Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 3191 

1See, e.g., 74 FR 1828 (Jan. 13, 2009). 

approval letter must specifically reference 

this AD. 

(2) Airworthy Product: For any requirement 

in this AD to obtain corrective actions from 

a manufacturer or other source, use these 

actions if they are FAA-approved. Corrective 

actions are considered FAA-approved if they 

are approved by the State of Design Authority 

(or their delegated agent). You are required 

to assure the product is airworthy before it 

is returned to service. 

(i) Related Information 

Refer to MCAI Canadian Airworthiness 

Directive CF–2011–14, dated June 17, 2011; 

and Bombardier Service Bulletin 84–32–89, 

dated March 22, 2011; for related 

information. 

Issued in Renton, Washington on January 

13, 2012. 

John Piccola, 

Acting Manager, Transport Airplane 

Directorate, Aircraft Certification Service. 

[FR Doc. 2012–1210 Filed 1–20–12; 8:45 am] 

BILLING CODE 4910–13–P 

FEDERAL TRADE COMMISSION 

16 CFR Parts 2 and 4 

Rules of Practice 

AGENCY: Federal Trade Commission 

(‘‘Commission’’ or ‘‘FTC’’). 

ACTION: Proposed rule amendments; 

request for public comment. 

SUMMARY: The FTC is proposing to 

amend parts of its regulations. The 

proposed amendments would make 

changes to the FTC’s investigatory 

procedures in the interest of fairness, 

efficiency, and openness in all FTC 

investigations. The amendments would 

also revise the Commission’s rules 

governing reprimand, suspension, and 

disbarment of attorneys practicing 

before the Commission. 

DATES: Written comments must be 

received on or before March 23, 2012. 

ADDRESSES: Interested parties may file a 

comment online or on paper, by 

following the instructions in the 

Request for Comment part (subsection 

III) of the SUPPLEMENTARY INFORMATION

section below. Write ‘‘Parts 2 and 4 

Rules of Practice Rulemaking (16 CFR 

Parts 2 and 4) (Project No. P112103)’’ on 

your comment, and file your comment 

online at https:// 

ftcpublic.commentworks.com/ftc/ 

rulespart2and4.1nprm, by following the 

instructions on the Web-based form. If 

you prefer to file your comment on 

paper, mail or deliver your comment to 

the following address: Federal Trade 

Commission, Office of the Secretary, 

Room H–113 (Annex Y), 600 

Pennsylvania Avenue NW., Washington, 

DC 20580. 

FOR FURTHER INFORMATION CONTACT: For 

further information on the proposed 

revisions to the investigatory 

procedures, contact Lisa M. Harrison, 

Assistant General Counsel, (202) 326– 

3204, or W. Ashley Gum, Attorney, 

(202) 326–3006, Office of the General 

Counsel, Federal Trade Commission, 

600 Pennsylvania Avenue NW., 

Washington, DC 20580. For information 

on the proposed revisions to the rule 

governing attorney discipline, contact 

Peter J. Levitas, Deputy Director, Bureau 

of Competition, (202) 326–2030, Federal 

Trade Commission, 600 Pennsylvania 

Avenue NW., Washington, DC 20580. 

SUPPLEMENTARY INFORMATION: This 

discussion contains the following 

sections: 

I. Introduction 

II. Section-by-Section Analysis of Proposed 

Rule Revisions 

III. Invitation To Comment 

IV. Proposed Rule Revisions 

I. Introduction 

1. Need for Reform of the Commission’s 

Investigatory Process 

The Commission has periodically 

examined and revised its Rules of 

Practice in the interest of clarifying the 

Rules and making the Commission’s 

procedures more efficient and less 

burdensome for all parties.1 Especially 

in response to growing reliance upon 

and use of electronic media in 

document discovery, the Commission 

has reviewed its current rules governing 

the process of nonadjudicative 

investigations (‘‘Part 2 Rules’’). 

Document discovery today is 

markedly different than it was only a 

decade ago. The growing prevalence of 

business files in electronic form—email, 

voicemail, text messages, blogs, word 

processing documents, PowerPoint 

presentations, videos, spreadsheets, and 

data files—has changed document 

discovery in several ways. First, 

information is no longer accurately 

measured in pages, but instead in 

megabytes, gigabytes, terabytes, and 

more. Second, because electronically 

stored information (‘‘ESI’’) is widely 

dispersed throughout organizations, 

parties can no longer complete searches 

by merely looking in file cabinets and 

desk drawers. While searchers must still 

reach into file cabinets and desk 

drawers, they must also—and 

primarily—seek and retrieve 

information from mainframe computers, 

shared servers, computers, cell phones, 

smart phones, portable devices, and 

other media, as well as from third-party 

service providers. Third, because ESI is 

broadly dispersed and not always 

consistently organized by its custodians, 

searches, identification, and collection 

all require special skills and, if done 

properly, may utilize one or more search 

tools such as advanced key word 

searches, Boolean connectors, Bayesian 

logic, concept searches, predictive 

coding, and other advanced analytics. 

Fourth, because ESI may be readily 

altered, it must be preserved early in 

any discovery process—or even before 

discovery, when litigation is 

anticipated—and handled carefully at 

all stages to preserve its accuracy, 

authenticity, and ultimate admissibility. 

Fifth, even when investigations are 

conducted cooperatively, and are both 

well organized and well managed, there 

remains a substantial risk that mistakes 

and delays will occur as the responding 

party collects responsive materials, 

analyzes them for relevance and 

privilege, and prepares them for 

production. 

The need to reform Part 2 Rules is 

also based in part on concerns that 

modern document discovery and its 

attendant complexities have become a 

source of delay in the Commission’s 

securing the information it needs to 

complete its investigations. Thus, the 

Commission views its reexamination of 

the rules as an opportunity not only to 

account for the widespread use of ESI, 

but also to improve the efficiency of 

investigations, and the willingness of 

targets and third parties to cooperate. 

2. Overview of Proposed Rule Revisions 

The proposed changes to the Part 2 

Rules would expedite Commission 

investigations by: (1) Conditioning any 

extensions of time to comply with 

Commission processes on a party’s 

continued progress in achieving 

compliance; (2) conditioning the filing 

of any petition to quash or limit 

Commission process on a party having 

engaged in meaningful ‘‘meet and 

confer’’ sessions with Commission staff; 

and (3) removing the two-step process 

for resolving petitions to quash and 

establishing tighter deadlines for the 

Commission to rule on petitions. 

The proposed revisions are also 

intended to streamline the rules and add 

structure to the agency’s investigatory 

process by consolidating related 

provisions that are currently scattered 

throughout Part 2. The rules also update 

investigatory practices, especially in 

light of the ubiquity of ESI, by including 

express references to ESI in the rules. 

Finally, they facilitate the enforcement 

of Commission compulsory process by 

clarifying the rights and obligations both 

of agency staff and compulsory process 

recipients. 


srobinson on DSK4SPTVN1PROD with PROPOSALS
3192 Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 

2The Sedona Conference is a nonprofit research 

and educational institute whose members are 

judges, attorneys and academics. The institute’s 

Cooperation Proclamation declares that ‘‘the legal 

profession can engage in a comprehensive effort to 

promote pre-trial discovery cooperation. Our 

‘officer of the court’ duties demand no less. This 

project * * * is a tailored effort to effectuate the 

mandate of court rules calling for a ‘just, speedy, 

and inexpensive determination of every action’ and 

the fundamental ethical principles governing our 

profession.’’ See http:// 

www.thesedonaconference.org/content/ 

tsc_cooperation_proclamation/proclamation.pdf. 

3The term ‘‘electronic media’’ is not a legal term 

of art. The Commission recommends the use of the 

term throughout the revised Rules for precisely this 

reason; it does not want any single technological 

advance in data storage or production to render a 

Rule provision obsolete. 

The Commission also proposes to 

amend the attorney disciplinary 

procedures codified in current Rule 

4.1(e) in order to address more 

effectively any misconduct by attorneys 

practicing before the agency. The 

proposed amendments are designed to 

provide additional guidance regarding 

appropriate standards of conduct, and 

procedures for addressing alleged 

violations of those standards. 

Finally, the Commission intends to 

make certain technical revisions 

throughout the rules including, for 

example, eliminating the convention of 

specifying numbers in both written and 

numerical form, and substituting 

gender-neutral language. The proposed 

rule revisions relate solely to agency 

practice and, thus, are exempt from the 

notice-and-comment requirements of 

the Administrative Procedure Act 

(‘‘APA’’). 5 U.S.C. 553(b)(3)(A). 

Nonetheless, the FTC is issuing the 

revisions as a proposed rule for public 

comment in order to benefit from the 

input of affected parties. The proposed 

revisions are also not subject to the 

requirements of the Regulatory 

Flexibility Act, 5 U.S.C. 601(2), the 

requirements of the Paperwork 

Reduction Act, 44 U.S.C. 

3518(c)(1)(B)(ii), and 5 CFR 1320.4 

(exempting information collected during 

the conduct of administrative 

proceedings or investigations). If 

finalized, these revisions would govern 

all Commission investigations 

commenced on or after the date on 

which the rules are issued. The 

amendments would also govern all 

Commission investigations pending as 

of that date, unless the Commission, 

acting through its managers, determines 

that the application of an amended rule 

in a particular investigation would not 

be feasible or would create an injustice. 

II. Section-by-Section Analysis of 

Proposed Rule Revisions 

The following is a section-by-section 

analysis of the proposed revisions to 

Part 2 of the Commission’s Rules, and 

the proposed revision to Rule 4.1, which 

provides for new attorney discipline 

procedures. 

Section 2.2: Request for Commission 

Action 

The Commission would amend this 

Rule to account for new web-based 

methods of submitting complaints and 

requests for agency action, and to avoid 

repetition of certain provisions in 

current Rule 2.1. The latter Rule—which 

the Commission does not propose to 

revise—identifies how, and by whom, 

any Commission inquiry or 

investigation may be initiated. Rule 2.2 

describes the procedures that apply 

when members of the public or other 

parties outside of the agency request 

Commission action. 

Section 2.4: Investigational Policy 

The revisions to this Rule would 

underscore the importance of 

cooperation between recipients of 

compulsory process and FTC staff to 

resolve issues related to compliance 

with CIDs and subpoenas. The proposed 

Rule affirms the Commission’s 

endorsement of voluntary cooperation 

in all investigations, but would view 

cooperation as a complement—rather 

than a mutually exclusive alternative— 

to compulsory process. This revision is 

intended to more accurately account for 

the complexity and scope of modern 

discovery, specifically the electronic 

discovery so prevalent in Commission 

investigations. 

Equally important, the Commission’s 

revised investigational policy would 

also endorse the principles articulated 

in the Sedona Conference’s 

‘‘Cooperation Proclamation’’ 2 and Fed. 

R. Civ. P. 1’s call for ‘‘just, speedy, and 

inexpensive’’ adjudication and apply 

them where they fit into law 

enforcement investigations. The Sedona 

Conference has been instrumental in 

providing guidance to practitioners with 

respect to modernized discovery 

practices. Numerous authorities, 

including more than 100 judges 

nationwide have endorsed the 

Cooperation Proclamation since its 

release, and the Commission believes 

that it provides a sound articulation of 

‘‘best practices’’ in modern discovery. 

Section 2.6: Notification of Purpose 

The Commission would amend this 

Rule to clarify staff’s ability to disclose 

the existence of an investigation to 

certain parties. The added provision 

would restate longstanding agency 

policy and practice recognizing that 

staff may at times need to disclose the 

existence of an otherwise non-public 

investigation, or the identity of a 

proposed respondent, to potential 

witnesses, informants, or other non-lawenforcement groups. 

Section 2.7: Compulsory Process in 

Investigations 

The revisions to this Rule would 

consolidate and re-designate into one 

rule the compulsory process provisions 

now found in Rules 2.8, 2.10, 2.11, and 

2.12. Although the proposed revisions 

would encompass all types of 

documentary material sought by the 

Commission, the revisions would better 

reflect modern document retention and 

production practices by expressly 

accounting for the use of new 

technologies.3

The Commission expects the 

proposed revisions to substantially 

expedite its investigations by: (1) 

Conditioning any extensions of time to 

comply on a party demonstrating its 

progress in achieving compliance; (2) 

articulating staff’s authority to inspect, 

copy, or sample documentary material— 

including electronic media—to ensure 

that parties are employing viable search 

and compliance methods; and (3) 

requiring parties to ‘‘meet and confer’’ 

with staff within ten days after 

compulsory process is received to 

discuss compliance with compulsory 

process and to address and attempt to 

resolve potential problems relating to 

document production. 

Finally, the proposed revisions to this 

Rule would update and streamline the 

process for taking oral testimony by 

requiring corporate entities to designate 

a witness to testify on their behalf, as 

provided in FRCP Rule 30(b)(6), and by 

allowing testimony to be videotaped or 

recorded by means other than 

stenograph. 

Section 2.9: Rights of Witnesses in 

Investigations 

Current Rule 2.9 details the rights of 

witnesses in Commission investigations, 

including witnesses compelled to 

appear in person at an investigational 

hearing or deposition. Rule 2.9(b)(2) 

permits a witness at an investigational 

hearing to refuse to answer questions 

that call for privileged information. As 

it is currently written, the rule does not 

provide guidance regarding the 

perimeters of the privileges that may be 

asserted. Counsel for witnesses have 

sometimes taken advantage of the rule’s 

lack of clarity by repeating objections, 

excessively consulting with their clients 

during the hearing, and otherwise 

employing arguably obstructionist 

tactics. Revised Rule 2.9(b)(1) is 


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Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 3193 

4See, e.g., Hall v. Clifton Precision, 150 F.R.D. 

525, 528 (E.D. Pa. 1993); Plaisted v. Geisinger Med. 

Ctr., 210 F.R.D. 527, 535 (M.D. Pa. 2002). 5Hall, 150 F.R.D. at 528. 6See, e.g., D. Col. L. Civ. R. 30.3(A) (Sanctions for 

Abusive Deposition Conduct); S.D. Ind. LR 30.1(b) 

(Private Conference with Deponent), E.D.N.Y. L. 

Civ. R. 30.6 (Conferences Between Deponent and 

Defending Attorney); S.D.N.Y. L. Civ. R. 30.6 

(Conferences Between Deponent and Defending 

Attorney); M.D.N.C, LR 204(b); (Differentiated Case 

Management and Discovery); N.D. Ohio LR 30.1(b); 

D. Or. LR 30–5; D. Wyo. LR 30 (Depositions Upon 

Oral Examination). 

7See, e.g., Fed. R. Civ. P. 30 advisory committee’s 

note (1993 Amendments) (noting that 

‘‘[d]epositions frequently have been unduly 

prolonged, if not unfairly frustrated, by lengthy 

objections and colloquy, often suggesting how the 

deponent should respond. While objections may 

* * * be made during a deposition, they ordinarily 

should be limited to * * * objections on grounds 

that might be immediately obviated, removed, or 

cured, such as to the form of a question or the 

responsiveness of an answer * * *. Directions to a 

deponent not to answer a question can be even 

more disruptive than objections.’’). 

8At present, the provisions are found in Rules 

2.7(d)–(e), 2.11(b)–(d), and 2.12(c)–(e). 

9The Commission would retain its inherent 

authority to extend this time period if the petition 

is not acted upon within 30 days. 10See 73 FR 58839. 

intended to prevent counsel from 

improperly engaging in such tactics 

during an investigational hearing or 

deposition conducted pursuant to 

Section 9 of the FTC Act by prohibiting 

consultation except with respect to 

issues of privilege or other protected 

status. The Commission believes that 

such a provision is necessary to prevent 

obstructionist conduct and has 

concluded that this revision is 

supported by federal court decisions 

that prevent counsel for a witness from 

conferring with the witness during a 

deposition while a question is pending.4

As one court has observed, such 

coaching ‘‘tend[s], at the very least, to 

give the appearance of obstructing the 

truth.’’ 5 Many district courts have 

adopted rules prohibiting consultation 

in depositions while a question is 

pending.6 Also persuasive is the 

Advisory Committee’s notes to Fed. R. 

Civ. P. 30, which associate the general 

regulation of attorney conduct during a 

deposition with the more specific 

prohibition against improper coaching.7

The Commission also proposes 

revising this Rule to clarify the process 

for resolving those privilege objections 

that require a recess in a deposition or 

investigational hearing. At present, the 

validity of a witness’s assertion of 

privilege during an investigational 

hearing is resolved definitively only 

through an enforcement action in 

district court, in accordance with the 

provisions of Rule 2.13, and not as part 

of a petition to limit or quash a 

subpoena in accordance with the 

provisions of existing Rule 2.7(d). 

Revised Rule 2.9(b)(3) would clarify the 

process for resolving privilege 

objections during a deposition or 

investigational hearing by expressly 

granting to Commission investigators 

the ability to recess, and subsequently 

continue, a course of inquiry 

interrupted by a witness’s privilege 

objection. The new rule also states 

expressly that the Commission may file 

an enforcement action if the witness 

fails to reappear. 

Section 2.10: Petitions To Limit or 

Quash Commission Compulsory Process 

The Commission proposes to 

consolidate the provisions governing 

petitions to limit or quash 8 into a redesignated Rule 2.10. Apart from this 

consolidation, the revised Rule would 

clarify the process for filing and ruling 

on such petitions. Revised paragraph 

(a)(3) provides guidance to parties in 

instances where the Commission 

investigator elects to recess and 

reconvene an investigational hearing to 

continue a line of questioning that was 

interrupted by a witness’s privilege 

objection. The provisions of 2.10 

expressly allow the Commission 

investigator to recess the hearing and 

give the witness an opportunity to 

challenge the reconvening of the hearing 

by filing a petition to limit or quash the 

Commission’s compulsory process 

directing his or her initial appearance. 

Paragraph (a)(4) clarifies the right of 

Commission staff to respond to a 

petition to limit or quash. 

To expedite rulings on petitions to 

quash, the revised Rule would provide 

that the Commission itself, rather than 

a designated Compulsory Process 

Commissioner, would rule upon 

petitions to quash or limit in the first 

instance. This amendment is designed 

to address the fact that it has now 

become standard procedure for 

petitioners to file requests for review of 

virtually all letter rulings issued by the 

Compulsory Process Commissioner, 

frequently by simply filing a request for 

review and attaching to that request the 

original petition to quash or limit in its 

entirety. The current practice now 

results in substantial delays in 

disposing of petitions to quash or limit 

without offering any countervailing 

advantages. Second, the Commission 

proposes a new Rule 2.10(c) to provide 

for a 30-day deadline for the issuance of 

an order ruling on a petition to limit or 

quash.9 To facilitate expedited review of 

petitions to limit or quash, the 

Commission also proposes an amended 

paragraph (a)(1), providing that 

petitions be limited to 3,750 words 

(approximately 15 pages). The word 

limit would not apply to affidavits or 

other supporting documentation. 

Section 2.11: Withholding Requested 

Material 

This proposed Rule would revise and 

re-designate current Rule 2.8A to 

require parties to give more meaningful 

and specific information concerning 

privilege claims in Part 2 investigative 

proceedings. Parties withholding 

requested material would be subject to 

the revised Rule 2.11, which would set 

out specifications for a privilege log to 

be submitted to the Commission in lieu 

of a motion to limit or quash 

compulsory process. 

As part of its comprehensive reforms 

governing adjudicative proceedings, in 

2009, the Commission amended Rule 

3.38A to eliminate the requirement that 

a privilege log must always contain 

specific information for each item being 

withheld.10 The Commission 

substituted the more flexible 

requirement of Fed. R. Civ. P. 

26(b)(5)(A), which prescribes that the 

nature of the materials withheld be 

described ‘‘in a manner that * * * will 

enable other parties to assess the claim.’’ 

The Commission believes that the Part 

2 Rule should contain a more specific 

requirement because there is no neutral 

Administrative Law Judge (‘‘ALJ’’) 

available in Part 2 proceedings to 

analyze the sufficiency of the log. At 

present, the Commission’s sole recourse 

in a Part 2 investigation is to file an 

enforcement action in federal court. 

The proposed amendment would 

require detailed descriptions of the 

withheld material (including the 

number of pages or bytes comprising the 

privileged material and the respective 

dates when the material was both 

created and sent), and descriptions of 

the authors and recipients of the 

material (including the parties’ names, 

titles, physical addresses, email 

addresses, and organizations). The 

revision would also require the person 

claiming a privilege to provide a factual 

basis for the claims. Finally, the 

proposed privilege log would be 

notarized by the ‘‘lead attorney’’ on the 

matter, to avoid instances where juniorlevel attorneys or non-lawyer ESI 

specialists might notarize a log and 

thereby attempt to shield senior 

attorneys from sanctions in the event of 

misrepresentation. 

Paragraph (b) of the proposed rule 

allows the requirements to be modified 

as the result of any agreement reached 

during the ‘‘meet and confer’’ session. In 

some situations, less detailed 

requirements (for example, allowing 


srobinson on DSK4SPTVN1PROD with PROPOSALS
3194 Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 

11See http://www.ftc.gov/os/2006/02/ 

mergerreviewprocess.pdf. 

12See 73 FR 58839. 

13Because closing letters are public, some 

companies affirmatively request that no closing 

letter be issued. 

documents to be described by category) 

may suffice to assess privilege claims. 

This revision is designed to encourage 

cooperation and facilitate partial 

privilege logs, such as those encouraged 

by the Commission’s ‘‘best practices’’ in 

merger cases.11

Paragraph (c) of the proposed rule 

addresses an issue that has arisen in 

some recent investigations wherein the 

targets of Part 2 investigations, in 

contravention of instructions in a 

subpoena issued by the Commission, 

redacted numerous documents that 

were not claimed to be protected by any 

privilege. Paragraph (c) highlights the 

instruction by explicitly providing that 

responsive material for which no 

privilege claim has been asserted must 

be produced without redaction. 

Finally, the suggested revised Rule 

also incorporates recent changes in 

Commission Rules 3.31(g), 3.38A, and 

Fed. R. Evid. 502 regarding the return or 

destruction of inadvertently disclosed 

material. The Federal Rule sets the new 

standard for subject matter waiver in the 

United States. As previously noted with 

respect to the Part 3 revisions,12 the risk 

of privilege and work product waiver, 

and the resources used to avoid it, 

significantly increase the costs and 

delay of discovery. This risk is 

amplified when a party is asked to 

produce ESI. The Commission believes 

that requiring parties to make only those 

efforts reasonably necessary to protect 

privilege or immunity will reduce the 

time and effort needed to avoid waivers. 

Section 2.13: Noncompliance With 

Compulsory Process 

The proposed Rule amendment would 

expedite the Commission’s Hart-ScottRodino enforcement process by 

delegating to the General Counsel the 

authority to initiate enforcement 

proceedings for noncompliance with a 

Hart-Scott-Rodino second request under 

15 U.S.C. 18a(g)(2) (‘‘(g)(2) actions’’). 

The Commission believes this change is 

appropriate because it would enable the 

General Counsel to file (g)(2) actions 

quickly and without the need for a 

formal recommendation by staff to the 

Commission, and a subsequent 

Commission vote. The revised Rule 

would also authorize the General 

Counsel to initiate an enforcement 

action in connection with 

noncompliance of a Commission order 

requiring access pursuant to 15 U.S.C. 

49, in addition to compliance with 

compulsory process already covered in 

the existing Rule. 

Section 2.14: Disposition 

Rule 2.14 applies after the 

Commission determines whether to take 

corrective action following an 

investigation. If corrective action is 

deemed necessary, the Commission may 

elect to institute proceedings in Part 3 

or in federal court. If corrective action 

is not necessary, the investigation is 

usually closed. Past subjects of 

Commission investigations have 

occasionally expressed informal 

concerns about the lack of a formal 

notification process following the 

disposition of an investigation, 

especially in light of the fact that at 

times staff does not affirmatively issue 

closing letters.13 Currently, if a party 

does not receive notification that a 

matter has been closed, it is under a 

continuing obligation to preserve 

documents. 

To address these concerns, the 

Commission proposes a new paragraph 

(c) to Rule 2.14. Paragraph (c) is 

intended to benefit both the subjects of 

FTC investigation and third parties by 

relieving them of any obligation to 

preserve documents after a year passes 

with no written communication from 

the Commission or staff. The 

Commission believes this revision is 

warranted because the retention and 

preservation of information, 

documentary material, and other 

evidence can, depending on the volume, 

be expensive—and wasteful if 

unnecessary. In many instances such 

retention and preservation can expose 

the custodian to potential liability; for 

example, sensitive personal or medical 

information, or non-current (but still 

sensitive) trade information and data 

can all cause substantial problems for a 

firm if lost, stolen, or hacked into. The 

Commission also notes that in some 

circumstances, 18 U.S.C. 1519 threatens 

imprisonment for any party who 

violates an obligation to retain such 

materials if an investigation is pending. 

Equally significant, third parties are 

generally not informed when one of the 

agency’s non-public investigations has 

been concluded. In sum, recipients of 

compulsory process report that they 

often do not know when they are 

relieved of any obligation to retain 

information or materials for which 

neither the agency nor they have any 

use; nor are they inclined to ask about 

the status of an investigation for fear of 

renewed agency attention. The proposed 

Rule 2.14 revisions would relieve 

parties of any obligation to preserve 

documents if twelve months pass with 

no written communication from the 

Commission or staff. 

Section 4.1: Appearances 

Rule 4.1(e) governs the administration 

of attorney discipline for attorneys 

practicing before the Commission. The 

Commission proposes to amend this 

Rule to provide additional guidance 

regarding the type of conduct that may 

warrant disciplinary action. The revised 

Rule provides for disciplinary action 

where an attorney engages in conduct 

during a Commission investigation or 

other proceeding that is contemptuous, 

obstructionist, or violates appropriate 

standards of professional conduct, as 

well as where an attorney knowingly or 

recklessly provides false or misleading 

information to the Commission or its 

staff. In addition, the revised Rule 

provides that a supervising attorney 

may be responsible for another 

attorney’s violation of these standards of 

conduct if he or she orders or ratifies the 

other attorney’s misconduct, or has 

managerial authority over the attorney. 

The revised Rule also establishes a 

new framework for evaluating and 

adjudicating allegations of misconduct 

by attorneys practicing before the 

Commission. The revised Rule provides 

for Commission staff to submit 

allegations of misconduct on a 

confidential basis to designated officers 

within the Bureaus of Competition or 

Consumer Protection with the authority 

to investigate such charges. The rule 

establishes procedures for the 

investigation of alleged misconduct and 

authorizes an investigating officer to 

request that the Commission issue 

compulsory process to facilitate an 

investigation of the allegations. After 

completion of an investigation, the 

revised rule provides the investigating 

officer with discretion to determine 

whether the allegations warrant further 

action and, if so, to recommend the 

charges to the Commission for its 

consideration. 

The revised Rule also introduces a 

process for issuance of attorney 

reprimands without an evidentiary 

hearing in appropriate circumstances. 

The revised Rule provides that the 

Commission may issue a public 

reprimand, after the subject of an 

investigation has been given notice and 

an opportunity to respond during the 

course of the investigation, if it 

determines, based on the attorney’s 

response, if any, and the record before 

it, that the attorney has engaged in 

professional misconduct warranting a 

public reprimand. 

In cases where the Commission 

determines that a full administrative 

disciplinary proceeding is warranted to 


srobinson on DSK4SPTVN1PROD with PROPOSALS
Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 3195 

14 In the alternative, the rule provides that the 

Commission may preside over the matter in the first 

instance or assign one or more members to sit as 

administrative law judges in a matter. Under the 

APA, the Commission or its members have the 

authority to preside over a hearing. See 5 U.S.C. 

556(b). 

15 In particular, the written request for 

confidential treatment that accompanies the 

comment must include the factual and legal basis 

for the request, and must identify the specific 

portions of the comment to be withheld from the 

public record. See FTC Rule 4.9(c), 16 CFR 4.9(c). 

determine if a reprimand, suspension, 

or disbarment should be imposed, the 

Rule provides for the Commission to 

institute disciplinary proceedings by 

serving an order to show cause on the 

respondent attorney and assigning the 

matter to an ALJ.14 The revised Rule 

grants the ALJ the necessary powers to 

oversee expeditious attorney 

disciplinary proceedings, including the 

authority to allow for limited discovery 

and the filing of pleadings. Agency 

attorneys—appointed by the Director of 

the Bureau that has proffered the 

allegations—would serve as 

Commission counsel during a hearing to 

adjudicate the allegations of 

misconduct. 

Revised Rule 4.1(e) also establishes 

expedited procedures to allow the 

Commission to suspend an attorney 

temporarily in the event that it receives 

official notice from a state bar that an 

attorney has been suspended or 

disbarred by that authority, pending a 

full disciplinary proceeding to assess 

the need for a permanent disbarment 

from practice before the Commission. 

These summary procedures would 

provide the Commission the ability to 

act promptly to suspend attorneys that 

have been found guilty by a state bar of 

conduct warranting suspension or 

disbarment. 

III. Invitation To Comment 

The Commission invites interested 

persons to submit written comments on 

any issue of fact, law, or policy that may 

bear upon its proposal to revise its Part 

2 and 4 Rules. Please include 

explanations for any answers provided, 

as well as supporting evidence where 

appropriate. After examining the 

comments, the Commission will 

determine whether to issue specific 

amendments. 

You can file a comment online or in 

a written document. For the 

Commission to consider your comment, 

we must receive it on or before March 

23, 2012. Write ‘‘Notice of Proposed 

Rulemaking on Parts 2 and 4 of the 

FTC’s Rules of Practice (16 CFR Parts 2 

and 4) (Project No. P112103)’’ on your 

comment. Your comment—including 

your name and your state—will be 

placed on the public record of this 

proceeding, including, to the extent 

practicable, on the public Commission 

Web site, at http://www.ftc.gov/os/ 

publiccomments.shtm. As a matter of 

discretion, the Commission tries to 

remove individuals’ home contact 

information from comments before 

placing them on the Commission Web 

site. 

Because your comment will be made 

public, you are solely responsible for 

making sure that your comment does 

not include any sensitive personal 

information, like anyone’s Social 

Security number, date of birth, driver’s 

license number or other state 

identification number or foreign country 

equivalent, passport number, financial 

account number, or credit or debit card 

number. You are also solely responsible 

for making sure that your comment does 

not include any sensitive health 

information, like medical records or 

other individually identifiable health 

information. In addition, do not include 

any ‘‘[t]rade secret or any commercial or 

financial information which is obtained 

from any person and which is privileged 

or confidential,’’ as provided in Section 

6(f) of the FTC Act, 15 U.S.C. 46(f), and 

FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). 

If you want the Commission to give your 

comment confidential treatment, you 

must file it in paper form, with a request 

for confidential treatment, and you have 

to follow the procedure explained in 

FTC Rule 4.9(c), 16 CFR 4.9(c).15 Your 

comment will be kept confidential only 

if the FTC General Counsel, in his or her 

sole discretion, grants your request in 

accordance with the law and the public 

interest. 

Postal mail addressed to the 

Commission is subject to delay due to 

heightened security screening. As a 

result, we encourage you to submit your 

comments online, or to send them to the 

Commission by courier or overnight 

service. To make sure that the 

Commission considers your online 

comment, you must file it at https:// 

ftcpublic.commentworks.com/ftc/ 

rulespart2and4.1nprm, by following the 

instructions on the web-based form. If 

this Notice appears at http:// 

www.regulations.gov/#!home, you also 

may file a comment through that Web 

site. 

If you file your comment on paper, 

write ‘‘Notice of Proposed Rulemaking 

on Parts 2 and 4 of the FTC’s Rules of 

Practice (16 CFR Parts 2 and 4) (Project 

No. P112103)’’ on your comment and on 

the envelope, and mail or deliver it to 

the following address: Federal Trade 

Commission, Office of the Secretary, 

Room H–113 (Annex Y), 600 

Pennsylvania Avenue NW., Washington, 

DC 20580. If possible, submit your 

paper comment to the Commission by 

courier or overnight service. 

Visit the Commission Web site at 

http://www.ftc.gov to read this Notice 

and the news release describing it. The 

FTC Act and other laws that the 

Commission administers permit the 

collection of public comments to 

consider and use in this proceeding as 

appropriate. The Commission will 

consider all timely and responsive 

public comments that it receives on or 

before March 23, 2012. You can find 

more information, including routine 

uses permitted by the Privacy Act, in 

the Commission’s privacy policy, at 

http://www.ftc.gov/ftc/privacy.htm. 

IV. Proposed Rule Revisions 

List of Subjects in 16 CFR Parts 2 and 

4 

Administrative practice and 

procedure. 

For the reasons set forth in the 

preamble, the Federal Trade 

Commission proposes to amend Title 

16, Chapter 1, Subchapter A of the Code 

of Federal Regulations, parts 2 and 4, as 

follows: 

PART 2—NONADJUDICATIVE 

PROCEDURES 

1. The authority citation for part 2 

continues to read as follows: 

Authority: 15 U.S.C. 46, unless otherwise 

noted. 

2. Revise § 2.2 to read as follows: 

§ 2.2 Request for Commission action. 

(a) A complaint or request for 

Commission action may be submitted 

via the Commission’s web-based 

complaint site (https:// 

www.ftccomplaintassistant.gov); by a 

telephone call to 1–877–FTC–HELP (1– 

(877) 382–4357); or by a signed 

statement setting forth the alleged 

violation of law with such supporting 

information as is available, and the 

name and address of the person or 

persons complained of, filed with the 

Office of the Secretary in conformity 

with § 4.2(d) of this chapter. No forms 

or formal procedures are required. 

(b) The person making the complaint 

or request is not regarded as a party to 

any proceeding that might result from 

the investigation. 

(c) Complaints or requests submitted 

to the Commission may be lodged in a 

database and made available to federal, 

state, local, and foreign law enforcement 

agencies that commit to maintain the 

privacy and security of the information 

provided. Further, where a complaint is 


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by a consumer or consumer 

representative concerning a specific 

consumer product or service, the 

Commission in the course of a referral 

of the complaint or request, or in 

furtherance of an investigation, may 

disclose the identity of the complainant. 

In referring any such consumer 

complaint, the Commission specifically 

retains its right to take such action as it 

deems appropriate in the public interest 

and under any of the statutes it 

administers. With these exceptions, it is 

the Commission’s policy not to publish 

or divulge the name of a complainant 

except as authorized by law or by the 

Commission’s rules. 

3. Revise § 2.4 to read as follows: 

§ 2.4 Investigational policy. 

Consistent with obtaining the 

information, including documentary 

material, it needs for investigations, the 

Commission encourages the just and 

speedy resolution of investigations. The 

Commission will therefore employ 

compulsory process when in the public 

interest. The Commission encourages 

cooperation in its investigations. In all 

matters, whether involving compulsory 

process or voluntary requests for 

documents and information, the 

Commission expects all parties to 

engage in meaningful discussions with 

staff to prevent confusion or 

misunderstandings regarding the nature 

and scope of the information and 

material being sought, in light of the 

inherent value of genuinely cooperative 

discovery. 

4. Revise § 2.6 to read as follows: 

§ 2.6 Notification of purpose. 

Any person, partnership or 

corporation under investigation 

compelled or requested to furnish 

information or documentary material 

shall be advised of the purpose and 

scope of the investigation, the nature of 

the acts or practices under investigation, 

and the applicable provisions of law. A 

copy of a Commission resolution, as 

prescribed under § 2.7(a), shall be 

sufficient to give persons, partnerships, 

or corporations notice of the purpose of 

the investigation. While investigations 

are generally nonpublic, Commission 

staff may disclose the existence of an 

investigation to potential witnesses or 

other third parties to the extent 

necessary to advance the investigation. 

5. Revise § 2.7 to read as follows: 

§ 2.7 Compulsory process in 

investigations. 

(a) In general. When the public 

interest warrants, the Commission may 

issue a resolution authorizing the use of 

compulsory process. The Commission 

or any Commissioner may, pursuant to 

a Commission resolution, issue a 

subpoena, or a civil investigative 

demand, directing the recipient named 

therein to appear before a designated 

representative at a specified time and 

place to testify or to produce 

documentary material, or both, and in 

the case of a civil investigative demand, 

to provide a written report or answers 

to questions, relating to any matter 

under investigation by the Commission. 

For the purposes of this section, the 

term: 

(1) Electronically stored information 

(‘‘ESI’’) means any writings, drawings, 

graphs, charts, photographs, sound 

recordings, images and other data or 

data compilations stored in any 

electronic medium from which 

information can be obtained either 

directly or, if necessary, after translation 

by the responding party into a 

reasonably usable form. 

(2) ‘‘Documentary material’’ includes 

all documents, materials, and 

information, including ESI, within the 

meaning of the Federal Rules of Civil 

Procedure. 

(3) ‘‘Compulsory process’’ means any 

subpoena, CID, access order, or order for 

a report issued by the Commission. 

(4) ‘‘Protected status’’ refers to 

information or material that may be 

withheld from production or disclosure 

on the grounds of any legal exemption, 

privilege, or work product protection. 

(b) Civil Investigative Demands. Civil 

Investigative Demands (‘‘CIDs’’) shall be 

the only form of compulsory process 

issued in investigations with respect to 

unfair or deceptive acts or practices 

under section 5(a)(1) of the Federal 

Trade Commission Act (hereinafter 

referred to as ‘‘unfair or deceptive acts 

or practices’’). 

(1) CIDs for the production of 

documentary material, including ESI, 

shall describe each class of material to 

be produced with sufficient definiteness 

and certainty as to permit such material 

to be fairly identified, prescribe a return 

date providing a reasonable period of 

time within which the material so 

demanded may be assembled and made 

available for inspection and copying or 

reproduction, and identify the 

Commission’s custodian to whom such 

material shall be made available. 

Documentary material, including ESI, 

for which a CID has been issued shall 

be made available as prescribed in the 

CID. Such productions shall be made in 

accordance with the procedures 

prescribed by section 20(c)(11) of the 

Federal Trade Commission Act. 

(2) CIDs for tangible things, including 

electronic media, shall describe each 

class of tangible thing to be produced 

with sufficient definiteness and 

certainty as to permit each such thing to 

be fairly identified, prescribe a return 

date providing a reasonable period of 

time within which the things so 

demanded may be assembled and 

submitted, and identify the 

Commission’s custodian to whom such 

things shall be submitted. Submission of 

tangible things in response to a CID 

shall be made in accordance with the 

procedures prescribed by section 

20(c)(12) of the Federal Trade 

Commission Act. 

(3) CIDs for written reports or answers 

to questions shall propound with 

sufficient definiteness and certainty the 

reports to be produced or the questions 

to be answered, prescribe a return date, 

and identify the Commission’s 

custodian to whom such reports or 

answers to questions shall be submitted. 

The submission of written reports or 

answers to questions in response to a 

CID shall be made in accordance with 

the procedures prescribed by section 

20(c)(13) of the Federal Trade 

Commission Act. 

(4) CIDs for the giving of oral 

testimony shall prescribe a date, time, 

and place at which oral testimony shall 

commence, and identify the 

Commission investigator and the 

Commission custodian. Oral testimony 

in response to a CID shall be taken in 

accordance with the procedures set 

forth in section 20(c)(14) of the Federal 

Trade Commission Act. 

(c) Subpoenas. Except in 

investigations with respect to unfair or 

deceptive acts or practices, the 

Commission may require by subpoena 

the attendance and testimony of 

witnesses and the production of 

documentary material relating to any 

matter under investigation. Subpoenas 

for the production of documentary 

material, including ESI, shall describe 

each class of material to be produced 

with sufficient definiteness and 

certainty as to permit such material to 

be fairly identified, prescribe a return 

date providing a reasonable period of 

time for production, and identify the 

Commission’s custodian to whom such 

material shall be made available. A 

subpoena may require the attendance of 

the witness or the production of 

documentary material at any place in 

the United States. 

(d) Special reports. Except in 

investigations regarding unfair or 

deceptive acts or practices, the 

Commission may issue an order 

requiring a person, partnership, or 

corporation to file a written report or 

answers to specific questions relating to 

any matter under investigation, study or 


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survey, or under any of the 

Commission’s reporting programs. 

(e) Commission orders requiring 

access. Except in investigations 

regarding unfair or deceptive acts or 

practices, the Commission may issue an 

order requiring any person, partnership, 

or corporation under investigation to 

grant access to their files, including 

electronic media, for the purpose of 

examination and to make copies. 

(f) Investigational hearings. 

(1) Investigational hearings may be 

conducted in the course of any 

investigation undertaken by the 

Commission, including rulemaking 

proceedings under subpart B of part 1 of 

this chapter, inquiries initiated for the 

purpose of determining whether or not 

a respondent is complying with an order 

of the Commission or to monitor 

performance under and compliance 

with a decree entered in suits brought 

by the United States under the antitrust 

laws, the development of facts in cases 

referred by the courts to the 

Commission as a master in chancery, 

and investigations made under section 5 

of the Webb-Pomerene (Export Trade) 

Act. 

(2) Investigational hearings shall be 

conducted by one or more of any 

Commission member, examiner, 

attorney, investigator, or other person 

duly designated under the Federal 

Trade Commission Act, for the purpose 

of hearing the testimony of witnesses 

and receiving documents and 

information relating to any subject 

under investigation. Such hearings shall 

be under oath or affirmation, 

stenographically recorded, and the 

transcript made a part of the record of 

the investigation. The Commission may, 

in addition, employ other means to 

record the hearing. 

(3) Unless otherwise ordered by the 

Commission, investigational hearings 

shall not be public. For investigational 

hearings conducted pursuant to a CID 

for the giving of oral testimony, the 

Commission Investigator shall exclude 

from the hearing room all persons other 

than the person being examined, 

counsel for the person being examined, 

and any stenographer or other person 

recording such testimony. A copy of the 

transcript shall promptly be forwarded 

by the Commission Investigator to the 

Commission custodian designated 

under § 2.16. At the discretion of the 

Commission Investigator, and with the 

consent of the person being examined 

(or, in the case of an entity, its counsel), 

persons other than Commission staff, 

court reporters, and Commission 

Investigator may be present in the 

hearing room. 

(g) Depositions. Except in 

investigations with respect to unfair or 

deceptive acts or practices, the 

Commission may order by subpoena a 

deposition pursuant to section 9 of the 

Federal Trade Commission Act, of any 

person, partnership, or corporation, at 

any stage of an investigation. The 

deposition shall take place upon notice 

to the subjects of the investigation, and 

the examination and cross-examination 

may proceed as they would at trial. 

Depositions shall be conducted by a 

Commission Investigator, for the 

purpose of hearing the testimony of 

witnesses and receiving documents and 

information relating to any subject 

under investigation. Depositions shall 

be under oath or affirmation, 

stenographically recorded, and the 

transcript made a part of the record of 

the investigation. The Commission may, 

in addition, employ other means to 

record the deposition. 

(h) Testimony from an entity. Where 

Commission compulsory process 

requires oral testimony from an entity, 

the compulsory process shall describe 

with reasonable particularity the matters 

for examination and the entity must 

designate one or more officers, directors, 

or managing agents, or designate other 

persons who consent, to testify on its 

behalf. Unless a single individual is 

designated by the entity, the entity must 

designate in advance and in writing the 

matters on which each designee will 

testify. The persons designated must 

testify about information known or 

reasonably available to the entity and 

their testimony shall be binding upon 

the entity. 

(i) Inspection, copying, testing, and 

sampling of documentary material, 

including electronic media. The 

Commission, through compulsory 

process, may require the production of 

documentary material, or electronic 

media or other tangible things, for 

inspection, copying, testing, or 

sampling. 

(j) Manner and form of production of 

ESI. When Commission compulsory 

process requires the production of ESI, 

it shall be produced in accordance with 

the instructions provided by 

Commission staff regarding the manner 

and form of production. All instructions 

shall be followed by the recipient of the 

process absent written permission to the 

contrary from a Commission official 

identified in § 2.7(l). Absent any 

instructions as to the form for producing 

ESI, ESI must be produced in the form 

or forms in which it is ordinarily 

maintained or in a reasonably usable 

form. 

(k) Mandatory pre-petition meet and 

confer process. Unless excused in 

writing by a Commission official 

identified in § 2.7(l), a recipient of 

Commission compulsory process shall 

meet and confer with Commission staff 

within 10 days after receipt of process 

or before the deadline for filing a 

petition to quash, whichever is first, to 

discuss compliance and to address and 

attempt to resolve all issues, including 

privilege issues and the form and 

manner in which privilege claims will 

be asserted. Such meetings may be in 

person or by telephone. The recipient 

must make available personnel with the 

knowledge necessary for resolution of 

the issues relevant to compliance with 

compulsory process. Such personnel 

could include individuals 

knowledgeable about the recipient’s 

information or records management 

systems, and/or other relevant materials 

such as organizational charts and 

samples of material required to be 

produced. If any issues relate to ESI, the 

recipient shall have a person familiar 

with its ESI systems and methods of 

retrieval participate in the meeting. The 

Commission will not consider petitions 

to quash or limit absent a pre-filing meet 

and confer session with Commission 

staff and will consider only issues 

raised during the meet and confer 

process. 

(l) Delegations regarding CIDs and 

subpoenas. The Directors of the Bureau 

of Competition, Consumer Protection, or 

Economics, their Deputy Directors, the 

Assistant Directors of the Bureaus of 

Competition and Economics, the 

Associate Directors of the Bureau of 

Consumer Protection, the Regional 

Directors, and the Assistant Regional 

Directors are all authorized to negotiate 

and, in writing, approve the terms of 

compliance with all compulsory 

process, including subpoenas, CIDs, 

reporting programs, orders requiring 

reports, answers to questions, and 

orders requiring access. If a recipient of 

compulsory process has demonstrated 

satisfactory progress toward 

compliance, a Commission official 

identified in this paragraph may, at his 

or her discretion, extend the time for 

compliance with Commission 

compulsory process. The subpoena 

power conferred by section 329 of the 

Energy Policy and Conservation Act (42 

U.S.C. 6299) and section 5 of the WebbPomerene (Export Trade) Act (15 U.S.C. 

65) are specifically included within this 

delegation of authority. 

6. Reserve § 2.8. 

7. Remove § 2.8A. 

8. Revise § 2.9 to read as follows: 

§ 2.9 Rights of witnesses in investigations. 

(a) Any person compelled to submit 

data to the Commission or to testify in 


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3198 Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 

a deposition or investigational hearing 

shall be entitled to retain a copy or, on 

payment of lawfully prescribed costs, 

procure a copy of any document 

submitted, and of any testimony as 

stenographically recorded, except that 

in a nonpublic hearing the witness may 

for good cause be limited to inspection 

of the official transcript of the 

testimony. Upon completion of 

transcription of the testimony, the 

witness shall be offered an opportunity 

to read the transcript. Any changes by 

the witness shall be entered and 

identified upon the transcript by the 

Commission Investigator, together with 

a statement of the reasons given by the 

witness for requesting such changes. 

After the changes are entered, the 

transcript shall be signed by the witness 

unless the witness cannot be found, is 

ill and unavailable, waives in writing 

his or her right to sign, or refuses to 

sign. If the transcript is not signed by 

the witness within 30 days of having 

been afforded a reasonable opportunity 

to review it, the Commission 

Investigator shall take the actions 

prescribed by section 20(c)(14)(E)(ii) of 

the Federal Trade Commission Act. 

(b) Any witness compelled to appear 

in person in a deposition or 

investigational hearing may be 

accompanied, represented, and advised 

by counsel, as follows: 

(1) In depositions or investigational 

hearings conducted pursuant to section 

9 of the Federal Trade Commission Act, 

counsel may not consult with the 

witness while a question directed to a 

witness is pending, except with respect 

to issues of privilege involving 

protected status. 

(2) Any objection during a deposition 

or investigational hearing shall be stated 

concisely on the record in a 

nonargumentative and nonsuggestive 

manner. Neither the witness nor counsel 

shall otherwise object or refuse to 

answer any question. Following an 

objection, the examination shall proceed 

and the testimony shall be taken, except 

for testimony requiring the witness to 

divulge information protected by the 

claim of privilege or work product. 

Counsel may instruct a witness not to 

answer only when necessary to preserve 

a claim of privilege or work product. 

(3) The Commission Investigator may 

elect to recess the deposition or 

investigational hearing and reconvene 

the deposition or hearing at a later date 

to continue a course of inquiry 

interrupted by any objection made 

under paragraph (b)(1) or (b)(2). The 

Commission Investigator shall provide 

written notice of the date of the 

reconvened deposition or hearing to the 

witness, which may be in the form of an 

email or facsimile. Failure to reappear 

or to file a petition to limit or quash in 

accordance with § 2.10 shall constitute 

noncompliance with Commission 

compulsory process for the purposes of 

a Commission enforcement action under 

§ 2.13 of this part. 

(4) In depositions or investigational 

hearings, immediately following the 

examination of a witness by the 

Commission Investigator, the witness or 

his or her counsel may on the record 

request that the Commission 

Investigator permit the witness to clarify 

any answers. The grant or denial of such 

request shall be within the discretion of 

the Commission Investigator and would 

ordinarily be granted except for good 

cause stated and explained on the 

record, and with an opportunity for 

counsel to undertake to correct the 

expressed concerns of the Commission 

Investigator or otherwise to reply. 

(5) The Commission Investigator shall 

conduct the deposition or 

investigational hearing in a manner that 

avoids unnecessary delay, and prevents 

and restrains disorderly or 

obstructionist conduct. The Commission 

Investigator shall, where appropriate, 

report pursuant to § 4.1(e) of this 

chapter any instance where an attorney, 

in the course of the deposition or 

hearing, has allegedly refused to comply 

with his or her directions, or has 

allegedly engaged in conduct addressed 

in § 4.1(e). The Commission may take 

any action as circumstances may 

warrant under § 4.1(e) of this chapter. 

9. Revise § 2.10 to read as follows: 

§ 2.10 Petitions to limit or quash 

Commission compulsory process. 

(a) In general. 

(1) Any petition to limit or quash any 

compulsory process shall be filed with 

the Secretary within 20 days after 

service of the Commission compulsory 

process or, if the return date is less than 

20 days after service, prior to the return 

date. Such petition shall set forth all 

assertions of privilege or other factual 

and legal objections to the Commission 

compulsory process, including all 

appropriate arguments, affidavits, and 

other supporting documentation. Such 

petition shall not exceed 3,750 words, 

including all headings, footnotes, and 

quotations, but excluding the cover, 

table of contents, table of authorities, 

glossaries, copies of the compulsory 

process order or excerpts thereof, 

appendices containing only sections of 

statutes or regulations, the statement 

required by paragraph (a)(2), and 

affidavits and other supporting 

documentation. Petitions to limit or 

quash that fail to comply with these 

provisions shall be rejected by the 

Secretary pursuant to § 4.2(g) of this 

chapter. 

(2) Statement. Each petition filed 

pursuant to paragraph (a)(1) shall be 

accompanied by a signed separate 

statement representing that counsel for 

the petitioner has conferred with 

counsel for the Commission pursuant to 

§ 2.7(k) in an effort in good faith to 

resolve by agreement the issues raised 

by the petition and has been unable to 

reach such an agreement. If some of the 

issues in controversy have been 

resolved by agreement, the statement 

shall specify the issues so resolved and 

the issues remaining unresolved. The 

statement shall recite the date, time, and 

place of each conference between 

counsel, and the names of all parties 

participating in each such conference. 

Failure to include the required 

statement may result in a denial of the 

petition. 

(3) Reconvened investigational 

hearings or depositions. If the 

Commission Investigator elects pursuant 

to § 2.9(b)(3) to recess the hearing or 

deposition and reconvene it at a later 

date, the witness compelled to reappear 

may challenge the reconvening by filing 

with the Secretary a petition to limit or 

quash the reconvening of the hearing or 

deposition. Such petition shall be filed 

within 5 days after receiving written 

notice of the reconvened hearing; shall 

set forth all assertions of privilege or 

other factual and legal objections to the 

reconvening of the hearing or 

deposition, including all appropriate 

arguments, affidavits, and other 

supporting documentation; and shall be 

subject to the word count limit in 

paragraph (a)(1). Except for good cause 

shown, the Commission will not 

consider issues presented and ruled 

upon in any earlier petition filed by or 

on behalf of the witness. 

(4) Staff reply. Commission staff may, 

without serving the petitioner, provide 

the Commission a statement that shall 

set forth any factual and legal response 

to the petition to limit or quash. 

(5) Extensions of time. The Directors 

of the Bureaus of Competition, 

Consumer Protection, and Economics, 

their Deputy Directors, the Assistant 

Directors of the Bureaus of Competition 

and Economics, the Associate Directors 

of the Bureau of Consumer Protection, 

the Regional Directors, and the Assistant 

Regional Directors are delegated, 

without power of redelegation, the 

authority to rule upon requests for 

extensions of time within which to file 

petitions to limit or quash Commission 

compulsory process. 

(b) Stay of compliance period. The 

timely filing of a petition to limit or 

quash any Commission compulsory 


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Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 3199 

process shall stay the amount of time 

permitted for compliance with the 

portion challenged. If the petition is 

denied in whole or in part, the ruling by 

the Commission shall specify new terms 

for compliance, including a new return 

date, for the Commission’s compulsory 

process. 

(c) Disposition and review. The 

Commission will issue an order ruling 

on a petition to limit or quash within 30 

days after the petition is filed with the 

Secretary. The order may be served on 

the petitioner via email, facsimile, or 

any other method reasonably calculated 

to provide notice to the petitioner of the 

order. 

(d) Public disclosure. All petitions to 

limit or quash Commission compulsory 

process and all Commission orders in 

response to those petitions shall become 

part of the public records of the 

Commission, except for information 

granted confidential treatment under 

§ 4.9(c) of this chapter. 

10. Revise § 2.11 to read as follows: 

§ 2.11 Withholding requested material. 

(a) Any person withholding 

information or material responsive to an 

investigational subpoena, CID, access 

order, or order to file a report issued 

pursuant to § 2.7, or any other request 

for production of material issued under 

this part, shall assert a claim of 

protected status not later than the date 

set for the production of the material. 

The claim of privilege, work product, or 

protected status by operation of law 

shall include a detailed log of the items 

withheld, which shall be attested by the 

lead attorney or attorney responsible for 

supervising the review of the material 

and who made the determination to 

assert a claim of privilege or protected 

status. All responsive material that is 

neither privileged, work product, nor in 

a protected status by operation of law, 

including all attachments, that contain 

privileged or protected information 

shall be produced only to the extent 

necessary to preserve any claim of 

protected status. The information 

provided in the log shall be of sufficient 

detail to enable the Commission staff to 

assess the validity of the claim of 

privilege, work product, or protected 

status by operation of law without 

disclosing the privileged or protected 

information. The failure to provide 

information sufficient to support a claim 

of privilege or protection may result in 

a denial of the claim of privilege or 

protection. The log shall provide: 

(1) The full title (if the withheld 

material is a document) and the full file 

name (if the withheld material is in 

electronic form); 

(2) A description of the material 

withheld (for example, a letter, 

memorandum, or email), including any 

attachments; 

(3) The date the material was created 

or prepared; 

(4) The date the material was sent to 

each recipient (if different from the date 

the material was created or prepared); 

(5) The names, titles, physical 

addresses, email addresses, and 

organizations of all authors (if not 

contained in the disclosed material); 

(6) The names, titles, physical 

addresses, email addresses, and 

organizations of all recipients of the 

material (if not contained in the 

disclosed material); 

(7) The factual basis supporting the 

claim that the material is privileged, 

work product, or protected by operation 

of law (for example, that it was prepared 

by an attorney rendering legal advice to 

a client in an attorney-client privileged 

communication, or prepared by an 

attorney in anticipation of litigation 

regarding a specifically identified claim 

of work product); 

(8) The number of pages (if the 

withheld material is a document) or the 

number of bytes (if the withheld 

material is in electronic form); and 

(9) Any other pertinent information 

necessary to support the assertion of 

privilege, work product, or protected 

status by operation of law. 

(b) A person withholding responsive 

material solely for the reasons described 

in paragraph (a) shall meet and confer 

with Commission staff pursuant to 

§ 2.7(k) to discuss and attempt to resolve 

any issues associated with the manner 

and form in which privilege or 

protection claims will be asserted. The 

participants in the meet and confer 

session may agree to modify the logging 

requirements set forth in paragraph (a). 

The Commission may challenge the 

validity of any privilege or protection 

claim for responsive material by 

initiating a judicial enforcement 

proceeding. 

(c) Unless otherwise provided in the 

instructions accompanying the 

compulsory process, and except for 

information or material subject to a 

valid claim of privilege or protection, all 

responsive information and material 

shall be produced without redaction. 

(d)(1)(A) The disclosure of material 

protected by the attorney-client 

privilege or as work product shall not 

operate as a waiver if: 

(i) The disclosure is inadvertent; 

(ii) The holder of the privilege or 

protection took reasonable steps to 

prevent disclosure; and 

(iii) The holder promptly took 

reasonable steps to rectify the error, 

including notifying Commission staff of 

the claim and the basis for it. 

(B) After being so notified, 

Commission must: 

(i) Promptly return or destroy the 

specified material and any copies, not 

use or disclose the material until any 

dispute as to the validity of the claim is 

resolved; and take reasonable measures 

to retrieve the material from all persons 

to whom it was disclosed before being 

notified; or 

(ii) Sequester such material until such 

time as an Administrative Law Judge or 

court may rule on the merits of the 

claim of privilege or protection in a 

proceeding or action resulting from the 

investigation. 

(C) The producing party must 

preserve the material until the claim of 

privilege or protection is resolved, the 

investigation is closed, or any 

enforcement proceeding is concluded. 

(2) When a disclosure is made that 

waives attorney-client privilege or work 

product, the waiver extends to an 

undisclosed communication or 

information only if: 

(A) The waiver is intentional; 

(B) The disclosed and undisclosed 

information or material concern the 

same subject matter; and 

(C) They ought in fairness to be 

considered together. 

11. Reserve § 2.12. 

12. Revise § 2.13 to read as follows: 

§ 2.13 Noncompliance with compulsory 

processes. 

(a) In cases of failure to comply with 

Commission compulsory processes, 

appropriate action may be initiated by 

the Commission or the Attorney 

General, including actions for 

enforcement, forfeiture, civil penalties, 

or criminal sanctions. The Commission 

may also take any action as the 

circumstances may warrant under 

§ 4.1(e) of this chapter. 

(b) The General Counsel, pursuant to 

delegation of authority by the 

Commission, without power of 

redelegation, is authorized, when he or 

she deems appropriate: 

(1) To initiate, on behalf of the 

Commission, an enforcement 

proceeding in connection with the 

failure or refusal of a recipient to 

comply with, or to obey, a subpoena, a 

CID, or an access order, if the return 

date or any extension thereof has 

passed; 

(2) To approve and have prepared and 

issued, in the name of the Commission, 

a notice of default in connection with 

the failure of a recipient of an order to 

file a report pursuant to section 6(b) of 

the Federal Trade Commission Act to 

timely file that report, if the return date 


srobinson on DSK4SPTVN1PROD with PROPOSALS
3200 Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 

1The standards of conduct and disciplinary 

procedures under this § 4.1(e) apply only to outside 

attorneys practicing before the Commission and not 

to Commission staff. Allegations of misconduct by 

Commission employees will be handled pursuant to 

procedures for employee discipline or pursuant to 

investigations by the Office of Inspector General. 

2For purposes of this rule, knowingly giving false 

or misleading information includes knowingly 

omitting material facts necessary to make any oral 

or written statements not misleading in light of the 

circumstances under which they were made. 

or any extension thereof has passed; to 

initiate, on behalf of the Commission, an 

enforcement proceeding; or to request to 

the Attorney General, on behalf of the 

Commission, to initiate a civil action in 

connection with the failure of such 

recipient to timely file a report, when 

the return date or any extension thereof 

has passed; 

(3) To initiate, on behalf of the 

Commission, an enforcement 

proceeding in a United States District 

Court under section 7A(g)(2) of the 

Clayton Act (15 U.S.C. 18a(g)(2)); and 

(4) To seek an order of civil contempt 

in cases where a court order enforcing 

compulsory process has been violated. 

13. Revise § 2.14 to read as follows: 

§ 2.14 Disposition. 

(a) When an investigation indicates 

that corrective action is warranted, and 

the matter is not subject to a consent 

settlement pursuant to subpart C of this 

part, the Commission may initiate 

further proceedings. 

(b) When corrective action is not 

necessary or warranted in the public 

interest, the investigation shall be 

closed. The matter may nevertheless be 

further investigated at any time if 

circumstances so warrant. 

(c) In matters in which a recipient of 

an access letter or Commission 

compulsory process has not been 

notified that an investigation has been 

closed or otherwise concluded, after a 

period of twelve months following the 

last written communication from the 

Commission staff to the recipient or the 

recipient’s counsel, the recipient is 

relieved of any obligation to continue 

preserving information, documentary 

material, or evidence, for purposes of 

responding to the Commission’s process 

or the staff’s access letter. The ‘‘written 

communication’’ may be in the form of 

a letter, an email, or a facsimile sent by 

the Commission or Commission staff to 

the recipient or his or her counsel. 

(d) The Commission has delegated to 

the Directors of the Bureaus of 

Competition and Consumer Protection, 

their Deputy Directors, the Assistant 

Directors of the Bureau of Competition, 

the Associate Directors of the Bureau of 

Consumer Protection, and the Regional 

Directors, without power of 

redelegation, limited authority to close 

investigations. 

PART 4—MISCELLANEOUS RULES 

14. The authority citation for Part 4 

continues to read as follows: 

Authority: 15 U.S.C. 46, unless otherwise 

noted. 

15. Amend § 4.1 by revising paragraph 

(e) to read as follows: 

* * * * * 

(e) Reprimand, suspension, or 

disbarment of attorneys. 

(1) The following provisions govern 

procedures for evaluating allegations of 

misconduct by attorneys practicing 

before the Commission who are not 

employed by the Commission.1 The 

Commission may publicly reprimand, 

suspend, or disbar from practice before 

the Commission any such person who 

has practiced, is practicing, or holds 

himself or herself out as entitled to 

practice before the Commission if it 

finds that such person: 

(i) Does not possess the qualifications 

required by § 4.1(a); 

(ii) Has failed to conform to standards 

of ethical conduct required of 

practitioners at the bar of any court of 

which he or she is a member; 

(iii) Has engaged in obstructionist, 

contemptuous, or unprofessional 

conduct during the course of any 

Commission proceeding or 

investigation; or 

(iv) Has knowingly or recklessly given 

false or misleading information, or has 

knowingly or recklessly participated in 

the giving of false information to the 

Commission or any officer or employee 

of the Commission.2

An attorney may be responsible for 

another attorney’s violation of this 

§ 4.1(e) if the attorney orders, or with 

knowledge of the specific conduct, 

ratifies the conduct involved, or is a 

partner or has comparable managerial 

authority in the law firm in which the 

other attorney practices, or has direct 

supervisory authority over the other 

attorney, and knew of the conduct at a 

time when its consequences could have 

been avoided or mitigated but failed to 

take reasonable remedial action. 

(2) Allegations of attorney misconduct 

in violation of paragraph (e)(1) of this 

subsection may be proffered by any 

person possessing information 

concerning the alleged misconduct. Any 

such allegations may be submitted 

orally or in writing to the Bureau 

Director, the Deputy Director if the 

Director is not available, or to any of 

their designees, of the Bureau or office 

responsible for the matter about which 

the allegations are made (‘‘Bureau 

Officer’’). 

(3) After review and evaluation of the 

allegations, any supporting materials, 

and any additional information that the 

Bureau Officer may acquire, the Bureau 

Officer, if he or she deems it 

appropriate, shall in writing notify the 

subject of the complaint of the 

underlying allegations and potential 

sanctions available to the Commission 

under this subsection, and provide him 

or her an opportunity to respond to the 

allegations and provide additional 

relevant information and material. The 

Bureau Officer may request that the 

Commission issue a resolution 

authorizing the use of compulsory 

process, and may thereafter initiate the 

service of compulsory process, to assist 

in obtaining information for the purpose 

of making a recommendation to the 

Commission whether further action may 

be warranted. 

(4) If the Bureau Officer, after review 

and evaluation of the allegations, 

supporting material, response by the 

subject of the allegations, if any, and all 

additional available information and 

material, determines that no further 

action is warranted, he or she may close 

the matter if the Commission has not 

issued a resolution authorizing the use 

of compulsory process. In the event the 

Bureau Officer determines that further 

Commission action may be warranted, 

or if the Commission has issued a 

resolution authorizing the use of 

compulsory process, he or she shall 

make a recommendation to the 

Commission. The recommendation shall 

include all relevant information and 

material as to whether further 

Commission action, or any other 

disposition of the matter, may be 

warranted. 

(5) If the Commission has good cause 

to believe, after review of the Bureau 

Officer’s recommendation, that an 

attorney has engaged in professional 

misconduct of the type described in 

paragraph (e)(1), the Commission may 

institute administrative disciplinary 

proceedings proposing public 

reprimand, suspension, or disbarment of 

the attorney from practice before the 

Commission. Except as provided in 

paragraph (e)(8) of this subsection, 

administrative disciplinary proceedings 

shall be handled in accordance with the 

following procedures: 

(i) The Commission shall serve the 

respondent attorney with an order to 

show cause why the Commission 

should not impose sanctions against the 

attorney. The order to show cause shall 

specify the alleged misconduct at issue 

and the possible sanctions. Within 14 

days of service of the order to show 


srobinson on DSK4SPTVN1PROD with PROPOSALS
Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 3201 

cause, the respondent may file a 

response admitting or denying the 

allegations of misconduct, and may 

request a hearing. If no response is filed, 

the allegations shall be deemed 

admitted. 

(ii) The Commission may assign the 

matter for further proceedings to be 

presided over by an Administrative Law 

Judge or by the Commission or one or 

more members of the Commission 

sitting as Administrative Law Judges. 

The Administrative Law Judge or the 

Commission if it reviews the matter in 

the first instance shall rule on any 

request for a hearing. 

(iii) Commission counsel shall be 

appointed by the Bureau Officer to 

prosecute the allegations of misconduct 

in any administrative disciplinary 

proceedings instituted pursuant to this 

rule. 

(iv) To the extent appropriate, 

practicable, and consistent with the 

Commission’s policy of conducting 

proceedings expeditiously, the 

Administrative Law Judge or the 

Commission may issue orders (1) 

authorizing the filing of pleadings in 

accordance with subpart B of Part 3 of 

the Commission’s rules; (2) specifying 

the available prehearing procedures in 

accordance with subpart C of Part 3 of 

the Commission’s rules, (3) authorizing 

discovery to whatever extent deemed 

appropriate, but no more than what is 

provided for in proceedings held under 

subpart D of Part 3 of the Commission’s 

rules; (4) conducting and controlling 

administrative proceedings in 

accordance with subpart E of Part 3 of 

the Commission’s rules; and (5) 

providing for the opportunity to be 

heard, the receipt into evidence of 

documentary material, and the taking of 

testimony at a hearing. The time periods 

specified in subparts B, C, D, and E of 

Part 3 of the Commission’s rules with 

respect to pleadings, prehearing 

procedures, discovery, and hearings 

shall not apply to administrative 

disciplinary proceedings. Instead, all 

time periods and deadlines shall be 

determined by the Administrative Law 

Judge or the Commission consistent 

with the Commission’s interest in an 

expeditious proceeding and fairness to 

the attorney respondent. 

(v) In its order to show cause, the 

Commission will establish a deadline 

for an initial decision by the 

Administrative Law Judge or by the 

Commission if it reviews the matter in 

the first instance. The deadline shall not 

be modified by the Administrative Law 

Judge except that it may be amended by 

leave of the Commission. 

(vi) After completing a review of the 

allegations of misconduct, the response 

of the respondent attorney, if any, and 

the entirety of the record of 

administrative proceedings, the 

Administrative Law Judge or the 

Commission if it reviews the matter in 

the first instance shall issue an initial 

decision either dismissing the 

allegations or, if it is determined that 

the allegations are supported by a 

preponderance of the evidence, specify 

an appropriate sanction. An 

Administrative Law Judge’s initial 

decision may be appealed to the 

Commission by either party within 30 

days. If the Administrative Law Judge’s 

initial decision is appealed, the 

Commission will thereafter issue a 

scheduling order governing the appeal. 

(vii) Any administrative hearing on 

the order to show cause, and any oral 

argument on appeal, shall be open to the 

public unless otherwise ordered for 

good cause by the Commission or the 

Administrative Law Judge. 

(6) Notwithstanding the 

administrative disciplinary proceedings 

described in paragraph (e)(5) of this 

subsection, if after completing a review 

of the Bureau Officer’s recommendation, 

the response of the attorney, if any, and 

the entirety of the record before it, the 

Commission determines that an attorney 

has engaged in professional misconduct 

of the type described in paragraph (e)(1) 

of this subsection, the Commission may 

issue a public reprimand without resort 

to the procedures specified in paragraph 

(e)(5). 

(7) Regardless of any action or 

determination the Commission may or 

may not make, the Commission may 

direct the General Counsel to refer the 

allegations of misconduct to the 

appropriate state, territory, or District of 

Columbia bar or any other appropriate 

authority for further action. 

(8) Upon receipt of notification from 

any authority having power to suspend 

or disbar an attorney from the practice 

of law within any state, territory, or the 

District of Columbia, demonstrating that 

an attorney practicing before the 

Commission is subject to an order of 

final suspension (not merely temporary 

suspension pending further action) or 

disbarment by such authority, the 

Commission may, without resort to any 

of the procedures described in this 

subsection, enter an order temporarily 

suspending the attorney from practice 

before it and directing the attorney to 

show cause within 30 days from the 

date of said order why the Commission 

should not impose further discipline 

against the attorney. If no response is 

filed, the attorney will be deemed to 

have acceded to such further discipline 

as the Commission deems appropriate. 

If a response is received, the 

Commission may take action or initiate 

proceedings consistent with paragraphs 

(e)(5) or (e)(6) of this subsection before 

making a determination whether, and to 

what extent, to impose further 

discipline against the attorney. 

(9) The disciplinary process described 

in this subsection is in addition to, and 

does not supersede, the authority of the 

Commission or an Administrative Law 

Judge to discipline attorneys 

participating in Part 3 proceedings 

pursuant to §§ 3.24(b)(2) or 3.42(d). 

By direction of the Commission, 

Commissioner Rosch dissenting. 

Donald S. Clark, 

Secretary. 

Concurring and Dissenting Statement of 

Commissioner J. Thomas Rosch 

Regarding Proposed Revisions to the 

Part 2 Rules and Rule 4.1(e) 

January 13, 2012 

The Commission announced today 

that it will publish a notice in the 

Federal Register proposing revisions to 

the FTC’s Rules of Practice. I support 

the Commission’s efforts to modernize 

our operating rules and generally agree 

with the changes proposed today. I 

nevertheless dissent from the proposed 

rule changes insofar as they omit two 

important reforms: mandatory 

compulsory process in all full-phase 

investigations and regular reports on the 

status of pending investigations to all 

Commissioners. 

A thorough investigation requires the 

use of compulsory process. This is 

particularly true for investigations 

involving competition concerns. Targets 

cannot be expected to provide 

incriminatory information in response 

to access letters, which are not 

judicially enforceable. Likewise, third 

parties cannot be expected to provide 

candid information unless they are 

given the ‘‘cover’’ from a target’s 

retaliation that compulsory process 

provides. Only through the use of 

mandatory compulsory process at the 

outset of all full-phase competition 

investigations can the Commission be 

assured of having a thorough and 

complete record when making 

enforcement decisions. 

Another needed reform to our Rules 

of Practice is requiring regular reports 

on the status of pending investigations 

to all Commissioners, not just the 

Chairman. Notwithstanding the 

laudable efforts of our current 

Chairman, the Commission has not 

always been kept apprised of the status 

of pending investigations, particularly 

those languishing for a lengthy period of 

time. The current Chairman will not be 

in his position forever so leaving the 


srobinson on DSK4SPTVN1PROD with PROPOSALS
3202 Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 

decision up to whoever is the Chairman 

about whether and when to brief other 

Commissioners does not solve the 

problem. Requiring regular reports to all 

Commissioners for investigations lasting 

longer than six months will inspire 

public confidence and help avoid undue 

delays in completing investigations. 

[FR Doc. 2012–985 Filed 1–20–12; 8:45 am] 

BILLING CODE 6750–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–157714–06] 

RIN 1545–BG43 

Determination of Governmental Plan 

Status 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of public hearing on 

proposed rulemaking. 

SUMMARY: This document announces a 

public hearing on proposed regulations, 

(REG–157714–06) relating to the 

determination of governmental plans. 

DATES: The public hearing is scheduled 

for Tuesday, June 5, 2012, at 10 a.m. in 

the auditorium of the Internal Revenue 

Building. The IRS must receive outlines 

of the topics to be discussed at the 

public hearing by February 6, 2012. 

ADDRESSES: The public hearing is being 

held in the Internal Revenue Building, 

1111 Constitution Avenue NW., 

Washington, DC. Due to building 

security procedures, visitors must enter 

at the Constitution Avenue entrance. In 

addition, all visitors must present photo 

identification to enter the building. 

Mail outlines to CC:PA:LPD:PR (REG– 

157714–06), Room 5205, Internal 

Revenue Service, POB 7604, Ben 

Franklin Station, Washington, DC 

20044. Submissions may be handdelivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to CC:PA:LPD:PR (REG–157714–06), 

Couriers Desk, Internal Revenue 

Service, 1111 Constitution Avenue NW., 

Washington, DC or sent electronically 

via the Federal eRulemaking Portal at 

www.regulations.gov (REG–157714–06). 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Pamela Kinard at (202) 622–6060, and 

regarding the submission of public 

comments and the public hearing, Ms. 

Oluwafunmilayo (Funmi) Taylor, at 

(202) 622–7180 (not toll-free numbers). 

SUPPLEMENTARY INFORMATION: The 

subject of the public hearing is the 

advanced notice of proposed 

rulemaking (REG–157714–06) that was 

published in the Federal Register on 

Tuesday, November 8, 2011 (76 FR 

69172). 

The rules of 26 CFR 601.601(a)(3) 

apply to the hearing. A period of 10 

minutes is allotted to each person for 

presenting oral comments. After the 

deadline has passed, persons who have 

submitted written comments and wish 

to present oral comments at the hearing 

must submit an outline of the topics to 

be discussed and the amount of time to 

be devoted to each topic (a signed 

original and four copies) by February 6, 

2012. 

The IRS will prepare an agenda 

containing the schedule of speakers. 

Copies of the agenda will be made 

available free of charge at the hearing. 

Because of access restrictions, the IRS 

will not admit visitors beyond the 

immediate entrance area more than 30 

minutes before the hearing. For 

information about having your name 

placed on the building access list to 

attend the hearing, see the FOR FURTHER

INFORMATION CONTACT section of this 

document. 

Guy R. Traynor, 

Federal Register Liaison, Legal Processing 

Division, Publications and Regulations Br., 

Procedure and Administration. 

[FR Doc. 2012–1253 Filed 1–20–12; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–120282–10] 

RIN 1545–BJ56 

Dividend Equivalents From Sources 

Within the United States 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

by cross-reference to temporary 

regulations and notice of public hearing. 

SUMMARY: In the Rules and Regulations 

section of this issue of the Federal 

Register, the IRS is issuing temporary 

regulations that provide guidance on the 

definition of the term ‘‘specified 

notional principal contract’’ for 

purposes of section 871(m) of the 

Internal Revenue Code (Code) beginning 

after March 18, 2012 through December 

31, 2012. The text of those regulations 

also serves as the text of the proposed 

regulations. The preamble to the 

temporary regulations explains the 

amendments added by the temporary 

regulations. The preamble to this notice 

of proposed rulemaking explains the 

proposed regulations, which provide 

guidance to nonresident aliens and 

foreign corporations that hold certain 

financial products providing for 

payments that are contingent upon or 

determined by reference to payments of 

dividends from sources within the 

United States. This document also 

provides a notice of a public hearing on 

these proposed regulations. 

DATES: Written or electronic comments 

must be received by April 6, 2012. 

Outlines of topics to be discussed at the 

public hearing scheduled for April 27, 

2012, at 10 a.m., must be received by 

April 6, 2012. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–120282–10), room 

5203, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. Submissions 

may be hand-delivered Monday through 

Friday between the hours of 8 a.m. and 

4 p.m. to CC:PA:LPD:PR (REG–120282– 

10), Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue NW., 

Washington, DC, or sent electronically, 

via the Federal eRulemaking Portal at 

http://www.regulations.gov (IRS REG– 

120282–10). The public hearing will be 

held in the auditorium, Internal 

Revenue Service Building, 1111 

Constitution Avenue NW., Washington, 

DC. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Mark E. Erwin or D. Peter Merkel at 

(202) 622–3870; concerning submission 

of comments, the hearing, and/or to be 

placed on the building access list to 

attend the hearing, Oluwafunmilayo 

(Funmi) Taylor, Publications and 

Regulations Branch Specialist, at (202) 

622–7180 (not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

Temporary regulations in the Rules 

and Regulations section of this issue of 

the Federal Register amend the Income 

Tax Regulations (26 CFR part 1) relating 

to section 871. The temporary 

regulations extend the section 

871(m)(3)(A) statutory definition of the 

term specified notional principal 

contract (specified NPC) through 

December 31, 2012. This document 

contains proposed regulations under 

section 871(m) of the Code that will be 

applicable as of January 1, 2013. The 

preamble to the temporary regulations 

provides a discussion of the background 

of section 871(m) and explains the 

provisions contained in the temporary 


srobinson on DSK4SPTVN1PROD with PROPOSALS