15440 Federal Register / Vol. 89, No. 43 / Monday, March 4, 2024 / Rules and Regulations 

Lists of Subjects in 14 CFR Part 97 

Air Traffic Control, Airports, 

Incorporation by reference, Navigation 

(Air). 

Issued in Washington, DC, on February 16, 

2024. 

Thomas J. Nichols, 

Manager, Aviation Safety, Flight Standards 

Service, Standards Section, Flight Procedures 

& Airspace Group, Flight Technologies & 

Procedures Division. 

Adoption of the Amendment 

Accordingly, pursuant to the 

authority delegated to me, 14 CFR part 

97 is amended by establishing, 

amending, suspending, or removing 

Standard Instrument Approach 

Procedures and/or Takeoff Minimums 

and Obstacle Departure Procedures 

effective at 0901 UTC on the dates 

specified, as follows: 

PART 97—STANDARD INSTRUMENT 

APPROACH PROCEDURES 

■ 1. The authority citation for part 97 

continues to read as follows: 

Authority: 49 U.S.C. 106(f), 106(g), 40103, 

40106, 40113, 40114, 40120, 44502, 44514, 

44701, 44719, 44721–44722. 

■ 2. Part 97 is amended to read as 

follows: 

Effective 21 March 2024 

Batesville, AR, BVX, RNAV (GPS) RWY 8, 

Amdt 1E 

Clarksville, AR, H35, RNAV (GPS) RWY 9, 

Orig–D 

Malvern, AR, M78, RNAV (GPS) RWY 22, 

Orig–D 

Key West, FL, EYW, RADAR 1, Amdt 5A, 

CANCELED 

Ankeny, IA, IKV, RNAV (GPS) RWY 18, 

Amdt 2A 

Forest City, IA, FXY, RNAV (GPS) RWY 33, 

Orig–D 

Perry, IA, KPRO, RNAV (GPS) RWY 14, Orig– 

B 

Perry, IA, PRO, RNAV (GPS) RWY 14, Orig, 

SUSPENDED 

Perry, IA, KPRO, RNAV (GPS) RWY 32, 

Amdt 1B 

Perry, IA, PRO, RNAV (GPS) RWY 32, Orig, 

SUSPENDED 

Storm Lake, IA, SLB, RNAV (GPS) RWY 17, 

Orig–D 

Indianapolis, IN, KMQJ, RNAV (GPS) RWY 

16, Amdt 1C 

Indianapolis, IN, 2R2, RNAV (GPS) RWY 18, 

Amdt 1E 

Indianapolis, IN, HFY, RNAV (GPS) RWY 19, 

Amdt 1D 

New Castle, IN, UWL, NDB RWY 10, Amdt 

1 

New Castle, IN, UWL, RNAV (GPS) RWY 10, 

Amdt 1 

New Castle, IN, UWL, RNAV (GPS) RWY 28, 

Amdt 1 

Sturgis, MI, KIRS, RNAV (GPS) RWY 19, 

Amdt 1D 

Anaconda, MT, 3U3, RNAV (GPS)-B, Orig 

Anaconda, MT, 3U3, VOR–A, Amdt 2 

Omaha, NE, OMA, RNAV (GPS) Y RWY 36, 

Amdt 2B 

Superior, NE, 12K, RNAV (GPS) RWY 14, 

Orig–B 

Lakewood, NJ, N12, RNAV (GPS) RWY 6, 

Amdt 1A 

Lakewood, NJ, N12, RNAV (GPS) RWY 24, 

Amdt 1B 

Somerville, NJ, SMQ, RNAV (GPS) RWY 30, 

Amdt 2B 

Somerville, NJ, SMQ, VOR RWY 8, Amdt 12C 

Lancaster, OH, LHQ, RNAV (GPS) RWY 10, 

Amdt 1 

Lancaster, OH, LHQ, RNAV (GPS) RWY 28, 

Amdt 2 

Wilmington, OH, ILN, ILS OR LOC RWY 

22R, ILS RWY 22R (SA CAT I), ILS RWY 

22R (CAT II), ILS RWY 22R (CAT III), 

Amdt 6B 

Wilmington, OH, ILN, RNAV (GPS) RWY 

22R, Amdt 1 

Zanesville, OH, ZZV, VOR RWY 4, Amdt 7, 

CANCELED 

Zanesville, OH, ZZV, VOR RWY 22, Amdt 4, 

CANCELED 

Sioux Falls, SD, FSD, RNAV (GPS) RWY 9, 

Orig–G 

Cowley/Lovell/Byron, WY, U68, NDB RWY 

9, Amdt 2B, CANCELED 

Cowley/Lovell/Byron, WY, U68, Takeoff 

Minimums and Obstacle DP, Amdt 3 

Greybull, WY, KGEY, Takeoff Minimums and 

Obstacle DP, Amdt 3 

[FR Doc. 2024–04363 Filed 3–1–24; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Bureau of the Fiscal Service 

31 CFR Part 344 

[FISCAL–2022–0002] 

RIN 1530–AA25 

U.S. Treasury Securities—State and 

Local Government Series 

AGENCY: Bureau of the Fiscal Service, 

Fiscal Service, Treasury. 

ACTION: Final rule. 

SUMMARY: The Department of the 

Treasury (Treasury) is issuing this final 

rule to amend the regulations governing 

State and Local Government Series 

(SLGS) securities. SLGS securities are 

non-marketable Treasury securities that 

are available for purchase only by 

issuers of tax-advantaged securities. The 

final rule amends the SLGS regulations 

to prevent impermissible uses of the 

SLGS program, most notably the use of 

program flexibilities by tax-advantaged 

entities, usually a state or local 

government, investing in SLGS 

securities to create impermissible costfree options. The final rule amends the 

existing regulations to prevent such 

activity. In addition, the final rule 

makes administrative changes to 

increase efficiencies in the program. 

DATES: This final rule is effective August 

26, 2024. 

FOR FURTHER INFORMATION CONTACT: 

Mike Goodwin, Division Director, Jared 

Waters, Program Manager, Brian Metz, 

Senior Counsel, or Elizabeth Spears, 

Senior Counsel, via email at SLGS@

fiscal.treasury.gov, by telephone at (304) 

480–5299, or via U.S. Mail at Bureau of 

the Fiscal Service, P.O. Box 396, 

Parkersburg, WV 26106–1328. 

SUPPLEMENTARY INFORMATION: 

I. Overview of Rulemaking 

On September 30, 2022, Treasury 

published a notice of proposed 

rulemaking (NPRM) with request for 

comments (87 FR 59353, September 30, 

2022), proposing amendments to the 

regulations governing U.S. Treasury 

securities of the State and Local 

Government Series (SLGS). The 

proposed amendments addressed 

certain practices of investors in SLGS 

securities that Treasury considers to be 

an inappropriate use of the SLGS 

securities program. The comment period 

ended on November 29, 2022, and 

Treasury received two comment letters. 

After careful consideration of the 

comments, Treasury is now issuing a 

final rule. 

The NPRM proposed amendments to 

the SLGS regulations to address 

impermissible uses of the SLGS 

program, most notably the misuse of 

program flexibilities by tax-advantaged 

entities, usually a state or local 

government, investing in SLGS 

securities to create impermissible costfree options. The NPRM proposed 

amendments designed to stop such 

activity. Additionally, the NPRM 

proposed administrative changes to 

increase efficiencies in the program. 

In the final rule, Treasury is adopting 

all but one of the proposed 

amendments. In response to the public 

comments, Treasury is providing 

additional detail and clarification 

herein. 

The following discussion provides 

background on previous related 

rulemakings, explains the NPRM’s 

proposed amendments, addresses the 

public comments on those proposed 

amendments, and describes the final 

rule. 

II. Background 

SLGS securities are a type of nonmarketable Treasury security that is 

available for purchase by state and local 

governments and other issuers (as 

defined in 31 CFR 344.1) of taxadvantaged bonds (Issuers). SLGS 


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securities have been issued by Treasury 

since 1972. The purpose of the SLGS 

program is to assist state and local 

government Issuers in complying with 

yield restriction and rebate 

requirements applicable to taxadvantaged bonds under the Internal 

Revenue Code. 

Generally, the arbitrage requirements 

under the Internal Revenue Code 

provide that with certain exceptions, the 

proceeds of a tax-advantaged bond may 

not be invested at a yield that is 

materially higher than the yield on the 

bond (26 CFR 1.148–2). In the limited 

circumstances in which bond proceeds 

may be invested above the bond yield, 

the bond issuer generally is required to 

rebate to the Federal Government any 

earnings in excess of the bond yield. 

SLGS securities may only be 

purchased with eligible funds (defined 

in 31 CFR 344.1). For SLGS Time 

Deposit securities (defined in 31 CFR 

344.4) that bear interest, purchasers may 

generally select any maturity period 

from 30 days to 40 years and any 

interest rate that does not exceed the 

applicable SLGS rate for that maturity 

published in the daily SLGS rate table. 

Since 2005, the maximum SLGS rates 

have been set at the current Treasury 

borrowing rate less one basis point. 

Purchasers of SLGS securities have the 

flexibility to structure the securities 

with specified payment dates and 

yields. 

In 1996, Treasury amended the 

regulations governing SLGS securities to 

eliminate certain requirements that had 

been introduced at various times since 

1972, and to make the program a more 

flexible and competitive investment 

vehicle for Issuers (61 FR 55690, 

October 28, 1996). Under the 1996 

regulations, Treasury also added a 

provision to permit Issuers to subscribe 

for SLGS securities and subsequently 

cancel the subscription, without a 

penalty, under certain circumstances. 

This additional flexibility led to 

unintended consequences in the SLGS 

program, primarily the creation of costfree options. 

Subsequently, in a series of regulatory 

amendments, Treasury has instructed 

that Issuers cannot use the flexibilities 

in the program, such as the ability to 

subscribe for SLGS and marketable 

securities and to select interest rates and 

maturities on SLGS securities, in a 

manner that either creates a cost-free 

option or is not necessary for the 

Issuer’s compliance with yield 

restriction and rebate requirements. In 

1997, Treasury amended the regulations 

to prohibit the use of the SLGS program 

to create a cost-free option in certain 

circumstances (62 FR 46444, September 

3, 1997). Treasury stated in the 

preamble to the rulemaking that it was 

inappropriate to use the SLGS securities 

program as an option and provided 

examples of unacceptable practices. 

These practices included, among others, 

subscribing for SLGS securities for an 

advance refunding escrow and 

simultaneously purchasing marketable 

securities for the same escrow, with the 

plan that the marketable securities 

would be sold if interest rates declined 

or the SLGS subscription would be 

canceled if interest rates did not 

decline. 

In 2004, Treasury proposed further 

amendments. In a proposed rule 

published in September 2004 (69 FR 

58756, September 30, 2004) (2004 

NPRM), Treasury indicated that it had 

become aware of several other practices 

involving SLGS securities that are also 

inappropriate uses of the securities and 

contrary to the purpose of the program. 

Several regulatory amendments were 

proposed to address these practices and 

other miscellaneous items. The 2004 

NPRM addressed the redemption before 

maturity or sale of securities to reinvest 

at a higher yield, as well as the 

cancellation of subscriptions for the 

purchase of SLGS securities and resubscribing at a higher yield when 

interest rate movements were favorable. 

The 2004 NPRM reiterated that 

Treasury views the practice of 

requesting redemption of SLGS 

securities before maturity to take 

advantage of relatively infrequent 

updates to SLGS interest rates as an 

inappropriate use of SLGS securities. 

Even if undertaken to eliminate negative 

arbitrage (where bond proceeds have 

been invested at a yield that is less than 

the yield on the Issuer’s bond), Treasury 

considers the practice to be a cost-free 

option and inconsistent with the 

purpose of the SLGS program. Treasury 

noted that there is a direct cost of such 

actions to Treasury because Treasury is 

not being compensated for the value of 

the option; that the practice results in 

volatility in Treasury’s cash balances 

and increases the difficulty of cash 

balance forecasting and thereby 

increases Treasury’s borrowing costs; 

and that there are administrative costs. 

The 2004 NPRM proposed a new 

provision making it impermissible to 

purchase a SLGS security with a 

maturity longer than is reasonably 

necessary to accomplish a governmental 

purpose of the Issuer. After reviewing 

the public comments and considering 

other measures being taken to stop the 

creation of cost-free options, Treasury 

decided not to implement the rule 

against purchasing securities with 

maturities longer than reasonably 

necessary to accomplish a governmental 

purpose. 

The 2005 final rule (70 FR 37904, 

June 30, 2005) addressed several 

inappropriate practices that provided 

SLGS investors cost-free options or 

arbitrage opportunities that are not 

available in marketable securities. Those 

practices imposed substantial costs on 

the Federal Government. The 

amendments in the 2005 final rule were 

intended to make investments in SLGS 

securities more closely resemble 

investment opportunities available in 

Treasury marketable securities. 

While implementation of the 2005 

final rule put an end to many of the 

impermissible practices, Treasury still 

observed misuses within the SLGS 

program whereby program flexibilities 

were used to create cost-free options. 

For these reasons, the September 30, 

2022 NPRM proposed the amendments 

described below to eliminate certain 

practices that persisted after Treasury’s 

previous rule amendments. Treasury 

intends these amendments to also 

address new, yet similar, types of 

transactions that may also create 

impermissible cost-free options. 

Treasury believes that the amendments 

proposed in the NPRM retain sufficient 

flexibility for Issuers to appropriately 

select maturities and interest payment 

dates (a principal reason that SLGS 

securities are an attractive investment 

vehicle for Issuers) without creating 

cost-free options. 

The final rule amendments will apply 

only to SLGS subscriptions started on or 

after August 26, 2024, the effective date 

of the final rule. 

III. Proposals, Comments, and Final 

Rule 

Treasury received two public 

comment letters on the NPRM: one from 

a nonprofit organization and bar 

association representing attorneys who 

work in the municipal bond market, and 

one from an independent municipal 

advisory firm. In general, the 

commenters objected to proposed rule 

amendments that would reduce 

flexibilities in the program. Commenters 

expressed concern that certain of the 

proposed amendments were vague or 

insufficiently clear. The commenters 

also made certain suggestions pertaining 

to items outside of the scope of the 

NPRM’s proposed amendments. 

Comments within the scope of the 

NPRM are addressed below. 

A. Proposals To Address Impermissible 

Use of Flexibilities in the Program To 

Create Cost-Free Options 

In the NPRM, Treasury explained 

that, despite prior rule amendments to 


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15442 Federal Register / Vol. 89, No. 43 / Monday, March 4, 2024 / Rules and Regulations 

explicitly prohibit the creation of costfree options within the SLGS program, 

it has observed misuse where 

purchasers buy long-term SLGS 

securities and then redeem the security 

before maturity when interest rates 

move in a favorable manner to capture 

a redemption premium. To eliminate 

the creation of cost-free options, 

Treasury proposed imposing a 

requirement that the term of the SLGS 

security subscribed for is no longer than 

reasonably necessary for the Issuer’s 

governmental purpose (as defined in 

§ 344.1 of the proposed rule) for its 

purchase of the security and that Issuers 

must hold Time Deposit securities for a 

minimum amount of time before 

requesting an early redemption. 

1. No Maturity Longer Than Necessary 

To eliminate the cost-free option, the 

final rule adds a new restriction on 

maturity lengths in § 344.2(f)(1)(iv) that 

will be evidenced by a duration 

certification under § 344.2(e)(3) 

requiring the Issuer to certify that the 

length of the maturity of a SLGS 

security subscribed for is no longer than 

reasonably necessary for the underlying 

governmental purpose of the 

investment. To further explain what it 

considers to be the creation of an 

impermissible a cost-free option, 

Treasury is amending the nonexhaustive list of impermissible 

transactions in § 344.2(f)(1) by adding a 

new functional description. This 

description exhibits an impermissible 

practice of purchasing or redeeming 

prior to maturity a SLGS security with 

a term that is longer than is reasonably 

necessary to accomplish the 

governmental purpose. 

Creating a subscription in the 

SLGSafe system (the secure internet site 

through which subscribers submit SLGS 

securities transactions) currently 

requires several certifications before a 

subscription can be completed; 

however, there is currently not a 

certification on the term of the SLGS 

security. The NPRM proposed a new 

duration certification which is intended 

to address a practice where an Issuer, in 

response to the direction of interest 

rates, purchases a SLGS security with a 

term longer than necessary for its 

governmental purpose, and then 

redeems the security before maturity to 

collect a premium. 

The current rule at § 344.2(e) requires 

the Issuer or its agent to make: (1) an 

agent certification, and (2) a yield 

certification upon submitting a 

subscription for purchase of SLGS 

securities. Both certifications are 

currently incorporated into the 

subscription process within the SLGSafe 

system. The new duration certification 

will be added to the existing 

certifications in SLGSafe and will not 

require any additional paperwork or 

other administrative burden. Demand 

Deposit securities (as defined in 31 CFR 

344.7) have a maturity of one day and 

will not be subject to the duration 

certification. 

Treasury received comments from 

both commenters on the proposed 

duration certification. One commenter 

expressed concern that the duration 

certification requirement is vague and 

may cause confusion, while the other 

commenter requested further details on 

the process by which an Issuer would 

fulfill the certification requirement and 

requested that the requirement not 

impose an additional cost or burden on 

the Issuer. 

Treasury has considered these 

comments and has determined that 

implementation of the duration 

certification is necessary to help stop 

inappropriate uses of the program. The 

duration certification requires that the 

term of the security subscribed for must 

be ‘‘reasonably’’ necessary for the 

Issuer’s governmental purpose (as 

defined in § 344.1). The duration 

certification requirement provides 

needed clarity but also allows for some 

limited flexibility in matching the 

security term to the governmental 

purpose. At the time of subscription, 

Issuers should have a reasonable 

understanding of their maturity 

requirements for a particular 

subscription. Additionally, by 

incorporating the duration certification 

into the existing subscription process, in 

which other required certifications 

(§ 344.2(e)) already exist, there is no 

additional burden or expense for 

Issuers. In this final rule, Treasury has 

updated the duration certification 

language in § 344.2(e) to better match 

the requirement in § 344.2(f)(1). 

2. Impermissible Practices 

Transactions that impermissibly take 

advantage of the flexibilities afforded to 

Issuers in the SLGS program to create 

cost-free options are prohibited. The 

final rule includes additional examples 

of impermissible practices in 

§ 344.2(f)(2). However, the list of 

examples in the regulation is nonexhaustive. These restrictions are 

necessary to curb the use of the SLGS 

program as a cost-free option. Previous 

efforts to eliminate the creation of costfree options within the program have 

not adequately addressed these 

activities, and no alternatives have been 

identified that would be workable to 

achieve this goal. 

There were no comments on the 

proposed addition of examples of 

impermissible practices, and 

accordingly Treasury adopts the 

amendment as proposed. 

3. Increase in Minimum Holding Period 

Before Notification for Early 

Redemption of Time Deposit Securities 

In the NPRM, Treasury proposed 

requiring a minimum 14-day holding 

period after a Time Deposit security has 

been issued and before the Issuer may 

request an early redemption of a Time 

Deposit note or bond. Treasury is 

adopting this change as proposed. 

Under the current regulations, the Issuer 

may request early redemption of a Time 

Deposit security as early as the day after 

Treasury issues the SLGS security. 

While a request for early redemption 

may be submitted as soon as the day 

after issue, a Time Deposit security that 

is a certificate of indebtedness of 30 

days or more has a minimum 25-day 

holding period for redemption, and a 

Time Deposit security that is a note or 

bond has a minimum 30-day holding 

period for redemption. Treasury is not 

amending these minimum holding 

periods for redemption; however, 

Treasury is increasing the holding 

period, as proposed, prior to an Issuer 

being permitted to request an early 

redemption of a Time Deposit security 

that is a note or bond. In other words, 

the minimum holding period for 

requesting early redemption is 

increased, while the minimum holding 

period for early redemption remains the 

same. For example, currently a Time 

Deposit security that is a note or bond 

issued on the first day of a month may 

not be early redeemed prior to the 31st 

of that month, and notice of the early 

redemption may be submitted as early 

as the second day of that month. Under 

the final rule, that same Time Deposit 

security still may not be early redeemed 

prior to the 31st of the month of 

issuance, but notice of early redemption 

may not be submitted until the 15th day 

of that month (after the minimum 14- 

day holding period). 

Because the interest rate used to 

calculate a premium or discount on an 

early redemption of a Time Deposit 

security is fixed as of the date that the 

early redemption of the security is 

requested, there are currently 

opportunities for Issuers to use the early 

redemption flexibility to generate 

premiums within the SLGS program. 

Treasury considers this to be the 

creation of a cost-free option and 

therefore impermissible. Increasing the 

minimum holding period before an 

Issuer may request early redemption 

will deter the creation of this type of 


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impermissible cost-free option by 

increasing the interest rate risk to a 

more meaningful level than exists under 

current regulations. It is Treasury’s view 

that even more than de minimis risk to 

the Issuer does not change the fact that 

this is still a cost-free option and, either 

with or without risk, is an 

impermissible practice. 

One commenter expressed concern 

that the minimum holding period could 

have an unintended negative impact on 

Issuers whose circumstances have 

changed or may require cash proceeds 

sooner than the proposed 14-day 

minimum holding period. Treasury 

believes this concern is misplaced, 

because Treasury is not changing the 

length of time that a Time Deposit 

security must be held prior to early 

redemption. The change is only to the 

amount of time that the security must be 

held prior to the Issuer making the 

request for early redemption. Therefore, 

Treasury adopts the amendment as 

proposed. 

4. Specifying the Maturity of Time 

Deposit Securities 

The NPRM proposed requiring that all 

Issuers must provide a maturity date at 

the start of a subscription, rather than by 

the time of completion of the 

subscription. The NPRM proposed that 

when starting a Time Deposit security 

subscription under § 344.5(b)(5) and 

completing a subscription under 

§ 344.5(e)(2), the Issuer must separately 

itemize the maturity date(s) by 

individual Time Deposit security. If 

necessary, Issuers could still adjust the 

maturities of each of the Time Deposit 

securities, within certain parameters as 

described below. 

One commenter expressed concern 

that adding this requirement could 

cause a problem for Issuers that know 

the minimum settlement requirement, 

but do not know the full details at the 

time of starting the subscription. The 

commenter’s concern appears to be that 

this requirement may be overly 

burdensome and result in additional 

potential errors in the subscription 

details. 

The NPRM did not propose adding 

additional requirements to the overall 

information necessary to issue a SLGS 

security. Specifying the term of a Time 

Deposit security has always been a 

requirement prior to issuance of that 

security in the SLGSafe system. 

Treasury is merely adjusting the time at 

which the security information must be 

provided from the time of issuance to 

the start of a SLGS subscription. 

Consequently, there is no additional 

burden placed upon an Issuer as to the 

type of information that must be 

provided to Treasury. Further, with 

respect to the risk of potential errors in 

the information that will be needed to 

start the SLGS subscription, SLGSafe 

will continue to include flexibility for 

the Issuer to adjust the initial 

established term of the security, within 

certain limits, to better match the 

projected needs of the Issuer that may 

change in the time between the start of 

the subscription and the issuance of the 

security. If the Issuer’s circumstances 

change such that the built-in flexibilities 

are inadequate to address the needed 

correction, the Issuer may contact 

Treasury and request a waiver under the 

rules to allow for an adjustment to the 

maturity date. Treasury will carefully 

review the waiver request and any 

relevant supporting information, as it 

currently does with waiver requests, to 

ensure that there is no creation of an 

impermissible cost-free option. The 

request should explain any time 

exigencies so that Treasury can timely 

reply to the request. Therefore, Treasury 

adopts the rule amendment as proposed. 

5. Limiting Maturity Adjustments on 

Time Deposit Securities 

The NPRM proposed limiting Issuer 

adjustments to the maturity of a Time 

Deposit security before issuance. While 

this flexibility is an attractive feature of 

the SLGS program, it is also a flexibility 

where Treasury has observed repeated 

misuses of the program to create costfree options. The NPRM proposed a new 

restriction that the Issuer cannot change 

the maturity date on a Time Deposit 

security by more than 30 days for 

certificates of indebtedness, six months 

for notes, and one year for bonds. The 

proposed rule amendments retain the 

Issuer’s flexibility in setting the 

maturity of SLGS securities, while 

removing the ability to alter maturities 

beyond the time required to accomplish 

a governmental purpose. The flexibility 

retained in this provision will allow 

appropriate amendments to 

subscriptions for the purchase of SLGS 

securities while curbing efforts to create 

impermissible cost-free options. 

One commenter requested that 

Treasury provide clear direction on the 

permissible and impermissible 

adjustments that may be made to the 

maturity of a Time Deposit security 

prior to issuance. Treasury believes the 

final rule provides clarity regarding 

these terms. 

For example, an Issuer that subscribes 

for a certificate of indebtedness Time 

Deposit security with a maturity of 60 

days may amend the maturity of that 

security prior to issuance by either 

lengthening or shortening the term by 

up to 30 days, such that the amended 

term may be any length between 30 days 

and 90 days, subject to other applicable 

rule requirements. A certificate of 

indebtedness subscribed for with a term 

of 360 days may be amended prior to 

issuance such that the term may be any 

length between 330 days and 390 days, 

subject to other applicable rule 

requirements. An Issuer that subscribes 

for a note Time Deposit security with a 

term of 5 years may amend the maturity 

prior to issuance by either lengthening 

or shortening the term by up to 6 

months, such that the term may be any 

length between 4 years and 6 months, 

and 5 years and 6 months, subject to 

other applicable rule requirements. An 

Issuer that subscribes for a bond Time 

Deposit security with a term of 15 years 

may amend the maturity prior to 

issuance by either lengthening or 

shortening the term by up to 1 year, 

such that the term may be any length 

between 14 years and 16 years, subject 

to other applicable rule requirements. 

The amount that a maturity can be 

adjusted is based on the term of the 

Time Deposit security as originally 

subscribed for, not the term of the 

resulting security after adjustment. For 

example, a note Time Deposit originally 

subscribed for with a term of 9 years 

and 7 months could be adjusted to a 

term of 10 years and 1 month. Even 

though the resulting security after 

adjustment is a bond Time Deposit 

security, the restriction on the amount 

of the adjustment is based on the Time 

Deposit security prior to any 

adjustment, which was a note Time 

Deposit security in this example. 

Additionally, Time Deposit securities 

whose maturities are adjusted more than 

once prior to issuance remain subject to 

the adjustment restriction based on the 

term of the security originally 

subscribed for, not on the term after the 

adjustments. For example, where a Time 

Deposit security was originally 

subscribed for with a term of 10 years, 

the maturity can be adjusted multiple 

times within SLGSafe prior to issuance; 

however, regardless of any maturity 

adjustments prior to issuance, the 

maximum term of the security remains 

10 years and 6 months, and the 

minimum term remains 9 years and 6 

months. Treasury reiterates that in 

addition to complying with these 

adjustment restrictions, the final 

maturity chosen must be no longer than 

reasonably necessary for the underlying 

governmental purpose of the 

investment, as required by the new 

duration certification described above. 

While this provision permits changes 

to the term of a Time Deposit security, 

Treasury emphasizes that such 

flexibilities are intended to address 


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15444 Federal Register / Vol. 89, No. 43 / Monday, March 4, 2024 / Rules and Regulations 

situations when there is a change 

related to the governmental purpose 

after a subscription is started and prior 

to the issuance of the security, such as 

changes in projections of when the 

funds will be needed to meet 

disbursement or payment needs. Such 

flexibility is not provided for the 

purpose of adjusting maturities in 

response to movements in interest rates, 

anticipated movements in interest rates, 

or for any reason other than a change in 

circumstances that requires an 

adjustment to the maturity date. A 

change made to the maturity date for 

any other reason, even if the change 

complies with the adjustment 

restrictions described in this section, is 

prohibited under the final rule as the 

creation of an impermissible cost-free 

option. 

6. Changing Principal Amounts on Time 

Deposit Securities 

Treasury’s current regulation provides 

that the aggregate principal amount 

originally specified in a SLGS 

subscription cannot be changed by more 

than 10 percent. The NPRM proposed to 

apply the 10 percent limit to each Time 

Deposit security rather than to a SLGS 

subscription as a whole. The ‘‘limiting 

maturity adjustments on Time Deposit 

Securities’’ proposed amendment would 

be ineffective if Issuers could simply 

‘‘shift’’ subscribed for amounts from one 

Time Deposit security to another Time 

Deposit security with a significantly 

different maturity date. 

Both commenters expressed concerns 

about the proposed change. One 

commenter noted that it could cause 

problems for Issuers that subscribe for 

SLGS securities when the minimum 

settlement amount is known but the full 

details for the subscription are not 

known at the time of starting a 

subscription. The other commenter 

expressed concern that this change 

would negatively impact the flexibility 

of Issuers to adjust subscriptions at the 

Time Deposit security level prior to 

issuance. The commenter also stated 

that maximum flexibility in refining 

subscriptions allows for optimal 

utilization of the SLGS program. 

Even with the proposed amendment, 

appropriate flexibilities for Issuers 

remain. The current requirement on the 

amount that a SLGS subscription as a 

whole may be adjusted (+/¥10%) is not 

being amended. The amendment 

requires that the Time Deposit security 

specific information that is required in 

all subscriptions prior to issue date, 

must be provided at the start of a SLGS 

subscription. The amendment is tailored 

to avoid the creation of impermissible 

cost-free options. Further, if the 

circumstances of an Issuer change such 

that the remaining flexibility is 

inadequate to address a necessary 

correction, the Issuer can contact 

Treasury and request a waiver under the 

rules to allow for a larger adjustment to 

the principal amount on the specific 

Time Deposit securities required. 

Therefore, Treasury adopts amendment 

as proposed. 

7. Changing Principal Amounts on 

Demand Deposit Securities 

In the NPRM, Treasury did not 

propose any amendments pertaining to 

the principal amounts for Demand 

Deposit securities. Accordingly, there 

were no comments relating to the rule 

as it pertains to Demand Deposit 

securities, and they will remain subject 

to the current rule that the aggregate 

principal amount may not be changed 

by more than 10 percent above or below 

the amount originally specified in the 

subscription. 

B. Proposals To Address Administrative 

Updates and Changes to the Program 

1. Purpose of the SLGS Program 

In the NPRM, Treasury proposed 

reinserting language that the purpose of 

the SLGS program is ‘‘to assist in 

complying with applicable provisions of 

the Internal Revenue Code’’ as it 

appeared prior to the amendments made 

in 2005. At that time, Treasury updated 

the stated purpose of the SLGS program 

based on commentors’ views that it was 

vague. However, the 2005 amendment 

was perceived as causing confusion 

among Issuers that interpreted the 

amendment to mean that the program 

could be used for broader, unintended 

purposes, such as eliminating negative 

arbitrage, in contravention of the rule 

against cost-free options. 

Treasury received no comments on 

the proposed amendment to § 344.0(a) 

stating the purpose of the SLGS program 

and adopts the amendment as proposed. 

2. Definitions Updates 

The NPRM proposed amendments to 

certain definitions used in the SLGS 

program, including revisions to some 

existing definitions and the addition of 

new definitions to help clarify various 

provisions in the rules. 

The NPRM proposed amending the 

definition of ‘‘business day’’ in § 344.1 

to clarify which days normal processing 

of SLGS securities transactions will 

occur. Treasury received no comments 

on the proposed amendment and adopts 

the change as proposed. 

The NPRM proposed amending the 

definition of ‘‘Issuer’’ in § 344.1 to 

update the definition to better align 

with the IRS arbitrage regulations. 

Treasury received no comments on the 

proposed amendment and adopts the 

change as proposed. 

The NPRM proposed amending the 

definition of ‘‘eligible source of funds’’ 

to better align with the relevant portions 

of the Internal Revenue Code and the 

Income Tax Regulations. Treasury 

received no comments on the proposed 

amendment and adopts the change as 

proposed. 

The NPRM proposed adding a 

definition of ‘‘cost-free option’’ in 

§ 344.1 that states that ‘‘the use of any 

provision(s) in the SLGS program to 

exploit movements in interest rates, 

including, but not limited to, those 

designed to provide marginal flexibility 

to Issuers in structuring their SLGS 

investments’’ constitutes a cost-free 

option, which is prohibited in the rules. 

One commenter expressed concern that 

the definition may be overly broad and 

suggested stating that the definition of a 

cost-free option is specific to SLGS and 

other Treasury obligations. Treasury 

intentionally drafted the definition of 

cost-free option broadly to encompass 

all situations in which impermissible 

actions could be taken by Issuers to 

exploit the movement in interest rates. 

Past behavior by Issuers supports this 

broad definition. These misuses have 

primarily arisen through the creation of 

inappropriate cost-free options. 

Treasury notes, however, that the 

definitions set out in § 344.1 are specific 

to the SLGS program and do not purport 

to apply outside of part 344. Therefore, 

Treasury adopts the addition of the 

definition of cost-free option as 

proposed. 

In the NPRM, Treasury proposed 

adding a definition of ‘‘marketable 

security’’ in § 344.1 that closely aligns 

with the example published in the SLGS 

Frequently Asked Questions. Treasury 

received no comments on the proposed 

amendment and adopts the addition of 

the definition of marketable security as 

proposed. 

The NPRM proposed adding a 

definition of ‘‘tax-advantaged bond’’ in 

§ 344.1 that corresponds with the 

definition of the types of bonds to 

which the relevant portions of the 

Internal Revenue Code and the Income 

Tax Regulations (generally 26 U.S.C. 

148 and 26 CFR 1.148–0 through 1.148– 

11) apply. Treasury received no 

comments on the proposed amendment 

and adopts the addition of the definition 

of tax-advantaged bond as proposed. 

The NPRM proposed adding a 

definition of ‘‘governmental purpose’’ in 

§ 344.1 clarifying that using the SLGS 

program to create cost-free options is 

not a permitted governmental purpose. 


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Treasury received no comments on the 

proposed amendment and adopts the 

addition of the definition of 

governmental purpose as proposed. 

3. Certification of Eligibility To 

Purchase 

The NPRM proposed adding a new 

§ 344.2(e)(4) that would add a 

certification on the Issuer’s eligibility to 

purchase SLGS securities. This 

certification would require the Issuer to 

notify Treasury if, at any point while 

SLGS securities are outstanding, the 

issuer becomes ineligible to purchase 

SLGS securities or the funds used to 

purchase SLGS securities are no longer 

‘‘an eligible source of funds.’’ The 

notification requirement would apply to 

all outstanding SLGS securities (e.g., 

Time Deposit, Demand Deposit, and 

special 90-day certificates of 

indebtedness). Once Treasury receives 

notification that funds used to purchase 

a SLGS security are no longer ‘‘an 

eligible source of funds,’’ reinvestment 

of those funds after maturity into 

another SLGS security will not be 

permitted. Because Demand Deposit 

SLGS are one-day certificates of 

indebtedness that are automatically 

rolled over each day until redemption is 

requested, Treasury will deem the 

notification to be a request to redeem 

those outstanding Demand Deposit 

securities that are affected by the 

ineligibility under § 344.9, as amended. 

The Issuer would not be required to 

early redeem Time Deposit securities 

that are outstanding at the time of the 

notification because Time Deposit 

securities are longer-term securities that 

would have been purchased with an 

eligible source of funds at the time of 

issuance. Likewise, special 90-day 

certificates of indebtedness purchased 

with funds that are no longer considered 

‘‘an eligible source of funds’’ would be 

redeemed either upon maturity (i.e., 

would not be rolled into a new special 

90-day certificate of indebtedness) or 

upon reversion to Demand Deposit 

securities and would not have to be 

early redeemed. 

One commenter on the proposed rule 

asked for additional detail on the 

process through which an Issuer would 

certify its eligibility to purchase SLGS 

securities. Additionally, the commenter 

suggested that the regulations would be 

enhanced by clarifying any timing 

requirements associated with the 

notification. Treasury anticipates 

incorporating the eligibility certification 

into the existing certification process 

within the SLGSafe system that is used 

to subscribe for the purchase of SLGS 

securities. Treasury further clarifies that 

an Issuer must notify Treasury when the 

Issuer receives a ‘‘final adverse 

determination’’ letter from the IRS 

informing the Issuer that the funds 

status has changed and the funds are no 

longer considered proceeds from a taxadvantaged bond. If an Issuer has any 

question about a particular instance or 

IRS determination, that Issuer may 

contact Treasury with its specific details 

and seek further guidance on what, if 

anything, is required under the 

eligibility certification. 

After considering this comment, 

Treasury has decided to adopt the 

amendment as proposed. 

4. SLGS Rate Table 

In the NPRM, Treasury proposed 

amending § 344.4(b)(1) to state that 

Treasury will post the SLGS rate table 

‘‘by 10 a.m. Eastern Time each business 

day or as soon as practicable thereafter,’’ 

to provide Treasury more flexibility in 

those rare instances where the SLGS 

rate table cannot be released to the 

public by 10 a.m. Eastern Time. The 

amendment would provide that if no 

SLGS rate table has been published by 

11 a.m. Eastern Time, then the SLGS 

rate table for the preceding business day 

would apply. 

One commenter on the proposed rule 

stated that the amendment to the time 

for posting the SLGS rate table would 

increase ambiguity surrounding the 

timing for when the SLGS rates may be 

published and could adversely affect 

Issuers that price bonds in the market 

before 11 a.m. Eastern Time. The 

commenter suggested that the provision 

should not be amended. Treasury 

appreciates the concerns expressed in 

the comment, and the proposal would 

maintain the general expectation that 

the SLGS Rate Table would be 

published by 10 a.m. each business day. 

However, there may be rare situations 

where it is not feasible for Treasury to 

post the SLGS rates by 10 a.m. (for 

example due to an operational issue 

such as internet connectivity), and the 

proposed amendment would provide 

Treasury limited flexibility in posting 

the rates shortly thereafter. 

Additionally, the SLGS window 

remains open until 10 p.m. Eastern 

Time each business day and provides 

ample time for Issuers to finalize pricing 

and enter a subscription in the SLGSafe 

system. Therefore, Treasury adopts the 

amendment as proposed. 

5. Lead Time for the Establishment of 

the Issue Date 

The NPRM proposed amending the 

lead time for an Issuer to subscribe for 

SLGS securities from 60 to 45 calendar 

days. Moving the subscription date 

closer to the issue date would provide 

more accurate pricing for SLGS 

securities and would narrow the 

window of time in which an 

impermissible cost-free option could be 

created. Since less than 4 percent of 

SLGS subscriptions are started more 

than 45 days in advance of issue date, 

the impact of the proposed reduction in 

subscription lead time on Issuers should 

be minimal. 

Treasury received comments from 

both commenters suggesting that 

maintaining the existing 60-day lead 

time would benefit Issuers in bond 

pricing and issuance especially during 

times of an impending debt limit 

contingency. In light of the other 

amendments in the final rule that are 

designed to reduce the opportunity to 

create impermissible cost-free options, 

Treasury accepts these comments and is 

not amending the current 60-day lead 

time for subscriptions to be submitted in 

SLGSafe. 

6. Subscription Process 

The NPRM proposed amendments to 

update §§ 344.5(e) and 344.8(e), which 

detail the information necessary for an 

issuer to start and complete the 

subscription process for Time Deposit 

and Demand Deposit securities, 

respectively. Updates are required due 

to the changes implemented by this 

rule. These amendments will help 

reduce opportunities to create 

impermissible cost-free options. 

One commenter stated that some 

Issuers that currently subscribe for 

SLGS in time to account for the 

minimum settlement requirement do 

not know the full details of their 

subscription at the time of initial 

subscription. The commenter noted that 

requiring these Issuers to provide full 

subscription details at the time of initial 

subscription may be overly burdensome 

and result in potential errors in 

subscription details. 

The proposed amendments would not 

add new requirements to the overall 

information necessary to issue a SLGS 

security. The maturity date for a Time 

Deposit security has always been a 

requirement prior to issuance. Treasury 

is only adjusting the time at which the 

Time Deposit security information must 

be provided, from the time of issuance 

to the start of a SLGS subscription. 

Hence, there is no additional burden on 

an Issuer as to the type of information 

that must be provided to Treasury. As 

to the concern about potential errors, 

Treasury is building in flexibility to 

allow the Issuer to adjust the previously 

established maturity of each Time 

Deposit security to better match the 

projected needs of the Issuer prior to the 

issuance of that security. If there are 


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significant changes to an Issuer’s 

circumstances and the SLGS program’s 

flexibilities are inadequate to address 

the necessary changes, the Issuer can 

contact Treasury and request a waiver 

under the rules to allow for an 

adjustment to the Time Deposit 

security’s maturity date. Therefore, 

Treasury adopts the amendment as 

proposed. 

7. Identification of the Tax-Advantaged 

Bond Issue 

The NPRM noted that under the 

current rule, the underlying taxadvantaged bond issue must be 

identified when the Issuer ‘‘starts’’ and 

‘‘completes’’ the subscription for SLGS 

securities. This requirement has been in 

the current regulation since the 2005 

rule required the Issuer to enter a 

description of the Issuer’s tax-exempt 

bond issue, such as ‘‘Water and Sewer 

Revenue Bonds Series 2004’’ (70 FR 

37904, 37907, June 30, 2005). 

Subsequently, the Municipal Securities 

Rulemaking Board (MSRB) launched its 

Electronic Municipal Market Access 

(EMMA®) system, and EMMA has now 

become the official repository for 

municipal securities disclosures. 

Given that EMMA generally contains 

information about state and local 

government bonds, the NPRM proposed 

requiring that if a bond issue is 

registered in EMMA, the Issuer must 

adhere to the naming convention 

supplied in the ‘‘issue description’’ field 

on the ‘‘Security Information’’ tab in 

EMMA at https://emma.msrb.org when 

describing the tax-advantaged bond in 

SLGSafe. If the EMMA website amends 

its naming convention, the Issuer would 

supply the updated registration as it is 

presented in EMMA or its successor 

system. 

The Issuer would be able to input the 

‘‘EMMA registration’’ into SLGSafe at 

the time the subscription is started, but 

that information could be changed or 

updated at any time. This would allow 

additional time for the Issuer to update 

the description field if the bond issue 

has not yet been registered with EMMA 

when the subscription is started. 

Coordinating the EMMA registration 

information with the underlying bond 

issuance field in SLGSafe will assist 

Treasury in determining if the amounts 

are an ‘‘eligible source of funds’’ that 

may be used to purchase SLGS 

securities. 

One commenter on the proposed 

amendment expressed concern that the 

requirement to provide EMMA 

registration information may prevent 

Issuers from using the SLGS program 

because the requirement to identify a 

single bond issue eliminates Issuers’ 

ability to invest commingled debt 

service reserve funds. Treasury is not 

amending its rules to change which 

funds can be used to purchase SLGS 

securities, including comingled funds. If 

the funds qualify as an eligible source 

of funds, the proposed amendment does 

not change their eligibility. Treasury 

intends to provide capability within 

SLGSafe for an Issuer to enter EMMA 

information for multiple registrations if 

needed. 

A commenter also raised concerns 

that in many instances, an escrow 

trustee will file the subscription for 

SLGS securities. Given the escrow 

trustee’s limited role in most bond 

issues, the commenter suggested that 

the additional identification 

requirement may cause confusion or 

result in faulty subscriptions for SLGS 

securities. An escrow trustee, acting as 

an agent on behalf of the Issuer, should 

be privy to the information surrounding 

an EMMA registration. Therefore, 

Treasury believes that requiring an 

agent for the Issuer to provide this 

information during the subscription 

process should not be unduly 

burdensome or costly. 

Another commenter expressed 

concern that Issuers may use naming 

conventions other than the EMMA 

registration’s naming convention for use 

within their own records and that 

requiring Issuers to change their naming 

conventions to those used in the EMMA 

registration could cause problems. To 

implement this amendment, Treasury is 

requiring that the EMMA registration 

information be entered in the existing 

‘‘Underlying Bond Issue’’ field within 

SLGSafe, while retaining flexibility for 

Issuers to continue current practices 

used when subscribing for SLGS 

securities. The amendment requires the 

same information, a description of the 

bond issuance, including the required 

EMMA description (where available), 

while allowing flexibility for the Issuer 

to include its own naming convention. 

Finally, a commenter noted that there 

are instances when the name of the 

issue is incorrectly entered on EMMA. 

Because Treasury may use this 

information to identify the underlying 

bond issue, the EMMA information 

provided should appear exactly as it 

does in the EMMA system. If there are 

any updates or corrections in the EMMA 

system, an Issuer must update the 

EMMA information in SLGSafe as soon 

as possible. 

For these reasons, Treasury adopts the 

amendment as proposed. 

8. Special Zero Interest Securities and 

Subscriptions on or Before December 

27, 1976 

The NPRM proposed removing 

subpart D of the current rule, as special 

zero interest securities were 

discontinued by Treasury on October 

28, 1996, and all outstanding SLGS 

securities issued on or before December 

27, 1976, matured by November 1, 2013. 

Treasury received no comments on this 

proposal and is removing §§ 344.5(e)(4) 

and 344.6(g) as proposed. 

9. Debt Limit Contingency 

a. Treasury’s Discretion To Leave 

Demand Deposit Securities Invested or 

To Invest in Special 90-Day Certificates 

of Indebtedness 

The NPRM noted that the current 

SLGS rules state that at any time the 

Secretary determines that issuance of 

obligations sufficient to conduct the 

orderly financing operations of the 

United States cannot be made without 

exceeding the statutory debt limit, 

Treasury must invest any unredeemed 

Demand Deposit securities in special 

90-day certificates of indebtedness. 

Treasury proposed amending § 344.7(b) 

to provide the Secretary with the 

flexibility to exercise discretion to either 

leave the unredeemed Demand Deposit 

securities invested or to invest them in 

special 90-day certificates of 

indebtedness. 

Treasury received no comments and 

therefore adopts the amendment as 

proposed. 

b. Terms Applying to Invested Demand 

Deposit Securities 

The NPRM proposed clarifying 

§ 344.7(b)(1) to provide that Demand 

Deposit securities during a debt limit 

contingency remain subject to the 

normal terms and conditions that apply 

to Demand Deposit securities. 

Treasury received no comments and 

therefore adopts the amendment as 

proposed. 

c. Terms Applying to Special 90-Day 

Certificates of Indebtedness 

The NPRM proposed to clarify 

§ 344.7(b)(2) to provide that special 90- 

day certificates of indebtedness that are 

issued during a debt limit contingency 

remain subject to the same redemption 

rules as Demand Deposit securities. As 

proposed, Treasury would roll over 

special 90-day certificates of 

indebtedness, along with accrued 

interest, into new special 90-day 

certificates of indebtedness when a debt 

limit contingency period lasts longer 

than 90 days. 


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Treasury received no comments and 

therefore adopts the amendment as 

proposed. 

d. End of a Debt Limit Contingency 

The NPRM noted that the current 

SLGS rules provide that at the end of a 

debt limit contingency, the Issuer has 

the option to keep the special 90-day 

certificates of indebtedness until 

maturity, redeem them before maturity, 

or reinvest them in Demand Deposit 

securities. Treasury proposed to amend 

§ 344.7(b)(2) to provide that when 

regular Treasury borrowing operations 

resume, Treasury would redeem any 

special 90-day certificates of 

indebtedness and reinvest the proceeds, 

along with accrued interest, in Demand 

Deposit securities. As a result, the Issuer 

would again hold the investment that 

the Issuer originally requested. 

Treasury received no comments and 

therefore adopts the amendment as 

proposed. 

10. Notice Period for Redemption of 

Demand Deposit Securities 

In the NPRM, Treasury noted that 

§ 344.9(a) currently requires notice of 

one business day for redemption of 

Demand Deposit securities in the 

amount of $10 million or less and notice 

of three business days for redemptions 

of more than $10 million. To aid in 

Treasury’s cash forecasting and cash 

management, Treasury proposed to 

amend § 344.9(a) to require notice of 

five business days for redemption of 

Demand Deposit securities and special 

90-day certificates of indebtedness in 

the principal amount of $500 million or 

more. 

One commenter noted that the 

amendment would assist Treasury in its 

cash forecasting and cash management 

but could have complications for Issuers 

and limit Issuer flexibility. While 

Treasury recognizes that this 

amendment would slightly reduce the 

flexibility in redeeming Demand 

Deposit securities, it will provide 

material benefits to Treasury’s cash 

forecasting and cash management 

processes, which require accurate 

projections of cash inflows and 

outflows. Furthermore, Treasury 

believes that for cash needs of $500 

million or more, Issuers will generally 

have sufficient notice and can provide 

the same to Treasury. Finally, in the 

event of an emergency, an issuer can 

request a waiver of this provision and 

ask that Treasury allow for a redemption 

of a Demand Deposit security with less 

notice. 

Therefore, Treasury adopts the 

amendment as proposed. 

C. Additional Comments Received 

Beyond the Scope of the Proposed 

Amendments 

In addition to those comments 

discussed above, commenters 

recommended additional amendments 

to the SLGS program. Such comments 

are beyond the scope of the NPRM and 

are not addressed here. 

Treasury notes that the delayed 

effective date of this final rule is 

intended to provide Issuers with 

sufficient time to review the final rule 

and make any necessary adjustments to 

their systems or processes. 

IV. Procedural Requirements 

A. Executive Order 12866 

This final rule is not a significant 

regulatory action for purposes of 

Executive Order 12866, dated 

September 30, 1993, as amended. 

B. Administrative Procedure Act (APA) 

Because this rule relates to United 

States securities, which are contracts 

between Treasury and the owner of the 

security, this rule falls within the 

contract exception to the APA, 5 U.S.C. 

553(a)(2). As a result, the notice, public 

comment, and delayed effective date 

provisions of the APA are inapplicable 

to this rule. 

C. Regulatory Flexibility Act 

This final rule relates to matters of 

public contract and procedures for 

United States securities. Therefore, 

under 5 U.S.C. 553(a)(2), the notice and 

public procedure requirements of the 

APA are inapplicable. Because a notice 

of proposed rulemaking is not required, 

the provisions of the Regulatory 

Flexibility Act, 5 U.S.C. 601 et seq., do 

not apply. 

D. Paperwork Reduction Act (PRA) 

Neither the proposed rule, nor the 

final rule contain any new collection of 

information subject to the Paperwork 

Reduction Act. 

E. Congressional Review Act (CRA) 

This rule is not a major rule pursuant 

to the CRA, 5 U.S.C. 801 et seq., because 

it is a minor amendment that is not 

expected to lead to any of the results 

listed in 5 U.S.C. 804(2). This rule will 

take effect on August 26, 2024, after 

publication in the Federal Register and 

after we submit a copy of it to Congress 

and the Comptroller General. 

List of Subjects in 31 CFR Part 344 

Bonds, Government securities, 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, we amend 31 CFR part 344 as 

follows: 

PART 344—U.S. TREASURY 

SECURITIES—STATE AND LOCAL 

GOVERNMENT SERIES 

■ 1. The authority citation for part 344 

continues to read as follows: 

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

3102, 3103, 3104, and 3121. 

■ 2. Amend § 344.0 by: 

■ a. Revising paragraph (a); and 

■ b. Removing paragraph (b)(3). 

The revision reads as follows: 

§ 344.0 What does this part cover? 

(a) What is the purpose of the SLGS 

securities offering? The Secretary of the 

Treasury (the Secretary) offers for sale 

non-marketable State and Local 

Government Series (SLGS) securities to 

provide issuers of tax-advantaged bonds 

with investments from any eligible 

source of funds (as defined in § 344.1) 

to assist issuers in complying with 

applicable provisions of the Internal 

Revenue Code. 

* * * * * 

■ 3. Amend § 344.1 by: 

■ a. Revising the definition of ‘‘Business 

day(s)’’; 

■ b. Adding in alphabetical order a 

definition for ‘‘Cost-free option’’; 

■ c. Revising the definition of ‘‘Eligible 

source of funds’’; 

■ d. Adding in alphabetical order a 

definition for ‘‘Governmental purpose’’; 

■ e. Revising the definition of ‘‘Issuer’’; 

■ f. Adding in alphabetical order 

definitions for ‘‘Marketable security’’ 

and ‘‘Tax-advantaged bond.’’ 

The revisions and additions read as 

follows: 

§ 344.1 What special terms do I need to 

know to understand this part? 

* * * * * 

Business day(s) means any day other 

than a Saturday or Sunday that the 

Federal Reserve Bank of New York is 

open for business. 

Cost-free option means the use of any 

provision(s) in the SLGS program to 

exploit movements in interest rates, 

including, but not limited to, those 

designed to provide marginal flexibility 

to issuers in structuring their SLGS 

investments. 

* * * * * 

Eligible source of funds means: 

(1) Any amounts that are gross 

proceeds of an issue of tax-advantaged 

bonds or are reasonably expected to 

become gross proceeds of such an issue 

of tax-advantaged bonds; 

(2) Any amounts that formerly were 

gross proceeds of a tax-advantaged bond 


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issue, but no longer are treated as gross 

proceeds of such issue as a result of the 

operation of the universal cap on the 

maximum amount treated as gross 

proceeds under 26 CFR 1.148–6(b)(2); 

(3) Amounts held or to be held 

together with gross proceeds of one or 

more tax-advantaged bond issues in a 

refunding escrow, defeasance escrow, 

parity debt service reserve fund, or 

commingled fund (as defined in 26 CFR 

1.148–1(b)); 

(4) Proceeds of a bond issue that is not 

an issue of tax-advantaged bonds but 

that refunds, or is refunded by, an issue 

of tax-advantaged bonds; or 

(5) Any other amounts that are subject 

to yield limitations under the rules 

applicable to tax-advantaged bonds 

under the Internal Revenue Code (see 

title 26 of the U.S. Code and 26 CFR 

chapter I). 

Governmental purpose, under this 

part, means the issuer’s expected use of 

the invested funds, including but not 

limited to, financing a construction 

project, repaying a prior issue of bonds, 

or funding a debt service reserve. Such 

use must be consistent with the 

purposes of the Income Tax Regulations 

in 26 CFR part 1 under section 148 of 

the Internal Revenue Code. Generating 

gain on the proceeds of a bond issue 

through the use of a cost-free option in 

purchasing and redeeming SLGS is not 

a permitted governmental purpose. 

Issuer refers to the government body 

or other entity that issues taxadvantaged bonds, or to a conduit 

borrower. 

Marketable security, with reference to 

the types of securities that issuers are 

permitted to purchase with an eligible 

source of funds, means any security 

other than a SLGS security. Examples of 

marketable securities include Treasury 

securities (other than SLGS securities) 

and Federal agency securities. 

* * * * * 

Tax-advantaged bond means taxadvantaged bond as defined in 26 CFR 

1.150–1(b). 

* * * * * 

■ 4. Amend § 344.2 by: 

■ a. Revising paragraph (d) and 

paragraph (e)(2)(i) introductory text; 

■ b. Adding paragraphs (e)(3) and (4); 

■ c. Revising paragraph (f)(1), the 

second sentence of paragraph (f)(2)(iv), 

and the first sentence of paragraph 

(f)(2)(v) introductory text; 

■ d. Adding paragraph (f)(2)(vii); and 

■ e. Revising the last sentence of 

paragraph (g). 

The revisions and additions read as 

follows: 

§ 344.2 What general provisions apply to 

SLGS securities? 

* * * * * 

(d) Can SLGS securities be 

transferred? No. SLGS securities issued 

as any one type, i.e., Time Deposit or 

Demand Deposit, cannot be transferred 

for other securities of that type or any 

other type. Transfer of securities by sale, 

exchange, assignment, pledge, or 

otherwise is not permitted. 

(e) * * * 

(2) * * * 

(i) Purchase of SLGS securities. Upon 

submitting a subscription, or performing 

any other transaction for a SLGS 

security, a subscriber must certify that: 

* * * * * 

(3) Duration certification. For each 

subscription to purchase a Time Deposit 

SLGS security, the subscriber must 

certify that the term of the SLGS 

security subscribed for is no longer than 

is reasonably necessary to accomplish 

the issuer’s governmental purpose for its 

purchase of the SLGS security. 

(4) Eligibility certification. For each 

subscription to purchase a SLGS 

security, the subscriber must certify that 

if, at any point while SLGS securities 

are outstanding, the issuer becomes 

ineligible to purchase SLGS securities or 

the funds used to purchase SLGS 

securities are no longer an eligible 

source of funds, the issuer or agent 

thereof must, as soon as practicable, 

notify Treasury of such ineligibility. 

Such notification will be deemed to be 

a request for redemption of those 

outstanding Demand Deposit securities 

that are affected by the ineligibility. 

(f) * * * 

(1) Impermissible transactions. (i) To 

use the SLGS program to create a costfree option (while the examples in 

paragraph (f)(2) of this section may 

specifically use marketable securities for 

illustration, creating a cost-free option 

via any means is prohibited); 

(ii) To purchase a SLGS security with 

any amount received from the sale or 

redemption (at the option of the holder) 

before maturity of any marketable 

security, if the yield on such SLGS 

security exceeds the yield at which such 

marketable security is sold or redeemed; 

(iii) To invest any amount received 

from the redemption before maturity of 

a Time Deposit security (other than a 

Zero Percent Time Deposit security) at 

a yield that exceeds the yield that is 

used to determine the amount of 

redemption proceeds for such Time 

Deposit security; or 

(iv) To purchase a SLGS security with 

a maturity that is longer than is 

reasonably necessary to accomplish the 

issuer’s governmental purpose for its 

purchase of the SLGS security or to 

purchase a SLGS security with an 

intention to redeem such SLGS security 

earlier than is reasonably necessary to 

accomplish the issuer’s governmental 

purpose for its purchase of the SLGS 

security. 

(2) * * * 

(iv) * * * To reduce or eliminate this 

negative arbitrage, the issuer subscribes 

for SLGS securities for purchase in 45 

days. * * * 

(v) * * * On February 6, 2006, an 

issuer purchases a Time Deposit 

security using an eligible source of 

funds from a debt service reserve fund. 

* * * 

* * * * * 

(vii) Purchase of SLGS security with 

maturity longer than reasonably 

necessary. An issuer may purchase 

SLGS securities to facilitate compliance 

with arbitrage yield restrictions for 

investments of various types of proceeds 

of tax-advantaged bonds, including 

investments in refunding escrow funds, 

bond debt service reserve funds, or 

project construction funds, respectively. 

The determination of whether a 

maturity for a SLGS security is longer 

than is reasonably necessary depends on 

the issuer’s governmental purpose for 

the issuance. Thus, the maturities of 

SLGS securities invested in a refunding 

escrow fund are reasonably necessary if 

they are no longer than those necessary 

to accomplish the defeasance of the 

underlying refunded bonds until the 

applicable redemption date or 

retirement date of the refunded bonds. 

Maturities of SLGS securities invested 

in a project construction fund are 

reasonably necessary if they are no 

longer than the reasonably expected 

construction period for the financed 

project, and early redemptions of such 

securities are reasonably necessary if 

they are reasonably related to 

construction draws for the financed 

project. Maturities of SLGS securities 

invested in a debt service reserve fund 

are reasonably necessary if they are no 

longer than the earlier of the permitted 

term of investments in that reserve fund 

under the bond documents or the term 

of the secured bonds. Early redemptions 

of SLGS securities with reasonably 

necessary maturities are permissible for 

the above bona fide business reasons, 

including changes in market interest 

rates. By contrast, the purchase of SLGS 

securities with maturities that are longer 

than the reasonably necessary maturities 

described above and associated early 

redemptions of those SLGS securities to 

obtain the funds within periods that 

would correspond to an issuer’s bona 

fide governmental purpose for a SLGS 


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Federal Register / Vol. 89, No. 43 / Monday, March 4, 2024 / Rules and Regulations 15449 

investment constitute impermissible 

practices under paragraph (f)(1)(iv) of 

this section. Thus, for example, if an 

issuer purchases SLGS securities to 

fund a refunding escrow to be used to 

defease and call refunded bonds at the 

first call date in five years, the issuer’s 

purchase of SLGS securities with 

maturities beyond that five-year period 

and corresponding early redemptions of 

those SLGS securities within that 

five-year period constitute an 

impermissible use of the SLGS program. 

(g) * * * Fiscal Service’s American 

Bankers Association (ABA) Routing 

Number can be found on Fiscal 

Service’s website under the SLGS 

frequently asked questions (FAQs). 

* * * * * 

■ 5. Amend § 344.3 by revising 

paragraph (e) to read as follows: 

§ 344.3 What provisions apply to the 

SLGSafe Service? 

* * * * * 

(e) How do I apply for SLGSafe 

access? Submit to Fiscal Service a 

completed SLGSafe Application for 

internet Access, which is found on 

Fiscal Service’s website. 

* * * * * 

■ 6. Amend § 344.4 by revising 

paragraph (b)(1) to read as follows: 

§ 344.4 What are Time Deposit securities? 

* * * * * 

(b) * * * 

(1) When is the SLGS rate table 

released? We release the SLGS rate table 

to the public by 10 a.m. Eastern time 

each business day or as soon as 

practicable thereafter. If the SLGS rate 

table is not available by 11 a.m. Eastern 

time on any given business day, the 

SLGS rate table for the preceding 

business day applies. 

* * * * * 

■ 7. Amend § 344.5 by revising 

paragraphs (a), (b), (d), (e), and (f) to 

read as follows: 

§ 344.5 What other provisions apply to 

subscriptions for Time Deposit securities? 

(a) When is my subscription due? The 

subscriber must set the issue date for the 

securities in the subscription. The issue 

date must be a business day. The issue 

date cannot be more than 60 days after 

the date we receive the subscription. If 

the subscription is for $10 million or 

less, we must receive a subscription at 

least 5 days before the issue date. If the 

subscription is for over $10 million, we 

must receive the subscription at least 7 

days before the issue date. 

Example 1 to paragraph (a): If SLGS 

securities totaling $10 million or less 

will be issued on May 16th, we must 

receive the subscription no later than 

May 11th. If SLGS securities totaling 

more than $10 million will be issued on 

May 16th, we must receive the 

subscription no later than May 9th. In 

all cases, if SLGS securities will be 

issued on May 16th, we will not accept 

the subscription before March 17th. 

(b) How do I start the subscription 

process? A subscriber starts the 

subscription process by entering into 

SLGSafe the following information: 

(1) The issue date; 

(2) The total principal amount; 

(3) The issuer’s name and Taxpayer 

Identification Number; 

(4) A description of the taxadvantaged bond issue; 

(5) Separately itemized securities to 

be purchased, specifying principal 

amount, maturity date, interest rate, and 

first interest payment date (in the case 

of notes and bonds) for each; and 

(6) The certifications required by 

§ 344.2(e). 

* * * * * 

(d) How do I change a subscription? 

You can change a subscription on or 

before 3 p.m. Eastern time, on the issue 

date. Changes to a subscription are 

acceptable with the following 

exceptions: 

(1) You cannot change the issue date; 

provided, however, you may change the 

issue date up to 7 days after the original 

issue date if you establish to the 

satisfaction of Treasury that such 

change is required as a result of 

circumstances that were unforeseen at 

the time of the subscription and are 

beyond the issuer’s control (for 

example, a natural disaster); 

(2) You cannot change the principal 

amount originally specified for any 

security in the subscription by more 

than ten percent; 

(3) You cannot change an interest rate 

to exceed the maximum interest rate in 

the SLGS rate table that was in effect for 

a security of comparable maturity on the 

business day that you began the 

subscription process; and 

(4) You cannot change the maturity 

date originally specified for any security 

in the subscription by more than 30 

days for certificates of indebtedness, 6 

months for notes, and 1 year for bonds. 

(e) How do I complete the 

subscription process? The completed 

subscription must: 

(1) Be dated and submitted 

electronically by an official authorized 

to make the purchase; 

(2) Separately itemize securities 

specifying principal amount, maturity 

date, interest rate, and first interest 

payment date (in the case of notes and 

bonds) for each; 

(3) Describe the bond issue. If the taxadvantaged bond issue referenced in 

paragraph (b)(4) of this section is, or 

will be, registered or disclosed in the 

Municipal Securities Rulemaking 

Board’s (MSRB) Electronic Municipal 

Market Access (EMMA®) system, 

describe the issue exactly as designated 

in the ‘‘issue description’’ field of 

EMMA®, or successor system; 

(4) Include the issuer’s address; 

(5) Include information on the 

financial institution that will transmit 

the funds for the purchase of the 

securities and information on the 

financial institution that will receive 

security principal and interest 

payments; 

(6) Not be more than ten percent 

above or below the aggregate principal 

amount originally specified in the 

subscription and not be more than ten 

percent above or below the originally 

subscribed for amount for each 

individual security; 

(7) Not deviate from the original 

subscribed for maturity date specified 

for any security in the subscription by 

more than 30 days for certificates of 

indebtedness, 6 months for notes, and 1 

year for bonds; 

(8) Include the information required 

under paragraph (b) of this section, if 

not already provided; and 

(9) Include the certifications required 

by § 344.2(e). 

(f) When must I complete the 

subscription? We must receive a 

completed subscription on or before 3 

p.m. Eastern time on the issue date. 

■ 8. Amend § 344.6 by: 

■ a. Revising paragraph (a)(3); and 

■ b. Removing paragraph (g). 

The revision reads as follows: 

§ 344.6 How do I redeem a Time Deposit 

security before maturity? 

(a) * * * 

(3) Notes or bonds. A note or bond 

can be redeemed, at the owner’s option, 

no earlier than 30 days after the issue 

date. Any request for redemption 

received within 14 days of the issue 

date will be rejected. 

* * * * * 

■ 9. Amend § 344.7 by revising 

paragraph (b) to read as follows: 

§ 344.7 What are Demand Deposit 

securities? 

* * * * * 

(b) What happens to Demand Deposit 

securities during a debt limit 

contingency? At any time the Secretary 

determines that issuance of obligations 

sufficient to conduct the orderly 

financing operations of the United 

States cannot be made without 

exceeding the statutory debt limit, we 


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15450 Federal Register / Vol. 89, No. 43 / Monday, March 4, 2024 / Rules and Regulations 

may invest any unredeemed Demand 

Deposit securities in special 90-day 

certificates of indebtedness. 

(1) Funds left invested in Demand 

Deposit securities remain subject to the 

normal terms and conditions for such 

securities as set forth in this part. 

(2) Funds invested in 90-day 

certificates of indebtedness earn simple 

interest equal to the daily factor in effect 

at the time Demand Deposit security 

issuance is suspended, multiplied by 

the number of days outstanding. Ninetyday certificates of indebtedness are 

subject to the same request for 

redemption notification requirements as 

those for Demand Deposit securities and 

will be redeemed at par value plus 

accrued interest. If a 90-day certificate 

of indebtedness reaches maturity during 

a debt limit contingency, we will 

automatically roll it into a new 90-day 

certificate of indebtedness, along with 

accrued interest, that earns simple 

interest equal to the daily factor in effect 

at the time that the new 90-day 

certificate of indebtedness is issued, 

multiplied by the number of days 

outstanding. When regular Treasury 

borrowing operations resume, the 90- 

day certificates of indebtedness, along 

with accrued interest, will be reinvested 

in Demand Deposit securities. 

■ 10. Amend § 344.8 by revising 

paragraphs (a), (b), and (e) to read as 

follows: 

§ 344.8 What other provisions apply to 

subscriptions for Demand Deposit 

securities? 

(a) When is my subscription due? The 

subscriber must set the issue date in the 

subscription. You cannot change the 

issue date to require issuance earlier or 

later than the issue date originally 

specified; provided, however, you may 

change the issue date up to 7 days after 

the original issue date if you establish 

to the satisfaction of Treasury that such 

change is required as a result of 

circumstances that were unforeseen at 

the time of the subscription and are 

beyond the issuer’s control (for 

example, a natural disaster). The issue 

date must be a business day. The issue 

date cannot be more than 60 days after 

the date we receive the subscription. If 

the subscription is for $10 million or 

less, we must receive the subscription at 

least 5 days before the issue date. If the 

subscription is for more than $10 

million, we must receive the 

subscription at least 7 days before the 

issue date. 

(b) How do I start the subscription 

process? A subscriber starts the 

subscription process by entering into 

SLGSafe the following information: 

(1) The issue date; 

(2) The total principal amount; 

(3) The issuer’s name and Taxpayer 

Identification Number; 

(4) A description of the taxadvantaged bond issue; and 

(5) The certifications required by 

§ 344.2(e)(1), if the subscription is 

submitted by an agent of the issuer. 

* * * * * 

(e) How do I complete the 

subscription process? The completed 

subscription must: 

(1) Be dated and submitted 

electronically by an official authorized 

to make the purchase; 

(2) Describe the bond issue. If the taxadvantaged bond issue referenced in 

paragraph (b)(4) of this section is, or 

will be, registered or disclosed in the 

Municipal Securities Rulemaking 

Board’s (MSRB) Electronic Municipal 

Market Access (EMMA®) system, 

describe the issue exactly as designated 

in the ‘‘issue description’’ field of 

EMMA®, or successor system; 

(3) Include the issuer’s address; 

(4) Include the information on the 

financial institution that will transmit 

the funds for the purchase of the 

securities; 

(5) Not be more than ten percent 

above or below the aggregate principal 

amount originally specified in the 

subscription; 

(6) Include the information required 

under paragraph (b) of this section, if 

not already provided; and 

(7) Include the certifications required 

by § 344.2(e)(1) (agent certification), 

(e)(2)(i) (yield certification), and (e)(4) 

(eligibility certification). 

■ 11. Amend § 344.9 by revising 

paragraph (a) to read as follows: 

§ 344.9 How do I redeem a Demand 

Deposit security? 

(a) When must I notify Treasury to 

redeem a security? Demand Deposit 

securities can be redeemed at the 

owner’s option, if we receive a request 

for redemption not less than: 

(1) One business day before the 

requested redemption date for total 

redemptions by an owner of $10 million 

or less; 

(2) Three business days before the 

requested redemption date for total 

redemptions by an owner of more than 

$10 million but less than $500 million; 

and 

(3) Five business days before the 

requested redemption date for total 

redemptions by an owner of $500 

million or more. 

* * * * * 

Subpart D [Removed] 

■ 12. Remove subpart D. 

By the Department of the Treasury. 

David Lebryk, 

Fiscal Assistant Secretary. 

[FR Doc. 2024–04380 Filed 3–1–24; 8:45 am] 

BILLING CODE 4810–AS–P 

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Part 0 

RIN 2900–AS04 

Agency Ethics Officials 

AGENCY: Department of Veterans Affairs. 

ACTION: Final rule. 

SUMMARY: The Department of Veterans 

Affairs (VA) is amending its regulation 

governing Agency ethics officials to 

reflect that the Secretary designates 

these officials, to identify the employees 

who may serve in these roles, and to 

make other relevant nomenclature 

changes regarding employees and 

groups within the Office of General 

Counsel. 

DATES: Effective date: This rule is 

effective March 4, 2024. 

FOR FURTHER INFORMATION CONTACT: 

Tracianna L. Winston, Chief Counsel, 

Ethics Specialty Team, Office of the 

General Counsel (021), Department of 

Veterans Affairs, 810 Vermont Avenue 

NW, Washington, DC 20420, (202) 461– 

6269. (This is not a toll-free telephone 

number.) 

SUPPLEMENTARY INFORMATION: Title 38 of 

the Code of Federal Regulations, 

Chapter I, Part 0 governs the Values, 

Standards of Ethical Conduct, and 

Related Responsibilities of VA 

employees. Subpart B, ‘‘General 

Provisions’’ includes 38 CFR 0.735–1 

‘‘Agency ethics officials’’ which is 

amended to provide updated 

information regarding the designation of 

agency ethics officials and the 

employees who may serve in these 

roles. The sections are also amended to 

reflect nomenclature changes to the 

names of certain Office of General 

Counsel offices and the employees in 

those offices. 

Specifically, 38 CFR 0.735–1(a) is 

amended to reflect that the Secretary 

designates attorneys from the Office of 

General Counsel to serve as the 

Designated Agency Ethics Official 

(DAEO) and Alternate Designated 

Agency Ethics Official (ADAEO). 

Additionally, 38 CFR 0.735–1(b)(1) is 

amended to reflect nomenclature 

changes to the names of Office of 

General Counsel positions, including 

District Chief Counsels, and teams, 

including the Ethics Specialty Team. 


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