Federal Register / Vol. 73, No. 192 / Thursday, October 2, 2008 / Rules and Regulations 57237 

12See 17 CFR 190.01. 

13See Interpretative Statement Regarding Funds 

Determined To Be Held in the Futures Account 

Type of Customer Account Class, 69 FR 69510 

(Nov. 30, 2004). 

1 17 CFR 229.407. 

2PCAOB Rule 3600T. 

3 ISB No. 1. 

4Rule 3526 also superseded ISB Interpretation 

00–1, The Applicability of ISB Standard No. 1 

When ‘‘Secondary Auditors’’ are Involved in the 

Audit of a Registrant, and ISB Interpretation 00–2, 

The Applicability of ISB Standard No. 1 When 

‘‘Secondary Auditors’’ Are Involved in the Audit of 

a Registrant, An Amendment of Interpretation 

00–1. 

an account that currently is portfolio 

margined and one that was at one time 

or is intended to be so in the future. 

Indeed, Subchapter IV of the 

Bankruptcy Code includes as customers 

entities with certain claims arising out 

of property that is not currently 

margining a commodity contract. 

Specifically, Section 761(9)(A)(ii) 

provides that an entity can qualify as a 

‘‘customer’’ based on claims arising out 

of any of the following: (I) The 

‘‘liquidation, or change in the value of 

a commodity contract;’’ (II) a deposit of 

property ‘‘for the purpose of making or 

margining * * * a commodity 

contract;’’ or (III) ‘‘the making or taking 

of delivery of a commodity contract.’’ 

Accordingly, there is no requirement 

that the customer’s assets be margining 

commodity contracts on the day that the 

bankruptcy petition is filed. Therefore, 

all assets contained in such an account 

are properly included within the 

customer’s net equity. 

Account Classes 

Part 190 of the Commission’s 

Regulations divides accounts into 

several classes, specifically: Futures 

accounts, foreign futures accounts, 

leverage accounts, commodity option 

accounts, and delivery accounts.12

In October 2004, the Commission 

issued an interpretation regarding the 

appropriate account class for funds 

attributable to contracts traded on nondomestic boards of trade, and the assets 

margining such contracts, that are 

included in accounts segregated in 

accordance with Section 4d of the Act 

pursuant to Commission Order.13 In that 

context, the Commission concluded that 

the claim is properly against the Section 

4d account class because customers 

whose assets are deposited in such an 

account pursuant to Commission Order 

should benefit from that pool of assets. 

The same rationale supports the 

Commission’s conclusion that a claim 

arising out of a cleared-only contract, or 

the property margining such a contract, 

would be includable in the futures 

account class where, pursuant to 

Commission Order, the contract or 

property is included in an account 

segregated in accordance with Section 

4d of the Act. 

Issued in Washington, DC, on September 

26, 2008, by the Commodity Futures Trading 

Commission. 

David Stawick, 

Secretary of the Commission. 

Concurrence of Commission Michael V. 

Dunn CBOT Request for an Order 

Under Section 4d of the Commodity 

Exchange Act Related to the Clearing of 

OTC Ethanol Products 

I concur with granting 4d relief to the 

Chicago Board of Trade (CBOT) related to the 

clearing of OTC ethanol products while 

reserving judgment as to whether the 

Commission in the future should revisit the 

determination as to whether ethanol should 

be considered an agricultural commodity. 

Ethanol markets clearly impact agricultural 

markets as we all realize. Even though I 

recognize that arguments can be made that 

ethanol is an energy commodity because it is 

primarily used as a source of energy, I don’t 

think that should necessarily be the deciding 

factor. 

Ethanol is clearly an important part of our 

agricultural economy. At some point, I think 

we may need to reconsider carefully whether 

ethanol should be considered an agricultural 

commodity so that it would be subject to the 

highest level of Commission jurisdiction 

rather than the lesser jurisdiction that attends 

energy commodities. 

Despite this, I believe the order should be 

approved because the conditions attending 

the 4d order will bring greater transparency 

and accountability to the CBOT’s ethanol 

swaps market than currently exist. 

[FR Doc. E8–23277 Filed 10–1–08; 8:45 am] 

BILLING CODE 6351–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Part 229 

[Release Nos. 33–8961; 34–58656] 

Technical Amendment to Item 407 of 

Regulation S–K 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Final rule; technical 

amendment. 

SUMMARY: The Securities and Exchange 

Commission (‘‘Commission’’) is making 

a technical amendment to Item 407 of 

Regulation S–K. The technical 

amendment updates a reference to 

Independence Standards Board 

Standard No. 1 (‘‘ISB No. 1’’), which 

was previously adopted by the Public 

Company Accounting Oversight Board 

(‘‘PCAOB’’) as an interim standard but 

has been superseded by the PCAOB’s 

newly adopted Ethics and 

Independence Rule 3526, 

Communication with Audit Committees 

Concerning Independence. The 

reference is being updated to refer to the 

‘‘applicable requirements of the Public 

Company Accounting Oversight Board 

regarding the independent accountant’s 

communications with the audit 

committee concerning independence.’’ 

DATES: Effective Date: September 30, 

2008. 

FOR FURTHER INFORMATION CONTACT: 

Melanie Jacobsen, Special Counsel, at 

202–551–5300, Office of the Chief 

Accountant, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–5041. 

SUPPLEMENTARY INFORMATION: 

I. Background 

We are amending Item 407 of 

Regulation S–K 1 to update a reference 

as a result of the adoption of a new 

Public Company Accounting Oversight 

Board (‘‘PCAOB’’) rule. Item 407 is 

being amended to update the following 

reference: 

Old Reference: 

‘‘Independence Standards Board 

Standard No. 1 (Independence 

Standards Board Standard No. 1, 

Independence Discussions with Audit 

Committees), as adopted by the Public 

Company Accounting Oversight Board 

in Rule 3600T’’ 

New Reference: 

‘‘applicable requirements of the 

Public Company Accounting Oversight 

Board regarding the independent 

accountant’s communications with the 

audit committee concerning 

independence’’ 

Independence Standards Board 

Standard No. 1 (‘‘ISB No. 1’’) was part 

of the interim standards previously 

adopted by the PCAOB on April 16, 

2003.2 It required an auditor annually to 

discuss with the audit committee its 

independence and to provide written 

disclosures of all relationships between 

the auditor and the company that may 

reasonably be thought to bear on 

independence and a letter confirming 

the auditor’s independence.3

Effective on September 30, 2008, 

PCAOB Rule 3526 supersedes ISB No. 1 

regarding the annual discussion and 

disclosure the auditor must make to the 

audit committee.4 Rule 3526 was 

adopted by the PCAOB on April 22, 


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57238 Federal Register / Vol. 73, No. 192 / Thursday, October 2, 2008 / Rules and Regulations 

5 15 U.S.C. 78a et seq. 

6 5 U.S.C. 553(b). 

7For similar reasons, the amendment does not 

require analysis under the Regulatory Flexibility 

Act or analysis of major rule status under the Small 

Business Regulatory Enforcement Fairness Act. See 

5 U.S.C. 601(2) (for purposes of Regulatory 

Flexibility Act analysis, the term ‘‘rule’’ means any 

rule for which the agency publishes a general notice 

of proposed rulemaking); and 5 U.S.C. 804(3)(C) (for 

purposes of Congressional review of agency 

rulemaking, the term ‘‘rule’’ does not include any 

rule of agency organization, procedure or practice 

that does not substantially affect the rights or 

obligations of non-agency parties). 

8See 5 U.S.C. 553(d)(3). 

9 15 U.S.C. 78w(a)(2). 

10 15 U.S.C. 77s(a). 

11 15 U.S.C. 78w(a). 

2008 and approved by the Commission 

on August 22, 2008. 

Under existing Item 407 of Regulation 

S–K, an issuer’s audit committee must 

state that it has received from the 

independent accountants the written 

disclosures and letter required by ISB 

No. 1. As revised, Item 407 requires the 

audit committee to state that it has 

received the disclosure and letter 

required by the applicable PCAOB 

requirements for independent 

accountant communications with audit 

committees concerning auditor 

independence because ISB No. 1 has 

been superseded by PCAOB Rule 3526. 

To avoid the need to update a specific 

reference in the future if subsequently 

changed, we are revising the reference 

in Item 407 Regulation S–K so that it 

refers to the written disclosures and the 

letter from the independent accountants 

required by ‘‘applicable requirements of 

the Public Company Accounting 

Oversight Board regarding the 

independent accountant’s 

communications with the audit 

committee concerning independence.’’ 

We are not revising Item 407 of 

Regulation S–B in the same manner as 

we are revising Item 407 of Regulation 

S–K due to amendments that we made 

in December 2007 to expand the number 

of smaller reporting companies that 

qualify for our scaled disclosure 

requirements under the Securities Act 

and the Securities Exchange Act of 

1934.5 To streamline and simplify 

regulation, the amendments moved the 

scaled disclosure requirements from 

Regulation S–B into Regulation S–K. 

While Regulation S–B will remain in 

effect for transition purposes until 

March 15, 2009, it will be removed from 

the Code of Federal Regulations in its 

entirety after that date. We therefore are 

not revising Regulation S–B, but we 

intend to interpret existing Regulation 

S–B Item 407 consistently with the 

technical changes that we are making to 

the comparable Regulation S–K item. 

Accordingly, we expect companies 

complying with Regulation S–B after the 

effective date of these amendments, but 

before March 15, 2009, to follow the 

applicable PCAOB requirements for 

independent accountant auditor 

independence. 

II. Certain Findings 

Under the Administrative Procedure 

Act, a notice of proposed rulemaking is 

not required when the agency, for good 

cause, finds that notice and public 

comment are impracticable, 

unnecessary, or contrary to the public 

interest.6 The amendment to Item 407 of 

Regulation S–K is a technical change to 

update an outdated reference. Because 

no one is likely to want to comment on 

such a non-substantive, technical 

amendment, the Commission finds that 

it is unnecessary to publish notice of 

this amendment.7

The Administrative Procedure Act 

also requires publication of a rule at 

least 30 days before its effective date 

unless the agency finds otherwise for 

good cause.8 Due to the need to 

coordinate the effectiveness of the 

amendment with the effective date of 

the PCAOB’s new Rule 3526 (which is 

to take effect on September 30, 2008) 

and for the same reasons described with 

respect to opportunity for notice and 

comment, the Commission finds there is 

good cause for the amendments to take 

effect on September 30, 2008. 

III. Consideration of Competitive Effects 

of Amendment 

Section 23(a)(2) of the Exchange Act 

requires the Commission, in adopting 

rules under the Exchange Act, to 

consider the competitive effects of such 

rules, if any, and to refrain from 

adopting a rule that would impose a 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act.9 Because 

this amendment merely makes technical 

changes to update references to 

applicable PCAOB requirements, we do 

not anticipate any competitive 

advantages or disadvantages would be 

created. 

IV. Statutory Authority and Text of 

Amendments 

We are adopting this technical 

amendment under the authority set 

forth in Section 19(a) of the Securities 

Act 10 and Section 23(a) of the Exchange 

Act.11

List of Subjects in 17 CFR Part 229 

Reporting and recordkeeping 

requirements, Securities. 

Text of Amendments 

■ For the reasons set out in the 

preamble, Title 17, Chapter II of the 

Code of the Federal Regulations is 

amended as follows: 

PART 229—STANDARD 

INSTRUCTIONS FOR FILING FORMS 

UNDER SECURITIES ACT OF 1933, 

SECURITIES EXCHANGE ACT OF 1934 

AND ENERGY POLICY AND 

CONSERVATION ACT OF 1975— 

REGULATION S–K 

■ 1. The authority citation for part 229 

continues to read in part as follows: 

Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 

77k, 77s, 77z–2, 77z–3, 77aa(25), 77aa(26), 

77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 

77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 

78o, 78u–5, 78w, 78ll, 78mm, 80a–8, 80a–9, 

80a–20, 80a–29, 80a–30, 80a–31(c), 80a–37, 

80a–38(a), 80(a)–39, 80b–11, and 7201 et 

seq.; and 18 U.S.C. 1350, unless otherwise 

noted. 

* * * * * 

■ 2. Section 229.407 is amended by 

revising paragraph (d)(3)(i)(C) to read as 

follows: 

§ 229.407 (Item 407) Corporate 

governance. 

* * * * * 

(d) * * * 

(3) * * * 

(i) * * * 

(C) The audit committee has received 

the written disclosures and the letter 

from the independent accountant 

required by applicable requirements of 

the Public Company Accounting 

Oversight Board regarding the 

independent accountant’s 

communications with the audit 

committee concerning independence, 

and has discussed with the independent 

accountant the independent 

accountant’s independence; and 

* * * * * 

By the Commission. 

Dated: September 26, 2008. 

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23057 Filed 9–30–08; 11:15 am] 

BILLING CODE 8011–01–P 


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