Federal Register / Vol. 78, No. 250 / Monday, December 30, 2013 / Rules and Regulations 79295 

procedures specified in paragraph (l)(1) of 

this AD. 

(k) Terminating Action for Other ADs 

Accomplishing the revision required by 

paragraph (g)(1) of this AD terminates the 

requirements of the ADs specified in 

paragraphs (k)(1) through (k)(6) of this AD, 

for Airbus Model A340 airplanes only. 

(1) AD 2006–21–08, Amendment 39–14793 

(71 FR 61639, October 19, 2006). 

(2) AD 2007–14–01, Amendment 39–15123 

(72 FR 38006, July 12, 2007). 

(3) AD 2008–25–02, Amendment 39–15760 

(73 FR 75307, December 11, 2008). 

(4) AD 2010–04–09, Amendment 39–16202 

(75 FR 7940, February 23, 2010; as corrected 

in the Federal Register on March 3, 2010 (75 

FR 9515). 

(5) AD 2011–01–02, Amendment 39–16555 

(76 FR 432, January 5, 2011). 

(6) AD 2012–16–05, Amendment 39–17152 

(77 FR 48425, August 14, 2012). 

(l) Other FAA AD Provisions 

The following provisions also apply to this 

AD: 

(1) Alternative Methods of Compliance 

(AMOCs): The Manager, International 

Branch, ANM–116, Transport Airplane 

Directorate, FAA, has the authority to 

approve AMOCs for this AD, if requested 

using the procedures found in 14 CFR 39.19. 

In accordance with 14 CFR 39.19, send your 

request to your principal inspector or local 

Flight Standards District Office, as 

appropriate. If sending information directly 

to the International Branch, send it to ATTN: 

Vladimir Ulyanov, Aerospace Engineer, 

International Branch, ANM–116, Transport 

Airplane Directorate, FAA, 1601 Lind 

Avenue SW., Renton, WA 98057–3356; 

telephone: (425) 227–1138; fax: (425) 227– 

1149. Information may be emailed to: 9- 

ANM-116-AMOC-REQUESTS@faa.gov. 

Before using any approved AMOC, notify 

your appropriate principal inspector, or 

lacking a principal inspector, the manager of 

the local flight standards district office/

certificate holding district office. The AMOC 

approval letter must specifically reference 

this AD. 

(2) Airworthy Product: For any requirement 

in this AD to obtain corrective actions from 

a manufacturer, use these actions if they are 

FAA-approved. Corrective actions are 

considered FAA-approved if they were 

approved by the State of Design Authority (or 

its delegated agent, or the DAH with a State 

of Design Authority’s design organization 

approval). For a repair method to be 

approved, the repair approval must 

specifically refer to this AD. You are required 

to ensure the product is airworthy before it 

is returned to service. 

(m) Related Information 

Refer to Mandatory Continuing 

Airworthiness Information European 

Aviation Safety Agency (EASA) 

Airworthiness Directive 2012–0168, dated 

August 31, 2012, for related information, 

which can be found in the AD docket on the 

Internet at http://www.regulations.gov. 

(n) Material Incorporated by Reference 

(1) The Director of the Federal Register 

approved the incorporation by reference 

(IBR) of the service information listed in this 

paragraph under 5 U.S.C. 552(a) and 1 CFR 

part 51. 

(2) You must use this service information 

as applicable to do the actions required by 

this AD, unless the AD specifies otherwise. 

(i) Airbus A340 Airworthiness Limitations 

Section (ALS) Part 5—Fuel Airworthiness 

Limitations, Revision 00, dated November 16, 

2011. The revision date is not identified on 

the title page of this document. 

(ii) Airbus A340 Variation to revision 00 of 

ALS Part 5—Fuel Airworthiness Limitations 

(FAL), dated January 23, 2012 (variation 

reference 0FVLG110039/C0S). 

(3) For service information identified in 

this AD, contact Airbus SAS—Airworthiness 

Office—EAL, 1 Rond Point Maurice Bellonte, 

31707 Blagnac Cedex, France; telephone +33 

5 61 93 36 96; fax +33 5 61 93 45 80; email 

airworthiness.A330-A340@airbus.com; 

Internet http://www.airbus.com. 

(4) You may review copies of the service 

information at the FAA, Transport Airplane 

Directorate, 1601 Lind Avenue SW., Renton, 

Washington. For information on the 

availability of this material at the FAA, call 

425–227–1221. 

(5) You may view this service information 

that is incorporated by reference at the 

National Archives and Records 

Administration (NARA). For information on 

the availability of this material at NARA, call 

202–741–6030, or go to: http://

www.archives.gov/federal-register/cfr/ibrlocations.html. 

Issued in Renton, Washington, on 

December 11, 2013. 

John P. Piccola, 

Acting Manager, Transport Airplane 

Directorate, Aircraft Certification Service. 

[FR Doc. 2013–31042 Filed 12–27–13; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2013–0407; Directorate 

Identifier 2012–NE–22–AD; Amendment 39– 

17710; AD 2013–26–01] 

RIN 2120–AA64 

Airworthiness Directives; CFM 

International S.A. Turbofan Engines 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule. 

SUMMARY: We are adopting a new 

airworthiness directive (AD) for all CFM 

International (CFM) S.A. CFM56–3 and 

CFM56–7B series turbofan engines with 

certain accessory gearboxes (AGBs) not 

equipped with a handcranking pad ‘‘oil 

dynamic seal’’ assembly. This AD was 

prompted by 42 events of total loss of 

engine oil from CFM56 series turbofan 

engines while in flight. This AD 

requires an independent inspection to 

verify re-installation of the 

handcranking pad cover after removal of 

the pad cover for maintenance until 

installation of a handcranking pad oil 

dynamic seal assembly. We are issuing 

this AD to prevent loss of engine oil 

while in flight, which could result in 

engine failure, loss of thrust control, and 

damage to the airplane. 

DATES: This AD is effective February 3, 

2014. 

ADDRESSES: For service information 

identified in this AD, contact CFM 

International Inc., Aviation Operations 

Center, 1 Neumann Way, M/D Room 

285, Cincinnati, OH 45125; phone: 877– 

432–3272; fax: 877–432–3329; email: 

geae.aoc@ge.com. You may view this 

service information at the FAA, Engine 

& Propeller Directorate, 12 New England 

Executive Park, Burlington, MA. For 

information on the availability of this 

material at the FAA, call 781–238–7125. 

Examining the AD Docket 

You may examine the AD docket on 

the Internet at http://

www.regulations.gov by searching for 

and locating Docket No. FAA–2013– 

0407; or in person at the Docket 

Management Facility between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The AD docket 

contains this AD, the regulatory 

evaluation, any comments received, and 

other information. The address for the 

Docket Office (phone: 800–647–5527) is 

Document Management Facility, U.S. 

Department of Transportation, Docket 

Operations, M–30, West Building 

Ground Floor, Room W12–140, 1200 

New Jersey Avenue SE., Washington, 

DC 20590. 

FOR FURTHER INFORMATION CONTACT: 

Antonio Cancelliere, Aerospace 

Engineer, Engine Certification Office, 

FAA, Engine & Propeller Directorate, 12 

New England Executive Park, 

Burlington, Massachusetts, 01803; 

phone: 781–238–7751; fax: 781–238– 

7199; email: antonio.cancelliere@

faa.gov. 

SUPPLEMENTARY INFORMATION: 

Discussion 

We issued a notice of proposed 

rulemaking (NPRM) to amend 14 CFR 

part 39 to include an AD that would 

apply to the specified products. The 

NPRM published in the Federal 

Register on June 10, 2013 (78 FR 34605). 

The NPRM proposed to require an 

independent inspection to verify reinstallation of the handcranking pad 


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79296 Federal Register / Vol. 78, No. 250 / Monday, December 30, 2013 / Rules and Regulations 

cover after removal of the pad cover for 

maintenance until installation of a 

handcranking pad oil dynamic seal 

assembly. 

Comments 

We gave the public the opportunity to 

participate in developing this AD. The 

following presents the comments 

received on the proposal and the FAA’s 

response to each comment. 

Request To Make Optional Terminating 

Action Mandatory 

The National Transportation Safety 

Board comments that the FAA should 

make the installation of an oil dynamic 

seal assembly a mandatory, rather than 

an optional, terminating action, as has 

the European Aviation Safety Agency 

(EASA) and the Civil Aviation 

Administration of China. 

The FAA agrees that the loss of engine 

oil from unsecured handcranking pad 

covers can be addressed with the 

introduction of a dynamic seal. The 

FAA has structured its approach to 

achieving that goal, however, through a 

combination of inspections and part 

replacement, which allows each affected 

operator to manage its own maintenance 

schedule. The FAA believes that this 

approach will not have as great an 

economic effect on the affected 

operators as mandating a part 

replacement. The FAA also finds that 

the level of safety achieved with its 

approach to this unsafe condition is 

acceptable, and believes that operators 

will eventually incorporate the dynamic 

seal to terminate the required 

inspections. 

Request To Revise Optional 

Terminating Action 

American Airlines (AAL) requested 

that we revise paragraph (g) of the AD 

(the Terminating Action paragraph) to 

minimize the effects of differences in 

the AGB disassembly and assembly 

procedures between those specified in 

the engine shop manual and current or 

subsequent service bulletins. AAL noted 

that this method of specifying the 

terminating action would preclude the 

need for Alternative Method of 

Compliance (AMOC) requests. 

We agree in part. We revised the 

Terminating Action paragraph by 

removing the requirement to follow 

specific service bulletins (SBs). 

Guidance on CFM CFM56 SBs and 

engine manual can now be found in the 

Related Information section of this AD. 

Request To Include FAA-Approved 

Maintenance Program in Compliance 

Airlines for America asked that we 

include in paragraph (f) of this AD, a 

time period in which an approved 

maintenance program must be revised to 

include an Independent Inspection. 

Airlines for America also asked that we 

clarify that documentation for each 

inspection on every airplane need not 

be made if relying on the insertion of an 

Independent Inspection in the aircraft 

Continuous Airworthiness Maintenance 

Program (CAMP). 

We agree in part, and have made 

paragraphs (f)(1) and (f)(2) of this AD 

disjunctive in order to clarify that either 

an Independent Inspection is required 

after each maintenance involving the 

handcranking pad cover or that 

operators insert an Independent 

Inspection requirement in their aircraft 

CAMP. We do point out that if an 

operator relies on paragraph (f)(1) of this 

AD, a maintenance record entry is 

required to record compliance with this 

AD after each time the handcranking 

pad cover is removed and re-installed. 

If an operator relies on paragraph (f)(2) 

of this AD however, only one record 

entry is required to document that the 

CAMP has been modified as required. 

After the CAMP has been modified, the 

operator need only document actions as 

required by the CAMP. 

We have not, however, added a time 

period within which operators must 

make a change to their CAMP. This AD 

itself states that it will become effective 

35 days after publication in the Federal 

Register. After that date, operators must 

comply with either paragraph (f)(1), 

(f)(2), or (g) of this AD. 

Request To Clarify Inspection Options 

Delta Airlines (Delta) requested that 

we clarify that both apparent options— 

an independent inspection or addition 

of the inspection as a Required 

Inspection Item into the operator’s 

approved CAMP—in compliance with 

paragraph (f) of this AD are indeed 

options for meeting the requirements of 

this AD. 

We agree that further clarification was 

needed. As explained with the response 

to the Airlines for America comment, 

we have made paragraphs (f)(1) and 

(f)(2) of this AD disjunctive to clarify 

that an operator either perform an 

Independent Inspection each time the 

handcranking pad cover is removed and 

re-installed, or insert in its aircraft 

CAMP a requirement for an 

Independent Inspection. 

Request To Delay Issuance of This AD 

Delta requested that we delay 

issuance of this AD until CFM issues 

revisions to CFM SB CFM56–7B S/B 72– 

0564, Revision 3, dated May 25, 2011, 

and CFM SB CFM56–7B S/B 27–0879, 

Revision 1, dated April 12, 2012. Delay 

in publication of this AD would 

minimize the burden of AMOC requests 

on operators, CFM, and the FAA. It 

would also allow CFM to modify these 

SBs to correct tooling references and to 

modify impingement test requirements. 

We partially agree. We agree that we 

need not mandate use of specific SB 

versions to accomplish the terminating 

action. We have therefore, removed 

those SB references from paragraph (g) 

of this AD and moved those references 

to paragraph (j), Related Information, of 

this AD. This will eliminate the need for 

requests for AMOCs should the 

manufacturer modify its SBs. 

Accordingly, we need not delay 

issuance of this AD until any particular 

SB version is published. 

Request To Allow Acceptable 

Maintenance Procedures To Install Seal 

Delta requested that we allow 

operators or maintenance facilities to 

install oil dynamic seal assemblies 

using the SBs referenced in the NPRM 

(78 FR 34605, June 10, 2013) along with 

other acceptable maintenance 

procedures rather than mandating that 

all work be performed in accordance 

with the referenced SBs. 

We agree. We moved the references to 

the SBs from the compliance section of 

this AD to the Related Information 

section of this AD. 

Request To Define Compliance Time 

Delta asked that we specifically define 

the compliance time in which operators 

have after the effective date of this AD 

to put the inspection program in place. 

We disagree. As stated earlier, this AD 

will become effective as indicated in the 

DATES section. As of that date, operators 

must comply with this AD by either 

following paragraph (f)(1) of this AD for 

each time maintenance is performed to 

remove and re-install the handcranking 

pad cover, or (f)(2) of this AD to insert 

an Independent Inspection requirement 

in their aircraft CAMP, or (g) of this AD 

by replacing the AGB that incorporates 

an oil dynamic seal assembly. No 

further compliance time need be 

allowed. We did not change this AD. 

Request To Harmonize With EASA AD 

2012–0209 

RyanAir requested that we harmonize 

differences between the NPRM (78 FR 

34605, June 10, 2013) and EASA AD 

2012–0209, dated October 8, 2012. 

RyanAir identified differences between 

the EASA AD and the NPRM in the 

areas of applicability, terminating 

action, service information, and 

compliance language. 

We disagree. We believe that 

references in the Applicability section 


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Federal Register / Vol. 78, No. 250 / Monday, December 30, 2013 / Rules and Regulations 79297 

of this AD to specific AGB part numbers 

not equipped with the oil dynamic seal 

assembly will avoid the need to revise 

this AD in the future should additional 

approved AGBs be available for 

installation. We did not change this AD. 

Support for This AD 

The Boeing Company and United 

Airlines support this AD as proposed 

(78 FR 34605, June 10, 2013). 

Conclusion 

We reviewed the relevant data, 

considered the comments received, and 

determined that air safety and the 

public interest require adopting this AD 

with the changes described previously. 

We also determined that these 

changes will not increase the economic 

burden on any operator or increase the 

scope of this AD. 

Costs of Compliance 

We estimate that this AD will affect 

2,702 CFM56–3 and CFM56–7B engines 

installed on airplanes of U.S. registry. 

We also estimate that it will take about 

1 hour to perform the independent 

inspection required by this AD. The 

average labor rate is $85 per hour. We 

estimate that normal maintenance will 

require the AGB handcranking pad 

cover to be removed every 1,300 flights 

cycles. Based on an average use of these 

model engines of approximately 

6,000,000 flight cycles per year, we 

estimate that an independent inspection 

would be required about 4,615 times per 

year. Therefore, assuming that an 

operator does not already have an 

Independent Inspection of the AGB 

handcranking pad cover in its approved 

aircraft maintenance program, we 

estimate the cost of this AD for U.S. 

operators to be $392,275. 

Authority for This Rulemaking 

Title 49 of the United States Code 

specifies the FAA’s authority to issue 

rules on aviation safety. Subtitle I, 

section 106, describes the authority of 

the FAA Administrator. Subtitle VII: 

Aviation Programs, describes in more 

detail the scope of the Agency’s 

authority. 

We are issuing this rulemaking under 

the authority described in Subtitle VII, 

Part A, Subpart III, Section 44701: 

‘‘General requirements.’’ Under that 

section, Congress charges the FAA with 

promoting safe flight of civil aircraft in 

air commerce by prescribing regulations 

for practices, methods, and procedures 

the Administrator finds necessary for 

safety in air commerce. This regulation 

is within the scope of that authority 

because it addresses an unsafe condition 

that is likely to exist or develop on 

products identified in this rulemaking 

action. 

Regulatory Findings 

This AD will not have federalism 

implications under Executive Order 

13132. This AD will not have a 

substantial direct effect on the States, on 

the relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. 

For the reasons discussed above, I 

certify that this AD: 

(1) Is not a ‘‘significant regulatory 

action’’ under Executive Order 12866, 

(2) Is not a ‘‘significant rule’’ under 

DOT Regulatory Policies and Procedures 

(44 FR 11034, February 26, 1979), 

(3) Will not affect intrastate aviation 

in Alaska to the extent that it justifies 

making a regulatory distinction, and 

(4) Will not have a significant 

economic impact, positive or negative, 

on a substantial number of small entities 

under the criteria of the Regulatory 

Flexibility Act. 

List of Subjects in 14 CFR Part 39 

Air transportation, Aircraft, Aviation 

safety, Incorporation by reference, 

Safety. 

Adoption of the Amendment 

Accordingly, under the authority 

delegated to me by the Administrator, 

the FAA amends 14 CFR part 39 as 

follows: 

PART 39—AIRWORTHINESS 

DIRECTIVES 

■ 1. The authority citation for part 39 

continues to read as follows: 

Authority: 49 U.S.C. 106(g), 40113, 44701. 

§ 39.13 [Amended] 

■ 2. The FAA amends § 39.13 by adding 

the following new airworthiness 

directive (AD): 

2013–26–01 CFM International S.A.: 

Amendment 39–17710; Docket No. 

FAA–2013–0407; Directorate Identifier 

2012–NE–22–AD. 

(a) Effective Date 

This AD is effective February 3, 2014. 

(b) Affected ADs 

None. 

(c) Applicability 

This AD applies to CFM International S.A. 

CFM56–3 series and CFM56–7B series 

turbofan engines equipped with the 

following accessory gearbox (AGB) part 

numbers (P/Ns): 

(1) For CFM56–3 engines: 335–300–103–0, 

335–300–105–0, 335–300–106–0, 335–300– 

107–0, 335–300–108–0, 335–300–109–0, or 

335–300–110–0. 

(2) For CFM56–7B engines (except CFM56– 

7B27A, CFM56–7B27A/3, and CFM56– 

7B27AE engines): 340–046–503–0, 340–046– 

504–0, or 340–046–505–0. 

(3) For CFM56–7B27A, CFM56–7B27A/3, 

and CFM56–7B27AE engines: 340–188–601– 

0 or 340–188–603–0. 

(d) Unsafe Condition 

This AD was prompted by 42 events of 

total loss of engine oil while in flight. We are 

issuing this AD to prevent loss of engine oil 

while in flight, which could result in engine 

failure, loss of thrust control, and damage to 

the airplane. 

(e) Compliance 

Unless already done, do the actions in 

paragraphs (f) or (g) of this AD. 

(f) Inspection of the AGB Handcranking Pad 

Cover 

(1) Perform an Independent Inspection to 

verify re-installation of the AGB 

handcranking pad cover after any 

maintenance that involves the removal and 

re-installation of the AGB handcranking 

cover, or 

(2) Insert an Independent Inspection as a 

required inspection item in the approved 

continuous airworthiness maintenance 

program for the aircraft. 

(g) Optional Terminating Action 

As an optional terminating action to the 

inspection requirement of paragraph (f) of 

this AD, install an AGB that is not listed in 

paragraph (c) of this AD that incorporates the 

oil dynamic seal assembly. 

(h) Definition 

For the purpose of this AD, an Independent 

Inspection means a second inspection by a 

qualified individual who was not involved in 

the original re-installation of the AGB 

handcranking pad cover following 

maintenance to confirm that the cover is 

installed correctly. 

(i) Alternative Methods of Compliance 

(AMOCs) 

The Manager, Engine Certification Office, 

FAA, may approve AMOCs for this AD. Use 

the procedures found in 14 CFR 39.19 to 

make your request. 

(j) Related Information 

(1) For more information about this AD, 

contact Antonio Cancelliere, Aerospace 

Engineer, Engine Certification Office, FAA, 

Engine & Propeller Directorate, 12 New 

England Executive Park, Burlington, 

Massachusetts, 01803; phone: 781–238–7751; 

fax: 781–238–7199; email: 

antonio.cancelliere@faa.gov. 

(2) CFM International S.A. Service Bulletin 

(SB) No. CFM56–7B S/B 72–0564, Revision 3, 

dated May 25, 2011, and SB No. CFM56–7B 

S/B 27–0879, Revision 1, dated April 12, 

2012, which are not incorporated by 

reference in this AD, provide guidance on 

obtaining an AGB that incorporates an oil 

dynamic seal assembly. The CFM56 engine 

manuals, which are also not incorporated by 

reference in this AD, include instructions on 

assembling and disassembling the AGB. 

(3) For service information identified in 

this AD, contact CFM International Inc., 


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79298 Federal Register / Vol. 78, No. 250 / Monday, December 30, 2013 / Rules and Regulations 

1Regulation E—Exemption for Securities of Small 

Business Investment Companies, 23 FR 10484 (Dec. 

30, 1958). 

2Amendments to the Offering Exemption Under 

Regulation E of the Securities Act of 1933, 49 FR 

35342 (Sept. 7, 1984). 

3Section 203 of the Investment Advisers Act of 

1940 (‘‘Advisers Act’’) requires certain investment 

advisers to register with the Commission, and gives 

the Commission broad enforcement authority over 

them. In particular, current section 203(e) 

authorizes the Commission, by order, to censure, 

place limitations on the activities, functions, or 

operations of, suspend, or revoke the registration of 

any investment adviser if the Commission makes 

certain findings with regards to that adviser. 

Current section 203(f) allows the Commission, by 

order, to censure, suspend, bar, or place limitations 

on the activities of any person associated or seeking 

to become associated with an investment adviser or 

certain other entities if the Commission makes 

certain findings with regards to that person. 

4 Investment Company Amendments Act of 1970, 

Public Law 91547, 84 Stat. 1413 (Dec. 14, 1970). 

5Current rule 18f–3(f)(2)(iii) provides certain 

rights for shareholders of purchase classes in funds 

that are acquired as part of a merger. 

6Transactions of Investment Companies With 

Portfolio and Subadvisory Affiliates, Investment 

Company Act Release No. 25888 (Jan. 14, 2003) [68 

FR 3142 (Jan. 22, 2003)] (‘‘Adopting Release’’). 

7The cross-reference to rule 17a–6 was intended 

to conform provisions in paragraph (d)(6) of rule 

17d–1 to similar provisions in rule 17a–6 in order 

to make them consistent with regards to which 

entities are considered prohibited participants for 

purposes of affiliate transactions. See Transactions 

of Investment Companies With Portfolio and 

Subadvisory Affiliates, Investment Company Act 

Release No. 25557 (April 30, 2002) [67 FR 31081 

(May 8, 2002)] at n.30 and accompanying text. 

The renumbering of the paragraphs of rule 17d– 

1 reflected the deletion of a condition in the rule 

that limited a fund to committing no more than five 

percent of its assets to a joint enterprise with a 

portfolio affiliate. See Adopting Release, supra note 

1, at n.12. 

Aviation Operations Center, 1 Neumann 

Way, M/D Room 285, Cincinnati, OH 45125; 

phone: 877–432–3272; fax: 877–432–3329; 

email: geae.aoc@ge.com. 

(4) You may view this service information 

at the FAA, Engine & Propeller Directorate, 

12 New England Executive Park, Burlington, 

MA. For information on the availability of 

this material at the FAA, call 781–238–7125. 

(k) Material Incorporated by Reference 

None. 

Issued in Burlington, Massachusetts, on 

December 16, 2013. 

Frank P. Paskiewicz, 

Acting Director, Aircraft Certification Service. 

[FR Doc. 2013–30862 Filed 12–27–13; 8:45 am] 

BILLING CODE 4910–13–P 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 230 and 270 

[Release No. 33–9503; IC–30845] 

Securities Exempted; Distribution of 

Shares by Registered Open-End 

Management Investment Company; 

Applications Regarding Joint 

Enterprises or Arrangements and 

Certain Profit-Sharing Plans 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Final rule; technical 

amendments. 

SUMMARY: The Securities and Exchange 

Commission (‘‘Commission’’) is 

correcting outdated cross-references in 

rule 602 under the Securities Act of 

1933 (‘‘Securities Act’’) and rule 12b–1 

under the Investment Company Act of 

1940 (‘‘Investment Company Act’’) and 

correcting an inadvertent error in rule 

17d–1 under the Investment Company 

Act as published in the Federal Register 

on January 22, 2003. 

DATES: Effective December 30, 2013. 

FOR FURTHER INFORMATION CONTACT: 

Daniel K. Chang, Senior Counsel, or 

Thoreau Bartmann, Branch Chief, at 

(202) 551–6792, Investment Company 

Rulemaking Office, Division of 

Investment Management, U.S. Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–8549. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Rule 602 

In December 1958, the Commission 

adopted Regulation E under the 

Securities Act, which exempts from 

registration small offerings by small 

business investment companies 

registered under the Investment 

Company Act.1 Regulation E was 

amended in 1984 to increase the size of 

offerings that may be made under the 

regulation, and include as exempted 

issuers certain investment companies 

who elect to be treated as business 

development companies under the 

Investment Company Act.2 The purpose 

of the 1984 amendments was to increase 

the ability of small business investment 

companies and business development 

companies to raise capital. 

As part of Regulation E, rule 602 

establishes conditions under which 

securities issued by small business 

investment companies or business 

development companies may be exempt 

from registration under the Securities 

Act. Rule 602(c)(3) provides that the 

exemption is not available for the 

securities of any issuer if any of its 

affiliated directors, officers, principal 

security holders, investment advisers, or 

underwriters has been ‘‘subject to an 

order of the Commission entered 

pursuant to section 203(d) or (e) of the 

Investment Advisers Act of 1940.’’ 3

In 1970, the Investment Company 

Amendments Act was enacted and, 

among other things, redesignated 

sections 203(d) and (e) of the Advisers 

Act as sections 203(e) and (f), 

respectively.4 To correct this crossreference, this technical amendment to 

rule 602(c)(3) will replace the crossreference to paragraphs (d) and (e) of 

section 203 of the Advisers Act with a 

cross-reference to paragraphs (e) and (f). 

B. Rule 12b–1 

In 1980, the Commission adopted rule 

12b–1 under the Investment Company 

Act to permit a fund that meets certain 

conditions to use fund assets to pay for 

distribution of securities of which it is 

the issuer. Among other requirements, 

the fund must have a written plan 

describing all material aspects of the 

proposed distribution financing. 

Rule 12b–1(g) provides certain 

conditions for plans that cover more 

than one series or class of shares, but 

further provides that paragraph (g) does 

not affect the rights of any purchase 

class under rule 18f–3(e)(2)(iii).5

On January 2, 2001, the Commission 

adopted amendments to certain 

exemptive rules under the Investment 

Company Act and, among other things, 

redesignated paragraph (e) of rule 18f– 

3 as paragraph (f). To correct this crossreference, this technical amendment to 

rule 12b–1(g) will replace the crossreference to rule 18f–3(e)(2)(iii) with a 

cross-reference to rule 18f–3(f)(2)(iii). 

C. Rule 17d–1 

In January 2003, the Commission 

adopted amendments to certain rules 

under the Investment Company Act to, 

among other things, expand the 

exemptions for investment companies 

(‘‘funds’’) to engage in transactions with 

‘‘portfolio affiliates’’—companies that 

are affiliated with the fund solely as the 

result of the fund (or an affiliated fund) 

controlling them or owning more than 

five percent of their voting securities.6

The amendments were designed to 

permit transactions between funds and 

certain affiliated persons under 

circumstances where it was unlikely 

that the affiliate would be in a position 

to take advantage of the fund. 

In implementing these amendments, 

the Adopting Release renumbered the 

paragraphs of rule 17d–1 and also added 

a cross-reference in paragraph (d)(6) of 

the rule to rule 17a–6, a related rule 

dealing with exemptions for 

transactions with portfolio affiliates that 

was also amended by the Adopting 

Release.7 However, the text of rule 17d– 

1(d)(6) as published in the ‘‘Text of Rule 

and Form Amendments’’ section of the 

Adopting Release, and subsequently in 


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