402 Federal Register / Vol. 61, No. 4 / Friday, January 5, 1996 / Proposed Rules

affecting the national security and

whether the regulations and directives

meet current approval requirements.

(d) The agency shall prepare

regulations and directives governing use

of the polygraph in employment

screening and personnel investigations

which must be reviewed and approved

by the Director, OPM. These shall

contain at a minimum:

(1) Specific purposes for which the

polygraph may be used, and details

concerning the types of positions or

organizational entities in which it will

be used, and the officials authorized to

approve these examinations;

(2) A provision that a person to be

examined must be informed as far in

advance as possible of the intent to use

the polygraph, and of

(i) Other devices or aids to the

examination which may be used

simultaneously with the polygraph,

such as voice recordings,

(ii) The effect of the polygraph

examination, or his/her refusal to take

this examination, on eligibility for

employment, and that refusal to consent

to a polygraph examination will not be

made a part of the personnel file, and

(iii) The characteristics and nature of

the polygraph machine and

examination, including an explanation

of the physical operation of the

machine, the procedures to be followed

during the examination, and the

disposition of information developed;

(3) A provision that no polygraph

examination will be given unless the

person to be examined has voluntarily

consented in writing to be examined

after having been informed of the

provisions in paragraph (d)(2) of this

section;

(4) A provision that questions to be

asked during a polygraph examination

must have relevance to the subject of the

particular inquiry;

(5) Adequate standards for the

selection and training of examiners,

keeping in mind the Government’s

objective of insuring protection for the

subject of an examination and the

accuracy of polygraph results;

(6) A provision for adequate

monitoring of polygraph operations to

prevent abuses or unwarranted

invasions of privacy; and

(7) A provision for adequate

safeguarding of files, charts, and other

relevant data developed through

polygraph examinations to avoid

unwarranted invasions of privacy.

(e) Approval to use the polygraph for

employment selection screening for

positions in the competitive service will

be granted only for a 12-month period,

and is conditioned upon prior approval

of the agency’s regulations and

directives as provided in paragraph (d)

of this section. An agency given

approval to use the polygraph for

competitive service positions will be

required to recertify annually to the

Director, OPM, that the conditions

which led to the original certification

still exist in the agency. Nothing

contained in this section shall be

applicable to polygraph examinations

for purposes other than employment

selection screening.

(f) The basic requirements of National

Security Decision Directive Number 84

(NSDD–84), subject to and as affected by

any restrictions in force, approved by

former President Ronald W. Reagan on

March 11, 1983, include the use of the

polygraph in certain instances. Agencies

that originate or handle classified

national security information should

review the current requirements of

NSDD–84.

Subpart C—Maintenance of

Information

§ 736.301 Maintenance of Investigative

Files.

(a) Investigative files are records

subject to the Privacy Act and the

Freedom of Information Act and are

maintained in accordance with the

provisions of those Acts.

(b) Investigative information,

including investigative reports and

other materials, is highly personal and

is properly restricted to agency officials

who have an official need for it in

performance of their duties. All

investigative information shall be

maintained in confidence. Notices of

systems of records published to fulfill

Privacy Act requirements must show

full consideration for the highly

personal nature of this information.

(c) When not in use, personnel

investigations must be stored in a

combination-locked cabinet or safe, or

in an equally secure area. Access to case

files should be limited only to the

Security Officer and approved staff, who

shall not have access to their own files.

§ 736.302 Handling of OPM Investigative

Files.

(a) The agency security office must

maintain a record of each disclosure of

OPM investigative material within the

agency, including at a minimum:

(1) The name and title of the person

to whom disclosure was made;

(2) The type of background

investigation conducted on the person

to whom the material was disclosed;

(3) The date(s) of disclosure; and

(4) The reason(s) for the disclosure.

(b) An agency may disseminate OPM

investigative files, in whole or in part,

outside the agency only when the

agency obtains prior OPM approval.

Agency security officers are responsible

for controlling files within their

agencies.

(c) Privacy Act and Freedom of

Information Act requests for OPM

investigative records are to be submitted

to the Office of Personnel Management,

Federal Investigations Processing

Center, FOI/P, P.O. Box 618, Boyers,

Pennsylvania 16018–0618.

[FR Doc. 96–116 Filed 1–4–96; 8:45 am]

BILLING CODE 6325–01–M

DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 356

[Department of the Treasury Circular, Public

Debt Series No. 1–93]

Sale and Issue of Marketable BookEntry Treasury Bills, Notes, and Bonds

AGENCY: Bureau of the Public Debt,

Fiscal Service, Department of the

Treasury.

ACTION: Proposed rule.

SUMMARY: The Department of the

Treasury (‘‘Department’’) is proposing,

for comment, an amendment to 31 CFR

Part 356 (Uniform Offering Circular for

the Sale and Issue of Marketable BookEntry Treasury Bills, Notes, and Bonds).

The proposed amendment defines the

term ‘‘investment adviser’’ and contains

a new section on bidding through

investment advisers. The amendment

also makes certain clarifying changes.

DATES: Comments must be submitted on

or before March 5, 1996. The

Department is particularly interested in

receiving comments regarding

alternative methods for obtaining, in the

least burdensome manner possible, the

information needed to ensure that no

person or entity receive a

disproportionate share of the auction.

ADDRESSES: Comments should be sent

to: Government Securities Regulations

Staff, Bureau of the Public Debt, Room

515, E Street Building, Washington, D.C.

20239–0001. Comments received will be

available for public inspection and

copying at the Treasury Department

Library, FOIA Collection, Room 5030,

Main Treasury Building, 1500

Pennsylvania Avenue, N.W.,

Washington, D.C. 20220. Persons

wishing to visit the library should call

(202) 622–0990 for an appointment.

FOR FURTHER INFORMATION CONTACT:

Michael W. Sunner, Deputy Assistant

Commissioner, Office of Financing,
Federal Register / Vol. 61, No. 4 / Friday, January 5, 1996 / Proposed Rules 403

Bureau of the Public Debt (202) 219–

3350, or Margaret Marquette, AttorneyAdviser, Office of the Chief Counsel,

Bureau of the Public Debt (202) 219–

3320.

SUPPLEMENTARY INFORMATION: 31 CFR

Part 356, also referred to as the uniform

offering circular, sets out the terms and

conditions for the sale and issuance by

the Department of the Treasury to the

public of marketable book-entry

Treasury bills, notes, and bonds. The

uniform offering circular was originally

published on January 5, 1993 (58 FR

412), as a comprehensive statement of

those terms and conditions.

Amendments to the circular were

published on June 3, 1994 (59 FR

28773), and March 15, 1995 (60 FR

13906). In the time since the rule was

first published, several questions have

arisen about the application of the

circular in situations where an

investment adviser formulates a bid or

otherwise makes bidding decisions for a

managed account. As a result, the

Department is proposing to define the

term ‘‘investment adviser’’ and is setting

out the specific terms and conditions for

bidding through investment advisers.

31 CFR Part 356 currently does not

describe in detail rules applying to

investment advisers. The preamble to

the January 5, 1993, rule refers to

investment advisers and ‘‘others who

bid on behalf of their managed

investment accounts or other clients,’’

stating that an investment adviser can

bid for its clients in the name of the

investment adviser or in the names of

the clients. The section on net long

position reporting requires that a special

report be provided in those cases where

an investment adviser controls bids and

positions exceeding a specified amount.

The current rule, while allowing

investment advisers to bid for controlled

accounts, does not specify how the

various provisions of the rule apply

with respect to those accounts. In

particular, it does not address what is

meant by the statement in the preamble

to the January 5, 1993, rule that an

investment adviser or a managed

account is considered the ‘‘bidder for all

purposes of [the] rule.’’ It does not make

clear to what extent, if any, a managed

account must take into consideration

the bids and position of the person or

entity it would otherwise be associated

with under the bidder definitions

contained in Appendix A of the rule. It

also does not make clear to what extent

an adviser that manages accounts must

take into consideration the bids and

position of an entity that ‘‘supervises’’

the adviser.

The proposed rule adds, in § 356.2, a

definition for the term ‘‘investment

adviser.’’ The new definition describes

what is meant by the term ‘‘investment

discretion.’’ An entity exercising its

authority over an account to determine

which auctions an account will bid in

and the quantity of securities to be bid

for is an investment adviser for

purposes of the rule. The definition also

clarifies that an adviser employed or

supervised by an entity is considered to

be part of that entity, i.e., as if the

adviser was an affiliate of the entity

under the bidder definitions. For

example, in the case where an

individual serves as an investment

adviser to a mutual fund and is

employed by a partnership that advises

other mutual funds, it is the

partnership, not the individual, that is

considered the investment adviser for

purposes of the offering circular.

Section 356.15 sets out those terms

that are unique to bids placed through

investment advisers. It provides that a

controlled account is considered to be

separate from the person or entity that

it would otherwise be part of under the

bidder definitions. A corporate

investment account managed by a third

party that has investment discretion

would be a controlled account and,

therefore, would not be considered to be

part of the corporation under the

offering circular.

Section 356.15(a) incorporates a

provision found in the preamble to the

January 5, 1993, rule that an investment

adviser may bid for an account either in

the name of the investment adviser, in

which case the adviser is considered the

bidder, or in the name of the account,

in which case the account is considered

the bidder. This means that, for

purposes of bidding noncompetitively,

an investment adviser that bids for its

controlled accounts in the name of the

adviser is limited to the maximum

allowed bid and award amount for a

noncompetitive bid for that auction,

e.g., $1 million total in a bill auction.

An investment adviser that bids

noncompetitively for its controlled

accounts in the names of the accounts

may bid for each account for the

maximum allowed noncompetitive

amount, e.g., $1 million for each

account in a bill auction.

The proposed rule makes clear, in

§ 356.15(b), that a controlled account is

subject to the same bidding restrictions

as other bidders regardless of whether a

bid for the account is in the name of an

investment adviser or in the name of the

account. Specifically, the investment

adviser may not bid for the account both

competitively and noncompetitively in

the same auction. Also, the account is

subject to the noncompetitive bidding

and award limitations contained in the

rule.

As with the current rule, the proposed

rule states that an investment adviser

must include in its net long position

calculation those bids and positions it

controls in addition to bids and

positions it would otherwise have to

include as a bidder. Unlike the current

rule, however, the proposed rule

provides for the total reportable net long

position to be reported on the tender

rather than in a special report to a

Federal Reserve Bank.

A significant change in the proposed

rule from the current rule is the amount

of a net long position that an investment

adviser may exclude from its net long

position calculation. The current rule

allows the adviser to exclude net long

positions less than $500 million for

certain accounts that are not bid for in

an auction. The rule as revised would

provide for a similar type of exclusion

but decreases the amount of the

exclusion to $10 million. This change is

being proposed because the Department

believes that a lower exclusionary

amount is necessary to give a more

accurate picture of the amount of a

security controlled by an investment

adviser.

In developing this proposal, the

Department considered, as an

alternative, providing investment

advisers an exclusion based on an

aggregate amount as opposed to separate

position amounts in specific accounts,

e.g., allow an adviser to exclude the net

long positions of any accounts on whose

behalf it is not bidding up to a given

aggregate amount. For example, if the

aggregate net long position of all

controlled accounts on whose behalf the

adviser was not placing competitive

bids was equal to or less than a

designated amount (such as $200

million), then that amount could be

excluded from its net long calculation.

However, if the aggregate net long

position for these accounts exceeded

such amount, then the amount in excess

of the designated amount would have to

be included in the net long calculation.

This alternative was not selected

because of a concern that it would be

more burdensome for advisers with

large numbers of accounts to determine

the total balance of the net long

positions of all non-bidder accounts

than to determine which accounts had

net long positions in excess of a

specified threshold at the cutoff time for

reporting. Commenters are asked to

address this presumption when they

consider the proposal.

The Department would welcome any

comments on the exclusion provisions
404 Federal Register / Vol. 61, No. 4 / Friday, January 5, 1996 / Proposed Rules

outlined above. It would also welcome

any alternative suggestions that would

allow the Department to obtain the

information it needs to ensure that no

person or entity receive or control a

disproportionate share of the auction,

and to obtain that information in the

least burdensome manner possible.

Section 356.15(d) provides that an

investment adviser may submit bids for

its controlled accounts directly to a

Federal Reserve Bank or the Bureau of

the Public Debt or may forward such

bids to a depository institution or

dealer, regardless of whether those bids

are in the name of the adviser or in the

names of the accounts. If a bid is

submitted directly, the investment

adviser is considered the submitter and,

depending on whether the bid is in the

name of the adviser or in the name of

one of its accounts, the adviser or the

account, respectively, is considered the

bidder. If the adviser forwards a bid for

one of its controlled accounts to a

depository institution or dealer, either

the adviser or the account is considered

a customer of such depository

institution or dealer depending on

whether the bid is in the name of the

adviser or in the name of the account.

In such a case, the adviser is not

considered an intermediary as defined

in § 356.2 of the offering circular.

The provision allowing an adviser to

submit or forward bids in the names of

its controlled accounts is an exception

to the restriction against anyone other

than a depository institution or dealer

submitting or forwarding bids for others.

It is not the Department’s intent,

however, to authorize an investment

adviser that does not also meet the

definition of a depository institution or

dealer to submit or forward bids for

customers. A controlled account is not

the same as a customer. (See definition

of ‘‘customer’’ in § 356.2 which refers to

directing a depository institution or

dealer to bid for a specified amount of

securities in a specific auction.)

Accordingly, an investment adviser that

is not also a depository institution or

dealer may submit or forward bids only

for its own account or for its controlled

accounts.

Other Clarifying Changes

The Department is also taking this

opportunity to make other clarifying

changes to the rule. Section 356.13 has

been revised to make clear the

Department’s requirement that, in those

cases where a bidder has more than one

bid, its reportable net long position is to

be reported in connection with only one

of those bids. This requirement is to

avoid any possible confusion or

duplication in net long position

reporting.

Section 356.11 has been amended to

provide for the use of unique numbers

assigned to bidders for identification

purposes. Additionally, Appendix A has

been revised to provide that, for

purposes of the rule, a business trust is

considered to be a corporation. Finally,

a change has been made in the example

given in § 356.21 to reflect that Treasury

bills may now be held in multiples of

$1,000.

The proposed rule contained herein

includes a new § 356.15. It also amends

§§ 356.2, 356.11, 356.13, 356.21, and

356.22 as well as Appendix A to Part

356. Other sections have been

renumbered as a result of adding the

new section § 356.15.

Procedural Requirements

This proposed rule does not meet the

criteria for a ‘‘significant regulatory

action’’ pursuant to Executive Order

12866.

Although this proposed rule is being

issued in proposed form to secure the

benefit of public comment, the notice

and public procedures requirements of

the Administrative Procedure Act are

inapplicable, pursuant to 5 U.S.C.

553(a)(2).

As no notice of proposed rulemaking

is required, the provisions of the

Regulatory Flexibility Act (5 U.S.C. 601,

et seq.) do not apply.

The collection of information

contained in this proposed rule, in

§ 356.15, have been submitted to the

Office of Management and Budget for

review under § 3507(d) of the

Paperwork Reduction Act of 1995 (44

U.S.C. Chapter 35). Under the Act, an

agency may not conduct or sponsor, and

a person is not required to respond to,

a collection of information unless it

displays a valid OMB control number.

This information is being collected by

the Department of the Treasury in order

to determine the amount of a Treasury

security controlled by an investment

adviser bidding competitively in an

auction for that security. The

information will be used for the purpose

of determining the award to be made as

the result of a competitive bid for a

security.

Responses to the collection of

information are required in order for the

potential respondent to purchase

securities. Information concerning

securities holdings and transactions is

considered confidential under Treasury

regulations (31 CFR Part 323) and the

Privacy Act. The information may be

disclosed to a law enforcement agency,

courts and counsel for litigation

purposes, and as otherwise authorized

by law.

Estimated total annual reporting

burden: 250 hours.

Estimated average annual burden

hours per respondent: 5 hours.

Estimated number of respondents: 50.

Estimated annual frequency of

responses: On occasion.

The Department of the Treasury

solicits comments on the following

concerning the proposed collection of

information:

1. Whether the proposed collection of

information is necessary for the proper

performance of the functions of the

agency, including whether the

information shall have practical utility;

2. The accuracy of the estimate of the

burden of the proposed collection of

information;

3. How to enhance the quality, utility,

and clarity of the information to be

collected; and

4. How to minimize the burden of the

collection of information on those who

are to respond, including through the

use of automated collection techniques

or other forms of information

technology.

Comments on the collection of

information should be sent to the Office

of Information and Regulatory Affairs of

the Office of Management and Budget,

Attention: Desk Officer for Department

of the Treasury/Bureau of the Public

Debt, Washington, D.C. 20503, with

copies to the Government Securities

Regulations Staff, Bureau of the Public

Debt, at the address previously

specified.

List of Subjects in 31 CFR Part 356

Bonds, Federal Reserve System,

Government securities, Securities.

Dated: December 27, 1995.

Gerald Murphy,

Fiscal Assistant Secretary.

For the reasons set forth in the

preamble, 31 CFR Chapter II,

Subchapter B, Part 356, is proposed to

be amended as follows:

PART 356—SALE AND ISSUE OF

MARKETABLE BOOK-ENTRY

TREASURY BILLS, NOTES, AND

BONDS (DEPARTMENT OF THE

TREASURY CIRCULAR, PUBLIC DEBT

SERIES NO. 1–93)

1. The authority citation for Part 356

is revised to read as follows:

Authority: 5 U.S.C. 301; 31 U.S.C. 3102, et

seq.; 12 U.S.C. 391.

2. Section 356.2 is amended by

adding in alphabetical order the

definition of ‘‘investment adviser’’ to

read as follows:
Federal Register / Vol. 61, No. 4 / Friday, January 5, 1996 / Proposed Rules 405

§ 356.2 Definitions.

* * * * *

Investment adviser means any person

or entity that has investment discretion

for or otherwise exercises control over

the bids or positions of a person or

entity not considered part of the

investment adviser under the bidder

definitions in Appendix A. Investment

discretion includes determining what,

how many, and when securities shall be

purchased or sold. A person or entity

managing investments for itself is not

considered an investment adviser for

such investments. Where an investment

adviser is employed or supervised by an

entity, the investment adviser is

considered to be part of that entity.

* * * * *

3. Section 356.11(a)(1) is amended by

revising the second sentence to read as

follows:

§ 356.11 Submission of bids.

(a) General.

(1) * * * Except as otherwise

provided, tenders must be submitted in

an approved format, including the use

of preassigned identification numbers,

where applicable. * * *

* * * * *

4. Section 356.13 is amended by

removing paragraph (a)(2) and

redesignating paragraph (a)(1) as

paragraph (a). The last two sentences of

paragraph (a) are revised to read as

follows:

§ 356.13 Net long position.

(a) Reporting net long positions.

* * * In cases where a bidder that is

required to report the amount of its net

long position has more than one bid, the

bidder’s total net long position should

be reported in connection with only one

bid. A bidder that is a customer must

report its reportable net long position

through only one depository institution

or dealer. (See § 356.14(c).)

* * * * *

5. Sections 356.15 and 356.16 are

redesignated as §§ 356.16 and 356.17

respectively and new § 356.15 is added

to read as follows:

§ 356.15 Bidding through investment

advisers.

(a) General. Where bids or positions

of a person or entity are controlled by

an investment adviser, such bids or

positions are considered to be a

controlled account, separate from the

bids and positions of any person or

entity with which they would otherwise

be associated under the bidder

definitions in Appendix A. The

investment adviser may bid for

controlled accounts by including, in a

bid in the adviser’s name, amounts that

it is investing for the controlled

accounts. The investment adviser may

also bid for controlled accounts in the

names of such accounts. Where bids are

in an investment adviser’s name, the

investment adviser is considered the

bidder for such bids and, where bids are

in the name of a controlled account, the

named controlled account is considered

the bidder, for all purposes of this Part

356, except as specified in this § 356.15.

(b) Noncompetitive and competitive

bidding. Regardless of whether the bid

for a controlled account is in the name

of the investment adviser or in the name

of the controlled account, such account

may not be bid for both

noncompetitively and competitively in

the same auction. In addition, such

account is subject to the noncompetitive

bidding restrictions and award

limitations contained in § 356.12(b) and

356.22(a).

(c) Reporting net long positions. In

calculating the amount of its bids and

positions for purposes of the net long

position reporting requirement found in

§ 356.13(a), the investment adviser must

include, in addition to what would

otherwise be included for the

investment adviser as a bidder under

the bidder definitions, all other

competitive bids and positions

controlled by the investment adviser.

The investment adviser may exclude

any net long position less than $10

million of any nonproprietary

controlled account unless the adviser is

placing a competitive bid for that

account either in the name of the

investment adviser or in the name of the

account. However, if any net long

position less than $10 million of any

nonproprietary account not being bid

for is excluded, then all net short

positions less than $10 million of

nonproprietary accounts not being bid

for must also be excluded. Regardless of

whether the investment adviser bids in

its own name or in the name of its

controlled accounts, if the net long

position is reportable, it must be

reported as a total in connection with

only one bid.

(d) Submitting bids for controlled

accounts. Notwithstanding the

definition of submitter found in § 356.2,

and the restriction against submitting

bids for others found in § 356.14, an

investment adviser may submit bids,

whether in the adviser’s own name or in

the names of its controlled accounts,

directly to a Federal Reserve Bank or the

Bureau of the Public Debt, in which case

the investment adviser is considered a

submitter. In the alternative, the

investment adviser may forward such

bids to a depository institution or

dealer.

(e) Certifications. By bidding for a

controlled account, an investment

adviser is deemed to have certified that

it is in compliance with this Part and

the offering announcement governing

the sale and issue of the security.

Further, the investment adviser is

deemed to have certified that the

information provided on the tender or

provided to a submitter or intermediary

with regard to bids for controlled

accounts is accurate and complete.

(f) Proration of awards. In auctions

where bids at the highest accepted yield

or discount rate are prorated under

§ 356.20(a)(2) of this Part, investment

advisers that submit bids for controlled

accounts in the names of such accounts

are responsible for prorating awards for

their controlled accounts at the same

percentage as that announced by the

Department. The same prorating rules

apply to controlled accounts as apply to

submitters. See § 356.21 of this Part.

6. Section 356.21 is amended by

revising paragraph (a) to read as follows:

§ 356.21 Proration of awards.

(a) Awards to submitters. In auctions

where bids at the highest accepted yield

or discount rate are prorated under

§ 356.20(a)(2) of this Part, the Federal

Reserve Banks are responsible for

prorating awards for submitters at the

percentage announced by the

Department. For example, if 80% is the

announced percentage at the highest

yield or discount rate, then each bid at

that rate or yield shall be awarded 80%

of the amount bid. Hence, a bid for

$100,000 at the highest accepted yield

or discount rate would be awarded

$80,000. In all cases, awards will be for,

at least, the minimum to hold, and

awards must be in an appropriate

multiple to hold. Awards at the highest

accepted yield or rate are adjusted

upwards, if necessary, to an appropriate

multiple to hold. For example, Treasury

bills may be issued with a minimum to

hold of $10,000 and multiples of $1,000.

Where an $18,000 bid is accepted at the

high discount rate, and the percent

awarded at the high discount rate was

88%, the award to that bidder would be

$16,000, representing an upward

adjustment from $15,840 ($18,000 x .88)

to an appropriate multiple to hold. If

tenders at the highest accepted rate were

prorated at, for example, a rate of 4%,

the award for a $100,000 bid would be

$10,000, instead of $4,000, in order to

meet the minimum to hold for a bill

issue.

* * * * *

7. Section 356.22(b) is amended by

revising the last sentence to read as

follows:
406 Federal Register / Vol. 61, No. 4 / Friday, January 5, 1996 / Proposed Rules

§ 356.22 Limitation on auction awards.

* * * * *

(b) Awards to competitive bidders.

* * * When the bids and net long

positions of more than one person or

entity must be combined as required by

§ 356.15(c), such combined amount will

be used for the purpose of this award

limitation.

8. Appendix A to Part 356 is amended

by adding to section (a) a new paragraph

between the second and third

paragraphs of the introductory text to

read as follows:

Appendix A to Part 356

* * * * *

(a) Corporation—

* * * * *

For the purpose of this Part, a

business trust, such as a Massachusetts

business trust or a Delaware business

trust, is considered to be a corporation.

* * * * *

[FR Doc. 96–134 Filed 1–4–96; 8:45 am]

BILLING CODE 4810–35–P