

text. 

23Shadow pricing is the process of maintaining 

two sets of valuation records—one that reflects the 

value of a fund’s assets at amortized cost and the 

other that reflects the market value of the fund’s 

assets. 

24The proposal contemplates a stable NAV of 

$1.00. If a STIF has a stable NAV that is different 

than $1.00 it must adjust the reference value 

accordingly. 

25Where stress testing models are relied upon, a 

bank should validate the models consistent with the 

Supervisory Guidance on Model Risk Management 

issued by the OCC and the Board of Governors of 

the Federal Reserve System. See OCC Bulletin 

2011–12 (Apr. 4, 2011). 

period applicable to demand.21 The 

proposal would include this approach 

in the rule text for dollar-weighted 

average portfolio maturity and dollarweighted average portfolio life 

maturity 22 for ease of administration 

and implementation of the proposed 

rule’s requirements. 

Question 3: Is this approach for the 

determination of maturity limits 

appropriate, and if not, what alternative 

approach should be used? 

C. Section 9.18(b)(4)(iii)(E) 

To ensure that banks managing STIFs 

include practices designed to limit the 

amount of credit and liquidity risk to 

which participating accounts in STIFs 

are exposed, the proposal would require 

adoption of portfolio and issuer 

qualitative standards and concentration 

restrictions. The OCC would expect 

bank fiduciaries to identify, monitor, 

and manage issuer and lower quality 

investment concentrations and 

implement procedures to perform 

appropriate due diligence on all 

concentration exposures as part of the 

bank’s risk management policies and 

procedures for each STIF. In addition to 

standards imposed by applicable law, 

the portfolio and issuer qualitative 

standards and concentration restrictions 

should take into consideration market 

events and deterioration in an issuer’s 

financial condition. 

Question 4: Are defined portfolio 

concentration limits necessary in order 

for STIF managers and STIF 

participants to ensure that a fund has 

reduced its credit exposure to a specific 

issuer? Commenters who assert that 

portfolio concentration limits are 

necessary should provide details 

regarding the percent limits for specific 

issuers or classes of issuers. 

D. Section 9.18(b)(4)(iii)(F) 

Many banks process STIF withdrawal 

requests within a short time frame, often 

on the same day that the withdrawal 

request is received, which necessitates 

sufficient liquidity to meet such 

requests. By holding illiquid securities, 

a STIF exposes itself to the risk that it 

will be unable to satisfy withdrawal 

requests promptly without selling 

illiquid securities at a loss that, in turn, 

could impair its ability to maintain a 

stable NAV. Moreover, illiquid 

securities are generally subject to greater 

price volatility, exposing the STIF to 

greater risk that its mark-to-market value 

will deviate from its amortized cost 

value. To address this concern, the 

proposal would require adoption of 

standards that include provisions to 

address contingency funding needs. 

E. Section 9.18(b)(4)(iii)(G) 

The proposal would require a bank 

managing a STIF to adopt shadow 

pricing procedures.23 These procedures 

require the bank to calculate the extent 

of the difference, if any, between the 

mark-to-market NAV per participating 

interest using available market 

quotations (or an appropriate substitute 

that reflects current market conditions) 

from the STIF’s amortized cost value per 

participating interest. In the event the 

difference exceeds $0.005 per 

participating interest,24 the bank must 

take action to reduce dilution of 

participating interests or other unfair 

results to participating accounts in the 

STIF, such as ceasing fiduciary account 

withdrawals. The shadow pricing 

procedures must occur at least on a 

calendar week basis and more 

frequently as determined by the bank 

when market conditions warrant. 

Question 5: Does the proposal differ 

from banks’ current pricing practices? If 

so, how? Question 6: Is the proposed 

weekly shadow pricing frequency 

appropriate? Question 7: Would another 

reporting frequency be more appropriate 

and, if so, what frequency and why? 

F. Section 9.18(b)(4)(iii)(H) 

The proposal would require a bank 

managing a STIF to adopt procedures 

for stress testing the fund’s ability to 

maintain a stable NAV for participating 

interests. The proposal would require 

the stress tests be conducted at such 

intervals as an independent risk 

manager or a committee responsible for 

the STIF’s oversight determines to be 

appropriate and reasonable in light of 

current market conditions, but in no 

case shall the interval be longer than a 

calendar month-end basis. The 

independent risk manager or committee 

members must be independent from the 

STIF’s investment management. The 

stress testing would be based upon 

hypothetical events (specified by the 

bank) that include, but are not limited 

to, a change in short-term interest rates; 

an increase in participating account 

withdrawals; a downgrade of or default 

on portfolio securities; and the 

widening or narrowing of spreads 

between yields on an appropriate 

benchmark the fund has selected for 

overnight interest rates and commercial 

paper and other types of securities held 

by the fund. 

The proposal provides a bank with 

flexibility to specify the scenarios or 

assumptions on which the stress tests 

are based, as appropriate to the risk 

exposures of each STIF. Banks 

managing STIFs should, for example, 

consider procedures that require the 

fund to test for the concurrence of 

multiple hypothetical events, e.g., 

where there is a simultaneous increase 

in interest rates and substantial 

withdrawals.25

The proposal also would require a 

stress test report be provided to the 

independent risk manager or the 

committee responsible for the STIF’s 

oversight. The report would include: (1) 

The date(s) on which the testing was 

performed; (2) the magnitude of each 

hypothetical event that would cause the 

difference between the STIF’s mark-tomarket NAV calculated using available 

market quotations (or appropriate 

substitutes which reflect current market 

conditions) and its NAV per 

participating interest calculated using 

amortized cost to exceed $0.005; and (3) 

an assessment by the bank of the STIF’s 

ability to withstand the events (and 

concurrent occurrences of those events) 

that are reasonably likely to occur 

within the following year. 

In addition, the proposal would 

require that adverse stress testing results 

are reported to the bank’s senior risk 

management that is independent from 

the STIF’s investment management. 

The proposed stress testing 

procedures would provide banks with a 

better understanding of the risks to 

which STIFs are exposed and would 

give banks additional information that 

can be used for managing those risks. 

Question 8: Is the proposed 

requirement that a STIF adopt 

procedures for stress testing the fund’s 


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21062 Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Proposed Rules 

26See Interagency Policy on Banks/Thrifts 

Providing Financial Support to Funds Advised by 

the Banking Organization or its Affiliates, OCC 

Bulletin 2004–2 Attachment (Jan. 5, 2004) 

(instructing banks that to avoid engaging in unsafe 

and unsound banking practices, banks should adopt 

appropriate policies and procedures governing 

routine or emergency transactions with bank 

advised investment funds). 

ability to maintain a stable NAV for 

participating interests appropriate? Why 

so or why not? Question 9: In particular, 

is the proposed monthly stress testing 

frequency appropriate? Commenters 

who assert that another frequency 

would be more appropriate should 

identify the alternative and provide a 

supporting rationale. 

G. Section 9.18(b)(4)(iii)(I) 

The proposal would require banks 

managing STIFs to disclose information 

about fund level portfolio holdings to 

STIF participants and to the OCC within 

five business days after each calendar 

month-end. Specifically, the bank 

would be required to disclose the STIF’s 

total assets under management 

(securities and other assets including 

cash, minus liabilities); the fund’s markto-market and amortized cost NAVs, 

both with and without capital support 

agreements; the dollar-weighted average 

portfolio maturity; and dollar-weighted 

average portfolio life maturity as of the 

last business day of the prior calendar 

month. The current STIF Rule does not 

contain a similar disclosure 

requirement. 

Also, for each security held by the 

STIF, as of the last business day of the 

prior calendar month, the bank would 

be required to disclose to STIF 

participants and to the OCC within five 

business days after each calendar 

month-end at a security level: (1) The 

name of the issuer; (2) the category of 

investment; (3) the Committee on 

Uniform Securities Identification 

Procedures (CUSIP) number or other 

standard identifier; (4) the principal 

amount; (5) the maturity date for 

purposes of calculating dollar-weighted 

average portfolio maturity; (6) the final 

legal maturity date (taking into account 

any maturity date extensions that may 

be effected at the option of the issuer) 

if different from the maturity date for 

purposes of calculating dollar-weighted 

average portfolio maturity; (7) the 

coupon or yield; and (8) the amortized 

cost value. 

Question 10: What is the estimate of 

the burden, if any, associated with the 

proposed security level disclosures to 

STIF participants, specifically, whether 

details about every security in the fund 

should be disclosed? Question 11: What 

disclosure formats could accomplish the 

disclosure objective efficiently? 

Question 12: What would be the impacts 

on tax-qualified STIF participants of 

monthly, detailed security-level 

disclosures from the STIF, including 

how STIF participants might use the 

disclosed information? 

H. Section 9.18(b)(4)(iii)(J) 

The proposal would require a bank 

that manages a STIF to notify the OCC 

prior to or within one business day after 

certain events. Those events are: (1) Any 

difference exceeding $0.0025 between 

the NAV and the mark-to-market value 

of a STIF participating interest based on 

current market factors; (2) when a STIF 

has re-priced its NAV below $0.995 per 

participating interest; (3) any 

withdrawal distribution-in-kind of the 

STIF’s participating interests or 

segregation of portfolio participants; (4) 

any delays or suspensions in honoring 

STIF participating interest withdrawal 

requests; (5) any decision to formally 

approve the liquidation, segregation of 

assets or portfolios, or some other 

liquidation of the STIF; and (6) when a 

national bank, its affiliate, or any other 

entity provides a STIF financial support, 

including a cash infusion, a credit 

extension, a purchase of a defaulted or 

illiquid asset, or any other form of 

financial support in order to maintain a 

stable NAV per participating interest.26

This proposed requirement to notify the 

OCC prior to or within one business day 

after these limited specific events would 

permit the OCC to more effectively 

supervise STIFs that are experiencing 

liquidity or valuation stress. 

To comply with this proposed 

requirement, a bank would have to 

calculate the mark-to-market value of a 

STIF participating interest on a daily 

basis. 

Question 13: Is daily calculation of 

mark-to-market value of a STIF 

participating interest a feasible or 

appropriate frequency to permit 

effective monitoring and risk 

management by, and supervision of, 

STIFs experiencing liquidity or 

valuation stress? 

I. Section 9.18(b)(4)(iii)(K) 

The proposal would require banks 

managing a STIF to adopt procedures 

that in the event a STIF has re-priced its 

NAV below $0.995 per participating 

interest, the bank managing the STIF 

shall calculate, redeem, and sell the 

STIF’s participating interests at a price 

based on the mark-to-market NAV. 

Currently, the rule creates an incentive 

for withdrawal of participating interests 

if the mark-to-market NAV falls below 

the stable NAV because the earlier 

withdrawals are more likely to receive 

the full stable NAV payment. The 

proposal removes this incentive, as once 

the NAV is priced below $0.995, all 

withdrawals of participating interests 

will receive the mark-to-market NAV 

instead of the stable NAV. 

J. Section 9.18(b)(4)(iii)(L) 

The proposal would require a bank 

managing a STIF to adopt procedures 

for suspending redemptions and 

initiating liquidation of a STIF as a 

result of redemptions. The intent of the 

proposal is to reduce the vulnerability 

of participating accounts to the harmful 

effects of extraordinary levels of 

withdrawals, which can be 

accomplished to some degree by 

suspending withdrawals. These 

suspensions only would be permitted in 

limited circumstances when, as a result 

of redemption, the bank has: (1) 

Determined that the extent of the 

difference between the STIF’s amortized 

cost per participating interest and its 

current mark-to-market NAV per 

participating interest may result in 

material dilution of participating 

interests or other unfair results to 

participating accounts; (2) formally 

approved the liquidation of the STIF; 

and (3) facilitated the fair and orderly 

liquidation of the STIF to the benefit of 

all STIF participants. 

The OCC understands that 

suspending withdrawals may impose 

hardships on fiduciary accounts for 

which the ability to redeem 

participations is an important 

consideration. Accordingly, the 

proposed requirement is limited to 

permitting suspension in extraordinary 

circumstances when there is significant 

risk of extraordinary withdrawal activity 

to the detriment of other participating 

accounts. 

III. General Request for Comments 

In addition to the specific requests for 

comment outlined in this 

SUPPLEMENTARY INFORMATION section, the 

OCC is interested in receiving comments 

on all aspects of this proposed rule. 

IV. Community Bank Comment Request 

The OCC also invites comments on 

the impact of this proposal on 

community banks. The OCC recognizes 

that community banks operate with 

more limited resources than larger 

institutions and may present a different 

risk profile. Question 14: How would the 

proposal impact community banks’ 

current resources and available 

personnel with the requisite expertise? 

Question 15: How could the goals of the 

proposal be achieved for community 

banks through an alternative approach? 


pmangrum on DSK3VPTVN1PROD with PROPOSALS-1
Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Proposed Rules 21063 

V. Solicitation of Comments on Use of 

Plain Language 

Section 722 of the Gramm-LeachBliley Act, Pub. L. 106–102, sec. 722, 

113 Stat. 1338, 1471 (Nov. 12, 1999), 

requires the OCC to use plain language 

in all proposed and final rules 

published after January 1, 2000. The 

OCC invites your comments on how to 

make this proposal easier to understand. 

For example: 

• Question 16: Have we organized the 

material to suit your needs? If not, how 

could this material be better organized? 

• Question 17: Are the requirements 

in the proposed regulation clearly 

stated? If not, how could the regulation 

be more clearly stated? 

• Question 18: Does the proposed 

regulation contain language or jargon 

that is not clear? If so, which language 

requires clarification? 

• Question 19: Would a different 

format (grouping and order of sections, 

use of headings, paragraphing) make 

the regulation easier to understand? If 

so, what changes to the format would 

make the regulation easier to 

understand? 

• Question 20: What else could we do 

to make the regulation easier to 

understand? 

VI. Regulatory Analysis 

A. Paperwork Reduction Act Analysis 

Request for Comment on Proposed 

Information Collection 

In accordance with section 3512 of 

the Paperwork Reduction Act (PRA) of 

1995 (44 U.S.C. 3501–3521), the OCC 

may not conduct or sponsor, and a 

respondent is not required to respond 

to, an information collection unless it 

displays a currently valid Office of 

Management and Budget (OMB) control 

number. The information collection 

requirements contained in this notice of 

proposed rulemaking have been 

submitted to OMB for review and 

approval under section 3506 of the PRA 

and § 1320.11 of OMB’s implementing 

regulations (5 CFR part 1320) as an 

amendment to the OCC’s existing 

collection for Fiduciary Activities (OMB 

Control No. 1557–0140). The 

information collection requirements are 

found in §§ 9.18(b)(4)(iii)(E)–(L). 

Comments are invited on: 

(a) Whether the collection of 

information is necessary for the proper 

performance of the OCC’s functions, 

including whether the information has 

practical utility; 

(b) The accuracy of the estimate of the 

burden of the information collection, 

including the validity of the 

methodology and assumptions used; 

(c) Ways to enhance the quality, 

utility, and clarity of the information to 

be collected; 

(d) Ways to minimize the burden of 

information collection on respondents, 

including through the use of automated 

collection techniques or other forms of 

information technology; and 

(e) Estimates of capital or startup 

costs and costs of operation, 

maintenance, and purchase of services 

to provide information. 

All comments will become a matter of 

public record. Comments should be 

addressed to: Communications Division, 

Office of the Comptroller of the 

Currency, Public Information Room, 

Mailstop 2–3, Attention: 1557–0140, 

250 E Street SW., Washington, DC 

20219. In addition, comments may be 

sent by fax to 202–874–5274, or by 

electronic mail to 

regs.comments@occ.treas.gov. You may 

personally inspect and photocopy 

comments at the OCC, 250 E Street SW., 

Washington, DC 20219. For security 

reasons, the OCC requires that visitors 

make an appointment to inspect 

comments. You may do so by calling 

202–874–4700. Upon arrival, visitors 

will be required to present valid 

government-issued photo identification 

and submit to security screening in 

order to inspect and photocopy 

comments. 

Additionally, please send a copy of 

your comments by mail to: OCC Desk 

Officer, 1557–140, U.S. Office of 

Management and Budget, 725 17th 

Street NW., #10235, Washington, DC 

20503, or by fax to (202) 395–6974. 

Proposed Information Collection 

Title of Information Collection: 

Fiduciary Activities. 

Frequency of Response: On occasion. 

Affected Public: Businesses or other 

for-profit. 

Respondents: National banks and 

federal branches and agencies of foreign 

banks. 

OMB Control No.: 1557–0140. 

Abstract: The rule would allow an 

institution to value a STIF’s assets on a 

cost basis, rather than mark-to-market 

value for admissions and withdrawals if 

the written plan requires the STIF to 

adopt certain procedures and standards. 

These procedures and standards 

include: Portfolio and issuer qualitative 

standards and restrictions; liquidity 

standards; shadow pricing procedures; 

procedures for stress testing the ability 

to maintain a stable NAV and the testing 

itself; procedures to make certain 

disclosures for each security held and 

issuance of the disclosures; procedures 

to require notification to OCC regarding 

certain events; procedures regarding repricing events; and procedures for 

suspending redemptions and initiating 

liquidation of a STIF. 

Estimated Burden for the Amendment 

to the Collection: 

Estimated Number of Respondents: 15 

respondents administering 34 funds. 

Estimated Burden per Fund: 846 

hours. 

Estimated Total Annual Burden: 

28,764 hours. 

B. Regulatory Flexibility Act Analysis 

Pursuant to section 605(b) of the 

Regulatory Flexibility Act, 5 U.S.C. 

605(b) (RFA), the regulatory flexibility 

analysis otherwise required under 

section 603 of the RFA is not required 

if the agency certifies that the proposed 

rule will not, if promulgated, have a 

significant economic impact on a 

substantial number of small entities 

(defined for purposes of the RFA to 

include banks and federal branches and 

agencies with assets less than or equal 

to $175 million and trust companies 

with assets less than or equal to $ 7 

million) and publishes its certification 

and a short, explanatory statement in 

the Federal Register along with its 

proposed rule. 

The Proposed Rule would have no 

impact on any small national banks or 

federal branches and agencies or trust 

companies, as defined by the RFA. No 

small national banks or federal branches 

and agencies report management of 

STIFs on their required regulatory 

reports as of December 31, 2011. 

Therefore, the OCC certifies that the 

Proposed Rule would not, if 

promulgated, have a significant 

economic impact on a substantial 

number of small entities. 

C. OCC Unfunded Mandates Reform Act 

of 1995 Determination 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (2 U.S.C. 

1532) requires the OCC to prepare a 

budgetary impact statement before 

promulgating a rule that includes a 

federal mandate that may result in the 

expenditure by State, local, and tribal 

governments, in the aggregate, or by the 

private sector, of $100 million or more 

in any one year (adjusted annually for 

inflation). The OCC has determined that 

this proposed rule will not result in 

expenditures by State, local, and tribal 

governments, or the private sector, of 

$100 million or more in any one year. 

Accordingly, the OCC has not prepared 

a budgetary impact statement. 

List of Subjects in 12 CFR Part 9 

Estates, Investments, National banks, 

Reporting and recordkeeping 

requirements, Trusts and trustees. 


pmangrum on DSK3VPTVN1PROD with PROPOSALS-1
21064 Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Proposed Rules 

For the reasons set forth in the 

preamble, chapter I of title 12 of the 

Code of Federal Regulations is proposed 

to be amended as follows: 

PART 9—FIDUCIARY ACTIVITIES OF 

NATIONAL BANKS 

1. The authority citation for part 9 

continues to read as follows: 

Authority: 12 U.S.C. 24(Seventh), 92a, and 

93a; 12 U.S.C. 78q, 78q–1, and 78w. 

2. Section 9.18 is amended by revising 

paragraph (b)(4)(ii) and by adding 

paragraph (b)(4)(iii) to read as follows: 

§ 9.18 Collective investment funds. 

* * * * * 

(b) * * * 

(4) * * * 

(ii) General Method of Valuation. 

Except as provided in paragraph 

(b)(4)(iii) of this section, a bank shall 

value each fund asset at mark-to-market 

value as of the date set for valuation, 

unless the bank cannot readily ascertain 

mark-to-market value, in which case the 

bank shall use a fair value determined 

in good faith. 

(iii) Short-term investment funds 

(STIFs) Method of Valuation. A bank 

may value a STIF’s assets on a cost 

basis, rather than mark-to-market value 

as provided in paragraph (b)(4)(ii) of 

this section, for purposes of admissions 

and withdrawals, if the Plan includes 

appropriate provisions, consistent with 

this part, requiring the STIF to: 

(A) Operate with a stable net asset 

value of $1.00 per participating interest 

as a primary fund objective; 

(B) Maintain a dollar-weighted 

average portfolio maturity of 60 days or 

less and a dollar-weighted average 

portfolio life maturity of 120 days or 

less as determined in the same manner 

as is required by the Securities and 

Exchange Commission pursuant to Rule 

2a–7 for money market mutual funds 

(17 CFR 270.2a–7); 

(C) Accrue on a straight-line or 

amortized basis the difference between 

the cost and anticipated principal 

receipt on maturity; 

(D) Hold the STIF’s assets until 

maturity under usual circumstances; 

(E) Adopt portfolio and issuer 

qualitative standards and concentration 

restrictions; 

(F) Adopt liquidity standards that 

include provisions to address 

contingency funding needs; 

(G) Adopt shadow pricing procedures 

that: 

(1) Require the bank to calculate the 

extent of difference, if any, of the markto-market net asset value per 

participating interest using available 

market quotations (or an appropriate 

substitute that reflects current market 

conditions) from the STIF’s amortized 

cost price per participating interest, at 

least on a calendar week basis and more 

frequently as determined by the bank 

when market conditions warrant; and 

(2) Require the bank, in the event the 

difference calculated pursuant to this 

subparagraph exceeds $0.005 per 

participating interest, to take action to 

reduce dilution of participating interests 

or other unfair results to participating 

accounts in the STIF; 

(H) Adopt procedures for stress 

testing the STIF’s ability to maintain a 

stable net asset value per participating 

interest that shall provide for: 

(1) The periodic stress testing, at least 

on a calendar month basis and at such 

intervals as an independent risk 

manager or a committee responsible for 

the STIF’s oversight that consists of 

members independent from the STIF’s 

investment management determines 

appropriate and reasonable in light of 

current market conditions; 

(2) Stress testing based upon 

hypothetical events that include, but are 

not limited to, a change in short-term 

interest rates, an increase in participant 

account withdrawals, a downgrade of or 

default on portfolio securities, and the 

widening or narrowing of spreads 

between yields on an appropriate 

benchmark the STIF has selected for 

overnight interest rates and commercial 

paper and other types of securities held 

by the STIF; 

(3) A stress testing report on the 

results of such testing to be provided to 

the independent risk manager or the 

committee responsible for the STIF’s 

oversight that consists of members 

independent from the STIF’s investment 

management that shall include: the 

date(s) on which the testing was 

performed; the magnitude of each 

hypothetical event that would cause the 

difference between the STIF’s mark-tomarket net asset value calculated using 

available market quotations (or 

appropriate substitutes which reflect 

current market conditions) and its net 

asset value per participating interest 

calculated using amortized cost to 

exceed $0.005; and an assessment by the 

bank of the STIF’s ability to withstand 

the events (and concurrent occurrences 

of those events) that are reasonably 

likely to occur within the following 

year; and 

(4) Reporting adverse stress testing 

results to the bank’s senior risk 

management that is independent from 

the STIF’s investment management. 

(I) Adopt procedures that require a 

bank to disclose to STIF participants 

and to the OCC’s Asset Management 

Group, Credit & Market Risk Division, 

Comptroller of the Currency, 250 E St. 

SW., Washington, DC 20219–0001, 

within five business days after each 

calendar month-end, the fund’s total 

assets under management (securities 

and other assets including cash, minus 

liabilities); the fund’s mark-to-market 

and amortized cost net asset values both 

with and without capital support 

agreements; the dollar-weighted average 

portfolio maturity; the dollar-weighted 

average portfolio life maturity of the 

STIF as of the last business day of the 

prior calendar month; and for each 

security held by the STIF as of the last 

business day of the prior calendar 

month: 

(1) The name of the issuer; 

(2) The category of investment; 

(3) The Committee on Uniform 

Securities Identification Procedures 

(CUSIP) number or other standard 

identifier; 

(4) The principal amount; 

(5) The maturity date for purposes of 

calculating dollar-weighted average 

portfolio maturity; 

(6) The final legal maturity date 

(taking into account any maturity date 

extensions that may be effected at the 

option of the issuer) if different from the 

maturity date for purposes of calculating 

dollar-weighted average portfolio 

maturity; 

(7) The coupon or yield; and 

(8) The amortized cost value; 

(J) Adopt procedures that require a 

bank that administers a STIF to notify 

the Asset Management Group, Credit & 

Market Risk Division, Comptroller of the 

Currency, 250 E St. SW., Washington, 

DC 20219–0001 prior to or within one 

business day thereafter of the following: 

(1) Any difference exceeding $0.0025 

between the net asset value and the 

mark-to-market value of a STIF 

participating interest as calculated using 

the method set forth in paragraph 

(b)(4)(iii)(G)(1) of this section; 

(2) When a STIF has re-priced its net 

asset value below $0.995 per 

participating interest; 

(3) Any withdrawal distribution-inkind of the STIF’s participating interests 

or segregation of portfolio participants; 

(4) Any delays or suspensions in 

honoring STIF participating interest 

withdrawal requests; 

(5) Any decision to formally approve 

the liquidation, segregation of assets or 

portfolios, or some other liquidation of 

the STIF; or 

(6) In those situations when a bank, 

its affiliate, or any other entity provides 

a STIF financial support, including a 

cash infusion, a credit extension, a 

purchase of a defaulted or illiquid asset, 

or any other form of financial support in 


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Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Proposed Rules 21065 

order to maintain a stable net asset 

value per participating interest; 

(K) Adopt procedures that in the 

event a STIF has re-priced its net asset 

value below $0.995 per participating 

interest, the bank administering the 

STIF shall calculate, redeem, and sell 

the STIF’s participating interests at a 

price based on the mark-to-market net 

asset value; and 

(L) Adopt procedures that, in the 

event a bank suspends or limits 

withdrawals and initiates liquidation of 

the STIF as a result of redemptions, 

require the bank to: 

(1) Determine that the extent of the 

difference between the STIF’s amortized 

cost per participating interest and its 

mark-to-market net asset value per 

participating interest may result in 

material dilution of participating 

interests or other unfair results to 

participating accounts; 

(2) Formally approve the liquidation 

of the STIF; and 

(3) Facilitate the fair and orderly 

liquidation of the STIF to the benefit of 

all STIF participants. 

* * * * * 

Dated: April 2, 2012. 

John Walsh, 

Acting Comptroller of the Currency. 

[FR Doc. 2012–8467 Filed 4–6–12; 8:45 am] 

BILLING CODE P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Parts 721 and 799 

[EPA–HQ–OPPT–2010–0520; FRL–9343–9] 

RIN 2070–AJ66 

Certain High Production Volume 

Chemicals; Test Rule and Significant 

New Use Rule; Fourth Group of 

Chemicals; Notice of Public Meeting 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule; public meeting. 

SUMMARY: EPA will hold a public 

meeting on May 16, 2012, to give the 

public an opportunity to comment on a 

proposed test rule for 23 high 

production volume (HPV) chemical 

substances and a significant new use 

rule (SNUR) for another 22 HPV 

chemical substances under the Toxic 

Substances Control Act (TSCA). The test 

rule would require manufacturers and 

processors to develop screening-level 

health, environmental, and fate data 

based on the potential for substantial 

exposures of workers and consumers to 

the 23 HPV chemical substances, and 

the SNUR would require persons to file 

a significant new use notice (SNUN) 

with EPA prior to manufacturing, 

importing, or processing any of the 22 

HPV chemical substances for use in a 

consumer product or for any use, or 

combination of uses, that would be 

reasonably likely to expose 1,000 or 

more workers at a single-corporate 

entity to the chemical substances. The 

required notification would provide 

EPA with the opportunity to evaluate 

the intended use and, if necessary, to 

prohibit or limit that activity before it 

occurs. The opportunity to present oral 

comment was offered in the proposed 

rule and, in response to that offer, a 

request to present oral comments was 

received. 

DATES: The meeting will be held on 

Wednesday, May 16, 2012, from 1:30 

p.m. to 5 p.m. Requests to participate in 

the meeting must be received on or 

before May 15, 2012. 

To request accommodation of a 

disability, please contact either 

technical person listed under FOR

FURTHER INFORMATON CONTACT, 

preferably at least 10 days prior to the 

meeting, to give EPA as much time as 

possible to process your request. 

ADDRESSES: The meeting will be held at 

the Environmental Protection Agency, 

EPA East Rm. 1153, 1201 Constitution 

Ave. NW., Washington DC 20460–0001. 

Requests to participate in the meeting, 

identified by docket identification (ID) 

number EPA–HQ–OPPT–2010–0520, 

may be submitted to either technical 

person listed under FOR FURTHER

INFORMATION CONTACT. 

FOR FURTHER INFORMATION CONTACT: For 

technical information contact: Robert 

Jones or Paul Campanella, Chemical 

Control Division (7405M), Office of 

Pollution Prevention and Toxics, 

Environmental Protection Agency, 1200 

Pennsylvania Ave. NW., Washington, 

DC 20460–0001; telephone numbers: 

(202) 564–8161 and (202) 564–8091; 

email addresses: jones.robert@epa.gov 

and campanella.paul@epa.gov. 

For general information contact: The 

TSCA–Hotline, ABVI–Goodwill, 422 

South Clinton Ave., Rochester, NY 

14620; telephone number: (202) 554– 

1404; email address: TSCAHotline@epa.gov. 

SUPPLEMENTARY INFORMATION: 

I. General Information 

A. Does this action apply to me? 

You may be potentially affected by 

this action if you manufacture (defined 

by statute to include import) or process 

any of the chemical substances that are 

listed in 40 CFR 799.5090(j) or 40 CFR 

721.10228(a) of the proposed rule’s 

regulatory text published in the Federal 

Register issue of October 21, 2011 (76 

FR 65580) (FRL–8876–6). Potentially 

affected entities may include, but are 

not limited to: 

• Manufacturers (defined by statute to 

include importers) of one or more of the 

subject chemical substances (NAICS 

codes 325 and 324110), e.g., chemical 

manufacturing and petroleum refineries. 

• Processors of one or more of the 

subject chemical substances (NAICS 

codes 325 and 324110), e.g., chemical 

manufacturing and petroleum refineries. 

This listing is not intended to be 

exhaustive, but rather provides a guide 

for readers regarding entities likely to be 

affected by this action. Other types of 

entities not listed in this unit could also 

be affected. The North American 

Industrial Classification System 

(NAICS) codes have been provided to 

assist you and others in determining 

whether this action might apply to 

certain entities. If you have any 

questions regarding the applicability of 

this action to a particular entity, consult 

either technical person listed under FOR

FURTHER INFORMATION CONTACT. 

This action may also affect certain 

entities through pre-existing import 

certification and export notification 

rules under TSCA. See Unit VI. of the 

October 21, 2011 proposed rule for 

export notification requirements. 

B. How can I get copies of this document 

and other related information? 

EPA has established a docket for this 

action under docket ID number EPA– 

HQ–OPPT–2010–0520. All documents 

in the docket are listed in the docket 

index available at http:// 

www.regulations.gov. Although listed in 

the index, some information is not 

publicly available, e.g., Confidential 

Business Information (CBI) or other 

information whose disclosure is 

restricted by statute. Certain other 

material, such as copyrighted material, 

will be publicly available only in hard 

copy. Publicly available docket 

materials are available electronically at 

http://www.regulations.gov, or, if only 

available in hard copy, at the OPPT 

Docket. The OPPT Docket is located in 

the EPA Docket Center (EPA/DC) at Rm. 

3334, EPA West Bldg., 1301 

Constitution Ave. NW., Washington, 

DC. The EPA/DC Public Reading Room 

hours of operation are 8:30 a.m. to 4:30 

p.m., Monday through Friday, excluding 

legal holidays. The telephone number of 

the EPA/DC Public Reading Room is 

(202) 566–1744, and the telephone 

number for the OPPT Docket is (202) 

566–0280. Docket visitors are required 

to show photographic identification, 


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