16076 Federal Register / Vol. 62, No. 65 / Friday, April 4, 1997 / Rules and Regulations

1Pub. L. No. 104–121, 110 Stat. 857 (codified in

scattered sections of 5 U.S.C., 15 U.S.C. and as a

note to 5 U.S.C. § 601) (1996).

2The definition of ‘‘small entity’’ under SBREFA

is the same as the definition of ‘‘small entity’’ under

the Regulatory Flexibility Act, 5 U.S.C. § 601 et seq.

(‘‘Reg. Flex. Act’’). SBREFA § 221(1). The Reg. Flex.

Act defines ‘‘small entity’’ to include ‘‘small

business.’’ Pursuant to the Reg. Flex. Act, 5 U.S.C.

§ 601(3), the Commission has adopted appropriate

definitions of ‘‘small business’’ for purposes of the

Reg. Flex. Act. See infra n.10.

3 5 U.S.C. §§ 603(a), 604, and 605(b), codifying

SBREFA §§ 241 and 243.

§ 71.1 [Amended]

2. The incorporation by reference in

14 CFR 71.1 of Federal Aviation

Administration Order 7400.9D, Airspace

Designations and Reporting Points,

dated September 4, 1996, and effective

September 16, 1996, is amended as

follows:

Paragraph 6005 Class E airspace areas

extending upward from 700 feet above the

surface of the earth.

* * * * *

ASO GA E5 Thomson, GA [New]

Thomson-McDuffie Airport, GA

(Lat. 33°31′47′′ N. long. 82°31′00′′ W)

That airspace extending upward from 700

feet above the surface within a 7.5-mile

radius of Thomson-McDuffie Airport.

* * * * *

ASO GA E5 Augusta, GA [Revised]

Augusta, Bush Field, GA

(Lat. 33°22′12′′ N. long. 81°57′52′′ W)

Bushe NDB

(Lat. 33°17′13′′ N. long. 81°56′49′′ W)

Daniel Field

(Lat. 33°27′59′′ N. long. 82°02′21′′ W)

Burke County Airport

(Lat. 33°02′28′′ N. long. 82°00′14′′ W)

Burke County NDB

(Lat. 33°02′33′′ N. long. 82°00′17′′ W)

That airspace extending upward from 700

feet above the surface within an 8.2-mile

radius of Bush Field and within 8 miles west

and 4 miles east of Augusta ILS localizer

south course extending from the 8.2-mile

radius to 16 miles south of the Bushe NDB,

and within a 6.3-mile radius of Daniel Field,

and within a 6.2-mile radius of Burke County

Airport and within 3.5 miles each side of the

243° bearing from the Burke County NDB

extending from the 6.2-mile radius to 7 miles

southwest of the NDB.

* * * * *

Issued in College Park, Georgia, on March

24, 1997.

Wade T. Carpenter,

Acting Manager, Air Traffic Division,

Southern Region.

[FR Doc. 97–8614 Filed 4–3–97; 8:45 am]

BILLING CODE 4910–13–M

14 CFR Part 71

[Airspace Docket No. 96–AWP–30]

Amendment of Class E Airspace;

Victorville, CA

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Final rule; correction.

SUMMARY: This action corrects an error

in the geographic coordinates of a final

rule that was published in the Federal

Register on February 25, 1997 (62 FR

8369), Airspace Docket No. 96–AWP–

30.

EFFECTIVE DATE: 0901 UTC March 27,

1997.

FOR FURTHER INFORMATION CONTACT:

William Buck, Airspace Specialist,

Operations Branch, AWP–530, Air

Traffic Division, Western-Pacific

Region, Federal Aviation

Administration, 15000 Aviation

Boulevard, Lawndale, California, 90261,

telephone (310) 725–6556.

SUPPLEMENTARY INFORMATION:

History

Federal Register Document 97–4577,

Airspace Docket No. 96–AWP–30,

published on February 25, 1997 (62 FR

8369), revised the description of the

Class E airspace area at Victorville, CA.

An error was discovered in the

geographic coordinates for the

Victorville, CA, Class E airspace area.

This action corrects that error.

Correction to Notice of Proposed

Rulemaking

Accordingly, pursuant to the

authority delegated to me, the

geographic coordinates for the Class E

airspace are at Victorville, CA, as

published in the Federal Register on

February 25, 1997, Federal Register

Document 97–4577; page 8370, column

2), is corrected as follows:

§ 71.1 [Corrected]

* * * * *

AWP CA E5 Victorville, CA

By removing ‘‘(lat. 34°35′67′′ N., long.

117°22′93′′ W.)’’ and substituting ‘‘(lat.

34°35′40′′ N., long. 117°22′56′′ W.)’’.

* * * * *

Issued in Los Angeles, California, on

March 5, 1997.

George D. Williams,

Manager, Air Traffic Division, Western-Pacific

Region.

[FR Doc. 97–8500 Filed 4–3–97; 8:45 am]

BILLING CODE 4910–13–M

SECURITIES AND EXCHANGE

COMMISSION

17 CFR Part 202

[Release Nos. 33–7408, 34–38447, 35–26696,

39–2350, IC–22588, and IA–1625; File No.

S7–14–97]

Penalty-Reduction Policy for Small

Entities

AGENCY: Securities and Exchange

Commission.

ACTION: Policy statement; request for

comments.

SUMMARY: The Securities and Exchange

Commission is issuing a statement of its

penalty-reduction policy for small

entities as required by the Small

Business Regulatory Enforcement

Fairness Act, Pub. L. No. 104–121, 110

Stat. 857 (1996). The Commission also

requests comments on the policy. After

the comment period has closed and the

Commission has gained experience in

applying the policy, the Commission

intends to re-evaluate the policy in light

of its experience and the comments of

interested persons.

DATES: Effective March 29, 1997.

Interested persons may submit

comments on the policy on or before

December 31, 1997.

ADDRESSES: Interested persons should

submit three copies of their written

data, views, and opinions to Jonathan G.

Katz, Secretary, Securities and Exchange

Commission, 450 Fifth St. N.W.,

Washington, D.C. 20549. Comment

letters also may be submitted

electronically to the following electronic

mail address: rule-comments@sec.gov.

All comment letters should refer to File

No. S7–14–97; this file number should

be included on the subject line if E:mail

is used. All comment letters will be

made available for public inspection

and copying at the Commission’s Public

Reference Room, Room 1024, 450 Fifth

St., N.W., Washington, D.C. 20549.

Electronically submitted comment

letters will be posted on the

Commission’s Internet Web site (http://

www.sec.gov).

FOR FURTHER INFORMATION CONTACT: Joan

McKown (202–942–4530) or Susan

Mathews (202–942–4737), Office of the

Chief Counsel, Division of Enforcement,

or Amy Kroll (202–942–0927) or Anne

Sullivan (202–942–0954), Office of the

General Counsel.

SUPPLEMENTARY INFORMATION: The Small

Business Regulatory Fairness Act

(‘‘SBREFA’’ or ‘‘the Act’’) was enacted

on March 29, 1996.1 SBREFA seeks to

improve the regulatory climate for small

entities 2 by, among other things:

• Expanding the extent to which the

rule making process must include

evaluation of the impact of proposed

rules (and rule changes) on small

entities; 3
Federal Register / Vol. 62, No. 65 / Friday, April 4, 1997 / Rules and Regulations 16077

4 5 U.S.C. § 611, codifying SBREFA § 242.

5SBREFA § 223.

6SBREFA §§ 212, 213, 214 (codified at 15 U.S.C.

§ 648(c)(3)), and 215. In a companion release, the

Commission is adopting an informal guidance

program as required by SBREFA. Informal

Guidance Program for Small Entities, Securities Act

Rel. No. 33–7407 (Mar. 27, 1997). The Commission

previously, on January 28, 1997, adopted small

entity compliance guides as required by SBREFA.

Securities Act Rel. No. 7342, 62 FR 4104 ( Jan. 28,

1997) (codified at 17 CFR 202.8).

7SBREFA § 223(a). SBREFA also establishes that

‘‘[i]n any civil or administrative action against a

small entity, guidance given by an agency applying

the law to facts provided by the small entity may

be considered as evidence of the reasonableness or

appropriateness of any proposed fines, penalties or

damages sought against such small entity.’’ Id.

§ 213(a).

8 ‘‘Small Business Regulatory Enforcement

Fairness Act—Joint Managers Statement of

Legislative History and Congressional Intent,’’ 142

Cong. Rec. S3244 (daily ed. Mar. 29, 1996).

9SBREFA § 223(b).

10Pursuant to the Reg. Flex. Act, 5 U.S.C.

§ 601(3), the Commission has adopted appropriate

definitions of ‘‘small business’’ for purposes of the

Reg. Flex. Act. Based on an analysis of the language

and legislative history of the Reg. Flex. Act,

Congress does not appear to have intended that Act

to apply to natural persons (as opposed to

individual proprietorships) or to foreign entities.

The Commission understands that staff at the Small

Business Administration (SBA) have taken the same

position. Telephone conversation with Gregory J.

Dean, Jr., Assistant Chief Counsel for Finance and

Programs, SBA Office of Advocacy (Mar. 13, 1997).

See 17 CFR 270.0–10, 275.0–7, 240.0–10, 230.157,

250.110, and 260.0–7. The Commission recently

proposed amendments to certain of these

definitions. Definitions of ‘‘Small Business’’ or

‘‘Small Organization’’ Under the Investment

Company Act of 1940, the Investment Advisers Act

of 1940, the Securities Exchange Act of 1934, and

the Securities Act of 1933, Securities Act Rel. No.

7383, 62 FR 4106 (Jan. 28, 1997). The Commission

extended the comment period for the proposed

amendments to April 30, 1997, 62 FR 13356 (Mar.

20, 1997).

11At present, this threshold is $5 million. Thus,

non-regulated entities, such as general partnerships,

privately held corporations or professional service

organizations, with assets of $5 million or less may

qualify for penalty-reduction.

12See Johnson v. SEC, 87 F.3d 484 (D.C. Cir.

1996) (six-month suspension from supervisory

positions at broker-dealers constitutes a penalty for

the purposes of 28 U.S.C. § 2462).

13 ‘‘Small Business Regulatory Enforcement

Fairness Act: Views of the House Committees of

Jurisdiction on the Congressional Intent Regarding

the ‘Small Business Regulatory Enforcement

Fairness Act of 1996,’ ’’ 142 Cong. Rec. E572 (daily

ed. Apr. 19, 1996); 142 Cong. Rec. at S3244.

• Expanding the rights of action for

small businesses to seek judicial review

of rules impacting small entities; 4

• Requiring agencies to establish

small entity penalty reduction or waiver

policies; 5 and

• Directing agencies to expand their

efforts to provide formal and informal

guidance to small entities.6

In this release, the Commission

announces a small entity penaltyreduction policy (‘‘Penalty-Reduction

Policy’’ or ‘‘Policy’’) as mandated by

SBREFA and solicits comment on the

Policy.

SBREFA provides a general standard

for penalty-reduction policies:

Each agency regulating the activities of

small entities shall establish a policy or

program within 1 year of enactment of this

section to provide for the reduction, and,

under appropriate circumstances for the

waiver, of civil penalties for violations of a

statutory or regulatory requirement by a

small entity. Under appropriate

circumstances, an agency may consider

ability to pay in determining penalty

assessments on small entities.7

A statement entered into the

Congressional Record after enactment of

SBREFA explains that agencies have

‘‘flexibility to tailor their specific

programs to their missions and

charters’’ and instructs agencies ‘‘to

develop the boundaries of their program

and the specific circumstances for

providing for a waiver or reduction of

penalties.’’ 8 To that end, SBREFA

specifies that a penalty-reduction policy

adopted by an agency may be subject to

the requirements or limitations of other

applicable statutes. SBREFA also lists

six possible exclusions or conditions

that an agency may incorporate in its

policy.9

The Commission has reviewed the

current requirements of the federal

securities laws, its current practice in

assessing penalties on small entities,

and the appropriate conditions and

exclusions for a penalty-reduction

policy for small entities that violate the

federal securities laws. On the basis of

that review, the Commission announces

its Penalty-Reduction Policy for small

entities. Although the Commission’s

informal practice has been to consider

some or all of the factors contained in

the policy in its penalty analysis for all

entities, in accord with the mandates of

SBREFA, the Commission sets forth in

this release a formal policy specifically

for small entities that embodies these

factors. The Commission also invites

comments on this Policy.

I. Penalty-Reduction Policy

A. Text of Policy

The text of the policy follows:

The Commission’s policy with respect to

whether to reduce or assess civil money

penalties against a small entity is:

(a) The Commission will consider on a

case-by-case basis whether to reduce or not

assess civil money penalties against a small

entity. In determining whether to reduce or

not assess penalties against a specific small

entity, the following considerations will

apply:

(1) Except as provided in paragraph (a)(3)

below, penalty reduction will not be

available for any small entity if:

(i) The small entity was subject previously

to an enforcement action;

(ii) Any of the small entity’s violations

involved willful or criminal conduct; or

(iii) The small entity did not make a good

faith effort to comply with the law.

(2) In considering whether the Commission

will reduce or refrain from assessing a civil

money penalty, the Commission may

consider:

(i) The egregiousness of the violations;

(ii) The isolated or repeated nature of the

violations;

(iii) The violator’s state of mind when

committing the violations;

(iv) The violator’s history (if any) of legal

or regulatory violations;

(v) The extent to which the violator

cooperated during the investigation;

(vi) Whether the violator has engaged in

subsequent remedial efforts to mitigate the

effects of the violation and to prevent future

violations;

(vii) The degree to which a penalty will

deter the violator or others from committing

future violations; and

(viii) Any other relevant fact.

(3) The Commission also may consider

whether to reduce or not assess a civil money

penalty against a small entity, including a

small entity otherwise excluded from this

policy under paragraphs (a)(1)(i)–(iii) above,

if the small entity can demonstrate to the

Commission’s satisfaction that it is

financially unable to pay the penalty,

immediately or over a reasonable period of

time, in whole or in part.

(4) For purposes of this policy, an entity

qualifies as ‘‘small’’ if it is a small business

or small organization as defined by

Commission rules adopted for the purpose of

compliance with the Regulatory Flexibility

Act.10 An entity not included in these

definitions will be considered ‘‘small’’ for

purposes of this policy if it meets the total

asset amount that applies to issuers as set

forth in Rule 157(a) of the Securities Act of

1933.11

(b) The foregoing policy does not create a

right or remedy for any person. This policy

shall not apply to any remedy that may be

sought by the Commission other than civil

money penalties, whether or not such other

remedy may be characterized as penal or

remedial.

B. Penalties Eligible for Reduction

The Policy will apply only to civil

money penalties. It will not apply to any

remedy that the Commission may seek

other than civil money penalties,

whether or not such other remedy may

be characterized as penal or remedial.12

SBREFA provides that an agency may

consider an entity’s ‘‘ability to pay,’’

and requires agencies to report to

Congress on the ‘‘total amount of

penalty reductions.’’ The Commission

interprets these statements to refer to

civil money penalties. Committee

statements that were included in the

Congressional Record after enactment of

SBREFA also support limiting penalty

reduction policies to civil money

penalties.13 Moreover, an Environmental

Protection Agency (‘‘EPA’’) policy cited
16078 Federal Register / Vol. 62, No. 65 / Friday, April 4, 1997 / Rules and Regulations

14See EPA, Policy on Compliance Incentives for

Small Business, 61 FR 27984 (June 3, 1996).

15Pub. L. 101–429, 104 Stat. 931 (1990) (codified

in scattered sections of 15 U.S.C.) (‘‘Remedies

Act’’).

16Pub. L. No. 98–376, 98 Stat. 1264 (1984)

(codified in scattered sections of 15 U.S.C.)

(‘‘Insider Trading Act’’).

17See, e.g., Insider Trading and Securities Fraud

Enforcement Act of 1988, Pub. L. No. 100–704, 102

Stat. 4677 (1988) (codified in scattered sections of

15 U.S.C.).

18See section 20(d)(2) of the Securities Act of

1933 (civil actions) (15 U.S.C. 77t(d)(2)); sections

21(d)(3) (civil actions), 21A (insider trading

actions), and 21B (administrative proceedings) of

the Securities Exchange Act of 1934 (‘‘Exchange

Act’’) (15 U.S.C. §§ 78u(d)(3), 78u–1, and 78u–2);

sections 203(i)(2) (administrative proceedings) and

209(e) (civil actions) of the Investment Advisers Act

of 1940 (15 U.S.C. §§ 80b–3(i)(2) and 80b–9(e)); and

sections 9(d) (administrative proceedings) and 42(e)

(civil actions) of the Investment Company Act of

1940 (15 U.S.C. §§ 80a–9(d) and 80a–41(e)).

19See, e.g., section 21B(c)(1)–(6) of the Exchange

Act (15 U.S.C. § 78u–2(c)(1)–(6)); see also SEC v.

Brumfield et al., SEC Lit. Rel. No. 14,956 (June 20,

1996) (penalty not imposed in light of respondent’s

cooperation).

20Under this section, the Commission will

consider whether the entity previously violated the

federal or state securities laws or rules.

21 ‘‘Contract with America Advancement Act of

1996,’’ Speech of Hon. Thomas J. Bliley, Jr., 142

Cong. Rec. E591–92 (daily ed. Apr. 19, 1996).

22SBREFA § 223(b)(2).

23 Inspections and examinations by OCIE do not

constitute formal compliance assistance or audit

programs.

in the statements as an example of an

appropriate policy is limited to civil

money penalties.14

C. Other Relevant Statutes

The Policy is consistent with the

statutory provisions in the Securities

Enforcement Remedies and Penny Stock

Act of 1990,15 the Insider Trading

Sanctions Act of 1984,16 and other

statutes 17 that grant the Commission the

authority to impose civil money

penalties for a broad range of violations

of the federal securities laws.18 These

Acts give the Commission flexibility to

tailor sanctions and recommend factors

that guide the Commission’s discretion

in imposing money penalties. Although

each decision is based on fact-specific

circumstances, with respect to each

violator the Commission presently may

consider: (1) the violator’s financial

ability to pay a penalty; (2) whether the

violator is a repeat offender; (3)

cooperation provided during the

investigation; (4) subsequent remedial

efforts; (5) whether the violation was

willful; (6) the degree to which a

penalty will deter future violations; and

(7) any other relevant fact.19

D. Exclusions From and Conditions to

the Penalty-Reduction Policy

Section 223(b) of SBREFA lists six

possible exclusions or conditions that

agencies may incorporate in their

penalty-reduction policies, some of

which are similar to those factors the

Commission may consider when

fashioning a penalty under the statutes

described above. For the reasons

discussed below, the Commission

incorporates in the Policy three of the

suggested exclusions, which are

contained in paragraph (a)(1) of the

Policy, but does not incorporate the

other three.

1. Multiple Enforcement Actions

SBREFA permits an agency to exclude

from its policy small entities that have

been subject to multiple enforcement

actions. The Commission historically

has made a similar determination under

Section 21B(c) of the Exchange Act

when considering whether a penalty is

in the public interest.20 The

Commission believes it is appropriate to

deny access to the Penalty-Reduction

Policy to small entities against which

the Commission previously has filed an

action. Therefore, the Policy contains

this exclusion.

2. Willful or Criminal Conduct

SBREFA permits an agency to exclude

from its policy a small entity whose

violation involves willful or criminal

conduct. Thomas J. Bliley, Jr., Chairman

of the House Commerce Committee,

explained in a statement entered into

the Congressional Record after

enactment of SBREFA that:

We will not tolerate, and this bill does not

create, any free pass for financial fraud.

Specifically, Section 323(b)(4) of the bill

expressly excludes ‘‘violations involving

willful or criminal conduct’’ from the small

business enforcement variance. In the context

of the federal securities laws, I understand

‘‘willful’’ to have the longstanding judicial

construction as expressed in, for example,

Tager v. Securities and Exchange

Commission, 344 F.2d 5, 7 (2d. Cir. 1965).21

Consistent with Chairman Bliley’s

statement, the Policy is not available to

small entities if their violations involve

willful or criminal conduct.

3. Good Faith Compliance

SBREFA permits an agency to require

that a small entity has made a good faith

effort to comply with the law in order

for the small entity to avail itself of the

penalty reduction policy. The Policy

contains this exclusion. Under the

Policy, a small entity may qualify for

penalty reduction only if the

Commission has not alleged that its

actions were undertaken in bad faith

and if the entity proffers evidence

satisfactory to the Commission that it

made a ‘‘good faith’’ effort to comply

with the securities laws.

4. Reasonable Correction Period

SBREFA permits an agency to

condition the availability of penalty

reduction on a small entity’s correction

of a violation within a reasonable time

period. If a small entity violates the

securities laws, the violation cannot be

‘‘undone.’’ Rather, the Commission’s

enforcement program focuses on

stopping current violative conduct or

preventing future conduct through the

use of injunctions and temporary

restraining orders, and by recovering illgotten gains in the form of disgorgement

or by requiring undertakings to improve

compliance procedures at firms. The

Office of Compliance Inspections and

Examinations (‘‘OCIE’’) issues

deficiency letters to regulated entities

found to have weaknesses in their

compliance systems and or to have

violated applicable rules and

regulations. Depending on the nature of

violations found, however, even if an

entity corrects the violations, OCIE may

make an enforcement referral in an

effort to deter future violations by the

entity. Because enforcement action is

initiated when a violation is particularly

egregious, or when an entity has failed

to correct adequately its violations,

penalty reduction for correcting a

violation that is the basis of an

enforcement action would send the

wrong message to regulated entities.

Consequently, the Commission is not

including this condition in the Policy.

5. Compliance Assistance Program

SBREFA also permits an agency to

apply penalty reduction to violations

discovered through an entity’s

participation in a compliance assistance

or audit program operated or supported

by the agency or a state.22 Specifically,

some agencies, for example the

Occupational Safety and Health

Administration and EPA, have offices

that will audit, and pass judgment on,

a regulated entity’s compliance

program. SBREFA suggests that agencies

could consider applying their penalty

reduction policies to small entity

violations found in the course of such

a compliance audit. Although various

divisions within the Commission

provide regulatory guidance, the

Commission does not operate a formal

‘‘compliance assistance or audit

program.’’ 23 Rather than specify how

every regulated entity should structure

its compliance program, the

Commission sets standards and then

relies on the ability of each regulated

entity, and when applicable its selfregulatory organization, to determine

how best to implement its compliance
Federal Register / Vol. 62, No. 65 / Friday, April 4, 1997 / Rules and Regulations 16079

24See supra n.19 and accompanying text.

25See SBREFA § 223(a).

26 In accordance with section 21B(d) of the

Exchange Act, for example, the staff considers an

entity’s ‘‘ability to continue in business and the

collectability of a penalty, taking into account any

other claims of the United States or third parties

upon such person’s assets and the amount of such

person’s assets.’’

27 5 U.S.C. § 553(a)(3)(A).

program, based on the nature of its

business. Because the Commission does

not have a compliance program of the

type described in SBREFA, this

condition is not in the Policy. Notably,

however, as a general matter, the

Commission does take into

consideration compliance efforts and

gives appropriate weight to the

existence of effective compliance

procedures both in making prosecutorial

decisions regarding bringing charges

and in determining sanctions or

penalties.

6. Health, Safety or Environmental

Threats

Finally, SBREFA mentions excluding

from a penalty reduction policy those

violations ‘‘that pose serious health,

safety or environmental threats.’’ The

Commission does not regulate health,

safety or environmental entities.

Therefore, this exclusion is not in the

Policy.

E. Elements the Commission May

Consider When Assessing Whether to

Reduce or Not Assess Penalties

Consistent with the Commission’s

practice and the statutes which enable

the Commission to assess money

penalties, paragraph (a)(2) of the Policy

identifies eight elements the

Commission may consider when

determining whether to reduce or not

assess a civil money penalty against a

small entity. Although derived from

considerations the Commission already

applies when determining whether, and

the level at which, to apply penalties,24

the Policy gives the Commission

discretion to consider any or all of these

in any case where the Policy may apply.

F. Ability to Pay

SBREFA permits an agency to

consider ability to pay in determining

penalty assessments on small entities.25

Since passage of the Remedies Act in

1990, the Commission has complied

with the spirit of SBREFA, considering

an entity’s ability to pay before setting

a penalty amount. Generally, the

Commission seeks money penalties in

an amount that, after careful

examination of financial information

provided by the violator, the

Commission determines the violator is

able to pay. When analyzing appropriate

sanctions in a particular case, the

Commission typically will direct its

staff to examine an entity’s ability to pay

disgorgement first; if the entity has the

ability to pay a penalty after paying

disgorgement, the Commission will

demand an appropriate penalty amount

based on the entity’s ability to pay.26

Consistent with this practice,

paragraph (a)(3) of the Policy makes

penalty-reduction available to small

entities that may otherwise be excluded

under paragraph (a)(1). A small entity

must demonstrate to the Commission’s

satisfaction that it is unable financially

to pay a penalty before the Commission

will consider whether penalty-reduction

is warranted. The Policy establishes that

the Commission, in its sole discretion,

may consider the eight factors in

paragraph (a)(2) of the Policy as well as

reviewing evidence presented by the

small entity requesting penaltyreduction, such as sworn financial

statements, to determine whether

reduction is warranted in a particular

case. The small entity must demonstrate

to the Commission’s satisfaction that it

presently is unable financially to pay

the penalty, in whole or in part, and that

it will be unable to pay the penalty, in

whole or in part, over a reasonable

period of time.

II. Regulatory Requirements

The Commission is announcing a

Penalty Reduction Policy as required by

SBREFA. As a general statement of

policy, the Administrative Procedure

Act (‘‘APA’’) does not require that the

Commission publish the Policy for

notice and comment.27 The Commission

wishes, however, to provide interested

parties, particularly small entities, an

opportunity to comment on the Policy.

The Commission intends to revisit the

Policy when a reasonable period has

passed after the end of the comment

period. In its re-evaluation, the

Commission will consider its

experience administering the Policy and

comments the Commission receives.

List of Subjects in 17 CFR Part 202

Administrative practice and

procedure.

Text of Amendment

In accordance with the foregoing, 17

CFR, Chapter II, is amended as follows:

PART 202—INFORMAL AND OTHER

PROCEDURES

1. The authority citation for Part 202

is amended by adding the following

citation to read as follows:

Authority: 15 U.S.C. 77s, 77t, 78d–1, 78u,

78w, 78ll(d), 79r, 79t, 77sss, 77uuu, 80a–37,

80a–41, 80b–9, and 80b–11, unless otherwise

noted.

* * * * *

Section 202.9 is also issued under

section 223, 110 Stat. 859 (Mar. 29,

1996).

2. Section 202.9 is added to read as

follows:

§ 202.9 Small entity enforcement penalty

reduction policy.

The Commission’s policy with respect

to whether to reduce or assess civil

money penalties against a small entity

is:

(a) The Commission will consider on

a case-by-case basis whether to reduce

or not assess civil money penalties

against a small entity. In determining

whether to reduce or not assess

penalties against a specific small entity,

the following considerations will apply:

(1) Except as provided in paragraph

(a)(3) of this section, penalty reduction

will not be available for any small entity

if:

(i) The small entity was subject

previously to an enforcement action;

(ii) Any of the small entity’s

violations involved willful or criminal

conduct; or

(iii) The small entity did not make a

good faith effort to comply with the law.

(2) In considering whether the

Commission will reduce or refrain from

assessing a civil money penalty, the

Commission may consider:

(i) The egregiousness of the violations;

(ii) The isolated or repeated nature of

the violations;

(iii) The violator’s state of mind when

committing the violations;

(iv) The violator’s history (if any) of

legal or regulatory violations;

(v) The extent to which the violator

cooperated during the investigation;

(vi) Whether the violator has engaged

in subsequent remedial efforts to

mitigate the effects of the violation and

to prevent future violations;

(vii) The degree to which a penalty

will deter the violator or others from

committing future violations; and

(viii) Any other relevant fact.

(3) The Commission also may

consider whether to reduce or not assess

a civil money penalty against a small

entity, including a small entity

otherwise excluded from this policy

under paragraphs (a)(1) (i)–(iii) of this

section, if the small entity can

demonstrate to the Commission’s

satisfaction that it is financially unable

to pay the penalty, immediately or over

a reasonable period of time, in whole or

in part.

(4) For purposes of this policy, an

entity qualifies as ‘‘small’’ if it is a small
16080 Federal Register / Vol. 62, No. 65 / Friday, April 4, 1997 / Rules and Regulations

1Pursuant to the Reg. Flex. Act, 5 U.S.C. § 601(3),

the Commission has adopted appropriate

definitions of ‘‘small business’’ for purposes of the

Reg. Flex. Act. See 17 CFR 270.0–10, 275.0–7,

240.0–10, 230.157, 250.110, and 260.0–7. The

Commission recently proposed amendments to

certain of these definitions. Definitions of ‘‘Small

Business’’ or ‘‘Small Organization’’ Under the

Investment Company Act of 1940, the Investment

Advisers Act of 1940, the Securities Exchange Act

of 1934, and the Securities Act of 1933, Securities

Act Rel. No. 7383, 62 FR 4106 (Jan. 28, 1997). The

Commission extended the comment period for the

proposed amendments to April 30, 1997, 62 FR

13356 (Mar. 20, 1997). Based on an analysis of the

language and legislative history of the Reg. Flex.

Act, Congress does not appear to have intended that

Act to apply to natural persons (as opposed to

individual proprietorships) or to foreign entities.

The Commission understands that staff at the Small

Business Administration have taken the same

position.

2At present, this threshold is $5 million. Thus,

non-regulated entities, such as general partnerships,

privately held corporations or professional service

organizations, with assets of $5 million or less may

qualify for penalty-reduction.

business or small organization as

defined by Commission rules adopted

for the purpose of compliance with the

Regulatory Flexibility Act.1 An entity

not included in these definitions will be

considered ‘‘small’’ for purposes of this

policy if it meets the total asset amount

that applies to issuers as set forth in

§ 230.157a of this chapter.2

(b) This policy does not create a right

or remedy for any person. This policy

shall not apply to any remedy that may

be sought by the Commission other than

civil money penalties, whether or not

such other remedy may be characterized

as penal or remedial.

Dated: March 27, 1997.

By the Commission.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–8360 Filed 4–3–97; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF TRANSPORTATION

Coast Guard

33 CFR Part 165

[COTP Mobile, AL 97–005]

RIN 2115–AA97

Safety Zone Regulations: Pelican

Passage Dauphin Island, AL

AGENCY: Coast Guard, DOT.

ACTION: Temporary rule.

SUMMARY: The Coast Guard is

establishing a safety zone for Pelican

Passage extending 1⁄2 mile south and 3⁄4

mile east and west of Dauphin Island

Pier, Dauphin Island, Alabama.

The zone is needed to protect

personnel and property associated with

the Dauphin Island Spring Festival

Acrobatic airshow, Dauphin Island,

Alabama. Entry into this zone is

prohibited unless authorized by the

Captain of the Port.

DATES: This regulation is effective from

3 p.m. to 4 p.m. on April 5, 1997.

FOR FURTHER INFORMATION CONTACT:

LTJG H. Elena McCullough, (334) 441–

5286, 150 North Royal Street, Mobile,

AL 36652–2924.

SUPPLEMENTARY INFORMATION: In

accordance with 5 U.S.C. 553, a notice

of proposed rule making was not

published for this regulation and good

cause exists for making it effective in

less than 30 days after Federal Register

publication. Publishing an NPRM and

delaying its effective date would be

contrary to the public interest since

immediate action is needed to prevent

damage to the vessels involved.

Background and Purpose

The event requiring this regulation

will begin at 3 p.m. on April 5, 1997.

The Town of Dauphin Island will be

sponsoring an airshow, with low level

acrobatics, in the Pelican Passage

extending 1⁄2 mile south and 3⁄4 mile

east and west of Dauphin Island Pier,

Dauphin Island, Alabama, bounded by

the previously listed coordinates. The

airshow will terminate at 4 p.m. on

April 5, 1997. This regulation is issued

pursuant to 33 U.S.C. 1231 as set out in

the authority citation for all of Part 165.

The safety zone in bounded by 30–15N,

088–08.2W; 30–14N, 088–08.2W; 30–

13.5N, 088–06.5N; and 30–14.5N, 088–

06.5W.

Regulatory Evaluation

This temporary rule is not a

significant regulatory evaluation under

Executive Order 12866 and is not

significant under the ‘‘Department of

Transportation Regulatory Policies and

Procedures’’ (44 FR 11040; February 26,

1979). The Coast Guard expects the

economic impact of this rule to be so

minimal that a full regulatory evaluation

is unnecessary. This regulation will

only be in effect for a short period of

time, and the impacts on routine

navigation are expected to be minimal.

Collection of Information

This rule contains no collection of

information requirements under the

Paperwork Reduction Act (44 U.S.C.

3501 et seq.).

Federalism

The Coast Guard has analyzed this

rule under the principles and criteria

contained in Executive Order 12612 and

has determined that it does not have

sufficient federalism implications to

warrant the preparation of a Federalism

Assessment.

Environment

The Coast Guard considered the

environmental impact of this proposal

and concluded that under section 2.B.2.

of Commandant Instruction M16475.1

(series), this proposal is categorically

excluded from further environmental

documentation. A Categorical Exclusion

Determination is available by contacting

Commander (mps), Eight Coast Guard

District, 501 Magazine Street, New

Orleans, LA 70130–3396.

List of Subjects in 33 CFR Part 165

Marine safety, Waterways.

Regulation

For the reasons set out in the

preamble, 33 CFR 165 is amended as

follows:

PART 165—[AMENDED]

1. The authority citation for part 165

continues to read as follows:

Authority: 33 U.S.C. 1231; 50 U.S.C. 191;

33 CFR 1.05–1(g), 6.04–1, 6.04–6, and 160.5;

49 CFR 1.46.

2. Section 165.T08–009 is added to

read as follows:

§ 165.T08.009 Safety Zone: Pelican

Passage, Dauphin Island, AL.

(a) Location. The following area is a

safety zone: Pelican Passage extending

1⁄2 mile south and 3⁄4 mile east and west

of Dauphin Island Pier, Dauphin Island,

Alabama. The zone is needed to protect

personnel and property associated with

the Town of Dauphin Island will be

sponsoring an airshow, with low level

acrobatics.

(b) Effective date: This section is

effective from 3 p.m. to 4 p.m. on April

5, 1997, unless terminated sooner by the

Captain of the Port.

(c) Regulations: In accordance with

the general regulations in § 165.23 of

this part, entry into this zone is

prohibited unless authorized by the

Captain of the Port.

Dated: March 14, 1997.

S.E. Hartley,

Commander, U.S. Coast Guard, Captain of

the Port, Acting.

[FR Doc. 97–8504 Filed 4–3–97; 8:45 am]

BILLING CODE 4910–14–M