40230 Federal Register / Vol. 63, No. 144 /Tuesday, July 28, 1998 / Proposed Rules

DEPARTMENT OF COMMERCE

International Trade Administration

15 CFR Part 303

DEPARTMENT OF THE INTERIOR

Office of Territorial and International

Affairs

[Docket No. 980716178–8178–01]

RIN 0625–AA53

Proposed Limit on Duty-Free Insular

Watches in Calendar Year 1999

AGENCIES: Import Administration,

International Trade Administration,

Department of Commerce; Office of

Insular Affairs, Department of the

Interior.

ACTION: Proposed rule and request for

comments.

SUMMARY: This action invites public

comment on a proposal to amend the

Departments’ ITA regulations governing

duty-exemption allocations and dutyrefund entitlements for watch producers

in the United States’ insular possessions

(the Virgin Islands, Guam and American

Samoa) and the Northern Mariana

Islands. The proposed amendments

would change the value limit for

watches eligible for duty-exemption,

update the creditable wage ceiling,

modify the new entrant invitation

language and establish the total quantity

and respective territorial shares of

insular watches and watch movements

which would be allowed to enter the

United States free of duty during

calendar year 1999.

DATES: Comments must be received on

or before August 27, 1998.

ADDRESSES: Address written comments

to Faye Robinson, Program Manager,

Statutory Import Programs Staff, Room

4211, U.S. Department of Commerce,

Washington, DC 20230.

FOR FURTHER INFORMATION CONTACT: Faye

Robinson, (202) 482–3526, same address

as above.

SUPPLEMENTARY INFORMATION: The

insular possessions watch industry

provision in Sec. 110 of Pub. L. No. 97–

446 (96 Stat. 2331) (1983) as amended

by Sec. 602 of Pub. L. No. 103–465 (108

Stat. 4991) (1994) additional U.S. Note

5 to chapter 91 of the HTS requires the

Secretary of Commerce and the

Secretary of the Interior, acting jointly,

to establish a limit on the quantity of

watches and watch movements which

may be entered free of duty during each

calendar year. The law also requires the

Secretaries to establish the shares of this

limited quantity which may be entered

from the Virgin Islands, Guam,

American Samoa and the Northern

Mariana Islands. Regulations on the

establishment of these quantities and

shares are contained in Sec. 303.3 and

303.4 of title 15, Code of Federal

Regulations (15 CFR 303.3 and 303.4).

The Departments propose to establish

for calendar year 1999 a total quantity

of 3,740,000 units and respective

territorial shares as shown in the

following table:

Virgin Islands ........................... 2,240,000

Guam ........................................ 500,000

American Samoa ...................... 500,000

Northern Mariana Islands ....... 500,000

Compared to the total quantity

established for 1998 (63 FR 5887;

February 5, 1998), this amount would be

a decrease of 400,000 units. The

proposed Virgin Islands territorial share

would be reduced by 400,000 and the

shares for Guam, American Samoa and

the Northern Mariana Islands would not

change. The amount we propose for the

Virgin Islands is more than sufficient for

the anticipated needs of all the existing

producers.

We also propose raising the maximum

value of components for duty-free

treatment of watches from $200 to $500

by amending Sec. 303.14(b)(3). This

change would relax the limitation on

the value of imported components that

may be used in the assembly of dutyfree insular watches. The proposed

value levels would provide the

producers with a greater choice in the

kinds of watches they assemble, thereby

affording them an opportunity to

increase shipments and raise territorial

employment.

We propose raising from $35,000 to

$38,650 the maximum dollar amount of

wages creditable in the calculation of

the value of the production incentive

certificate by amending § 303.14(a)(1)(i).

The increase in the maximum creditable

wage limit is being proposed to keep

pace with inflation. The ceiling was last

raised in 1994.

Finally, we propose eliminating

subparagraphs (1) and (2) of § 303.14(d)

and consolidating provisions on new

entrant invitations in a revised

§ 303.14(d). There is no longer a

producer in Guam, leaving the Virgin

Islands as the only territory with an

active industry. The proposed change

would remove the need to amend the

regulations when such production shifts

occur.

Regulatory Flexibility Act

In accordance with the Regulatory

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

Assistant General Counsel for

Legislation and Regulation has certified

to the Chief Counsel, Small Business

Administration, that the proposed rule

will not have a significant economic

impact on a substantial number of small

entities. This is because the rulemaking

affects only the five watch companies

currently participating in the insular

possessions watch program, all of which

are located in the Virgin Islands.

Although a reduction of the 1999 Virgin

Islands territorial share of dutyexemption is being proposed, the

reduced amount would still represent

more than twice the amount of duty-free

shipments used in 1997. Accordingly,

the proposed reduction for the 1999

annual duty-exemption for the Virgin

Islands should not impose any cost or

have any economic effect on these small

companies. Similarly, updating the

creditable wage ceiling, simplifying and

updating the new entrant invitation

language and raising the value limit for

watches eligible for duty-exemption will

not impose any cost or have any other

adverse economic effect on the

producers.

Paperwork Reduction Act

This proposed rulemaking involves

information collection activities subject

to the Paperwork Reduction Act of 1980,

44 U.S.C. 3501 et seq. which are

currently approved by the Office of

Management and Budget under control

numbers 0625–0040 and 0625–0134.

The amendments will not increase the

information burden on the public.

Notwithstanding any other provision

of the law, no person is required to

respond to, nor shall any person be

subject to a penalty for failure to comply

with a collection of information unless

it displays a currently valid OMB

Control Number.

It has been determined that the

proposed rulemaking is not significant

for purposes of Executive Order 12866.

List of Subjects in 15 CFR Part 303

Administrative practice and

procedure, American Samoa, Customs

duties and inspection, Guam, Imports,

Marketing quotas, Northern Mariana

Islands, Reporting and recordkeeping

requirements, Virgin Islands, Watches

and jewelry.

For reasons set forth above, we

propose to amend 15 CFR part 303 as

follows:

PART 303—[AMENDED]

1. The authority citation for 15 CFR

part 303 continues to read as follows:

Authority: Pub. L. 94–241, 90 Stat. 263 (48

U.S.C. 1681, note); Pub. L. 97–446, 96 Stat.

2331 (19 U.S.C. 1202, note); Pub. L. 103–465,

108 Stat. 4991.
Federal Register / Vol. 63, No. 144 /Tuesday, July 28, 1998 / Proposed Rules 40231

1 15 U.S.C. 80a–15(a). Section 15(a) requires that

a majority of the fund’s outstanding voting

securities approve the contract. Section 2(a)(42) of

the Act (15 U.S.C. 80a–2(a)(42)) defines a vote of a

majority of the outstanding voting securities of a

fund to mean the vote of shareholders representing

(a) 67 percent or more of the voting securities

present at the meeting, if the holders of more than

50 percent of the fund’s outstanding voting

securities are present or represented by proxy, or (b)

more than 50 percent of the outstanding voting

securities of the fund, whichever is less.

2 15 U.S.C. 80a–15(a)(4). An ‘‘assignment’’ of an

investment advisory contract includes a transfer of

the contract to another investment adviser as well

as a transfer of a controlling block of the investment

adviser’s voting securities. 15 U.S.C. 80a–2(a)(4).

3 15 U.S.C. 80a–15(a)(2).

4Hearings on S. 3580 Before the Subcomm. of the

Senate Comm. on Banking and Currency, 76th

Cong., 3d Sess. 253 (1940) (statement of David

Schenker).

5 If an investment advisory contract is terminated

by a foreseeable assignment, an investment adviser

may be required, under its fiduciary duty, to

Continued

§ 303.14 [Amended]

2. Section 303.14(a)(1)(i) is amended

by removing ‘‘$35,000’’ and adding

‘‘$38,650’’ in its place.

3. Section 303.14(b)(3) is amended by

removing ‘‘$200’’ and adding ‘‘$500’’ in

its place.

4. Section 303.14(d) is revised to read

as follows:

§ 303.14 Allocation factors and

miscellaneous provisions.

* * * * *

(d) New entrant invitations.

Applications from new firms are invited

for any unused portion of any territorial

share.

* * * * *

5. Section 303.14(e) is amended by

removing ‘‘2,640,000’’ and adding

‘‘2,240,000’’ in its place.

Robert S. LaRussa,

Assistant Secretary for Import

Administration.

Allen Stayman,

Director, Office of Insular Affairs.

[FR Doc. 98–20162 Filed 7–27–98; 8:45 am]

BILLING CODE 3510–DS–P 4310–93–P

SECURITIES AND EXCHANGE

COMMISSION

17 CFR Part 270

[Release Nos. IC–23325, IA–1736; File No.

S7–22–98]

RIN 3235–AH02

Temporary Exemption for Certain

Investment Advisers

AGENCY: Securities and Exchange

Commission.

ACTION: Proposed rule.

SUMMARY: The Commission is proposing

for public comment amendments to the

rule under the Investment Company Act

of 1940 that permits an investment

adviser, in certain circumstances, to

advise an investment company

temporarily under a contract that the

investment company’s shareholders

have not approved. The proposed

amendments would expand the

exemption provided by the rule to

include new advisory contracts entered

into as a result of a merger or similar

business combination involving the

fund’s adviser or a controlling person of

the adviser, and would lengthen the

period during which the adviser may

serve under a contract without

shareholder approval. The proposed

amendments are intended to enable

more investment advisers to rely on the

rule rather than seek individual

exemptions from the Commission,

subject to conditions designed to protect

the interests of investors pending the

shareholder vote.

DATES: Comments must be received on

or before September 30, 1998.

ADDRESSES: Comments should be

submitted in triplicate to Jonathan G.

Katz, Secretary, Mail Stop 6–9,

Securities and Exchange Commission,

450 5th Street, NW., Washington, DC

20549. Comments also may be

submitted electronically at the following

E-mail address: rule-comments@sec.gov.

All comment letters should refer to File

No. S7–22–98; this file number should

be included on the subject line if E-mail

is used. Comment letters will be

available for public inspection and

copying in the Commission’s Public

Reference Room, 450 5th Street, NW.,

Washington, DC 20549. Electronically

submitted comment letters also will be

posted on the Commission’s Internet

web site (http://www.sec.gov).

FOR FURTHER INFORMATION CONTACT:

Marilyn Mann, Senior Counsel, or

Penelope W. Saltzman, Assistant Chief,

(202) 942–0690, Office of Regulatory

Policy, Division of Investment

Management, Mail Stop 5–6, Securities

and Exchange Commission, 450 5th

Street, NW., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The

Securities and Exchange Commission

(the ‘‘Commission’’) today is requesting

public comment on amendments to rule

15a–4 (17 CFR 270.15a–4) under the

Investment Company Act of 1940 (15

U.S.C. 80a) (the ‘‘Investment Company

Act’’ or the ‘‘Act’’).

Table of Contents

I. Executive Summary

II. Background

III. Proposed Amendments to Rule 15a–4

A. Board Approval

B. Adviser Mergers

1. Terms and Conditions

2. Placement of Advisory Fees in Escrow

3. Costs of Shareholder Solicitation

C. Length of Exemptive Period

D. Availability of Exemption After

Shareholder Vote

E. General Request for Comment

IV. Cost-Benefit Analysis

V. Summary of Initial Regulatory Flexibility

Analysis

VI. Statutory Authority

Text of Proposed Rule

I. Executive Summary

The Commission is proposing for

public comment amendments to rule

15a–4 under the Investment Company

Act. Rule 15a–4 permits an investment

adviser to an investment company

(‘‘fund’’) to serve temporarily under a

contract that has not been approved by

the fund’s shareholders. The proposed

amendments would extend the rule to

new advisory contracts entered into as

a result of a merger or similar business

combination involving the fund’s

adviser or a controlling person of the

adviser, in connection with which the

adviser or a controlling person of the

adviser receives a benefit (collectively,

‘‘adviser mergers’’). The amendments

also would increase the maximum

number of days the investment adviser

could serve under the rule and clarify

the timing of board approval of the

fund’s advisory contract. The proposed

amendments would enable more

investment advisers to rely on the rule

rather than seek an individual

exemption from the Commission,

subject to conditions designed to protect

the interests of investors pending the

shareholder vote.

II. Background

Section 15(a) of the Investment

Company Act prohibits a person from

serving as an investment adviser to a

fund except under a written advisory

contract that the fund’s shareholders

have approved. 1 Section 15(a) also

requires that an advisory contract must

provide for its automatic termination

upon its assignment.2 An advisory

contract that continues in effect for

more than two years must be approved

annually by either the fund’s board of

directors or its shareholders. 3

Section 15(a) is designed to give

shareholders a voice in a fund’s

investment advisory contract and to

prevent trafficking in fund advisory

contracts.4 One of section 15(a)’s

unintended effects, however, is to leave

a fund without an investment adviser if

the fund’s contract with the adviser is

terminated before the fund’s

shareholders can vote on a new

contract.5 A fund could face this