Federal Regulatory Agencies
News releases, reports, statements and associated documents from federal regulatory agencies ranging from the Securities Exchange Commission to the Commodities Futures Trading Commission
Featured Stories
Douglas Scheidt, Associate Director and Chief Counsel in the Division of Investment Management, to Leave Agency After 32 Years of Public Service
WASHINGTON, April 20 -- The Securities and Exchange Commission issued the following news release:
The Securities and Exchange Commission announced today that Douglas Scheidt, an Associate Director and the Chief Counsel in the Division of Investment Management, will retire from the SEC at the end of September.
Mr. Scheidt has led the Division's Chief Counsel's Office for over 21 years. During his tenure, Mr. Scheidt has provided legal and policy guidance for the $82 trillion asset management industry on a wide variety of matters, with a focus on regulatory compliance and the duties of fund directors
... Show Full Article
WASHINGTON, April 20 -- The Securities and Exchange Commission issued the following news release:
The Securities and Exchange Commission announced today that Douglas Scheidt, an Associate Director and the Chief Counsel in the Division of Investment Management, will retire from the SEC at the end of September.
Mr. Scheidt has led the Division's Chief Counsel's Office for over 21 years. During his tenure, Mr. Scheidt has provided legal and policy guidance for the $82 trillion asset management industry on a wide variety of matters, with a focus on regulatory compliance and the duties of fund directorsand investment advisers, including valuation, distribution, fiduciary duty, fund governance, affiliated transactions and portfolio management, under the Investment Company Act and the Investment Advisers Act. He has provided critical counsel and assistance on numerous SEC rulemakings, technical assistance to Congress on legislation, and has managed the Division's international program and its dealings with foreign regulators. He also directed the Division's responses to the financial crisis and the late trading and market timing scandals. Since 2014, he has overseen the Division's exemptive application program, which issues orders granting exemptive relief under the Acts. And, for the past 27 years, he has directed the Division's enforcement liaison program, providing insightful analytical guidance and assistance to the Division of Enforcement on many investigations and enforcement actions involving funds and investment advisers.
"Doug has been an insightful and innovative leader, and his contributions will have lasting positive impact on our markets and our Main Street investors," said SEC Chairman Jay Clayton. "He has consistently crafted regulatory solutions that are grounded in investor protection and respond to the needs of our ever changing markets."
"Doug is widely known and trusted throughout the Commission not only for his insights and thoughtful creativity in finding solutions to thorny problems, but also for the generosity with which he shares his talents with his colleagues across the SEC," said Dalia Blass, Director of the SEC's Division of Investment Management. "Staff across the Commission have benefitted from Doug's ability to provide lucid and concise explanations of even the most complex legal matters."
Mr. Scheidt said, "I have great regard for the SEC, where I have spent the most rewarding years of my career. The work has been immensely interesting, and my colleagues have been exceptional."
Mr. Scheidt has been an Associate Director and the Chief Counsel of the Division of Investment Management since 1997. Mr. Scheidt previously served as an Associate Director (Compliance, Financial Analysis, Public Utilities and Investment Company Regulation) and as the Assistant Director of the Office of Enforcement Liaison. He also has been a Lecturer at Howard University School of Law and Georgetown University Law Center.
In 2017, Mr. Scheidt received the Philp A. Loomis, Jr. Award for outstanding legal scholarship, analysis and draftsmanship, and over the years received six Law and Policy Awards, the Chair's Award for Excellence, the Capital Markets Award, the Excellence in Information Technology Award, the Labor-Management Relations Award, and the Supervisory Excellence Award.
Before joining the Division of Investment Management in 1991, Mr. Scheidt served as Vice President and Associate General Counsel at The Boston Company Advisors, Inc., and as an attorney in private practice. He also served as an attorney and Special Counsel in the SEC's Office of the General Counsel. Mr. Scheidt began his legal career as a law clerk to the Honorable Martin D. Van Oosterhout of the U.S. Court of Appeals for the Eighth Circuit. He earned his bachelor's degree from Northwestern University (cum laude) and his J.D. from Drake University Law School (Order of the Coif).
Wild & Wolf Recalls Petit Collage Children's Toy Xylophones Due to Choking Hazard
WASHINGTON, April 19 -- The Consumer Product Safety Commission issued the following recall alert on Ningbo Tooky Toy Petit Collage musical jumbo wooden xylophones:
Hazard: The ball on the end of the toy xylophone beater stick can separate, posing a choking hazard to young children.
Remedy: Replace
Recall date: April 19, 2018
Units: About 2,900 (In addition, about 240 were sold in Canada)
Consumer Contact: Wild & Wolf toll free at 855-215-5879 from 8 a.m. to 5 p.m. ET Monday through Friday or online at http://www.petitcollage.com and click on "Product Safety" or http://www.wildandwolf.com and click on "Product
... Show Full Article
WASHINGTON, April 19 -- The Consumer Product Safety Commission issued the following recall alert on Ningbo Tooky Toy Petit Collage musical jumbo wooden xylophones:
Hazard: The ball on the end of the toy xylophone beater stick can separate, posing a choking hazard to young children.
Remedy: Replace
Recall date: April 19, 2018
Units: About 2,900 (In addition, about 240 were sold in Canada)
Consumer Contact: Wild & Wolf toll free at 855-215-5879 from 8 a.m. to 5 p.m. ET Monday through Friday or online at http://www.petitcollage.com and click on "Product Safety" or http://www.wildandwolf.com and click on "ProductSafety News" for more information.
Recall Details
Description: This recall involves Petit Collage musical jumbo wooden xylophones. They are musical instrument toys for children. The recalled toy xylophone has a wooden base shaped like the profile of an elephant with five different colored metal keys and a wooden beater stick with a red wooden ball attached to one end. The beater stick measures about 5 5/8 inches long by 3/4 inches wide. "Petit Collage" and "TT.1902.0617" are printed on the bottom back of the xylophone. Only xylophones with this letter/number combination are included in the recall.
Remedy: Consumers should immediately take the recalled toy xylophone beater sticks away from children, stop using them and contact Wild & Wolf for a free replacement beater stick.
Incidents/Injuries: The firm has received one report of the ball separating from the beater rod and one report of the ball being loose. No injuries have been reported.
Sold At: Barnes & Noble, Patina, Urban Outfitters stores and other stores nationwide and online at PetitCollage.com and other websites from August 2017 through February 2018 for about $24.
Manufacturer(s): Ningbo Tooky Toy Co. Ltd, of China
Importer(s): Petit Collage, of San Francisco, Calif.
Distributor(s): Wild & Wolf, of U.K.
Manufactured In: China
Recall number: 18-143
SEC Issues Administrative Proceeding on Gemini Fund Services
WASHINGTON, April 19 -- The Securities and Exchange Commission issued the following administrative proceeding (File No. 3-18348) involving Gemini Fund Services:
In the Matter of
GEMINI FUND SERVICES LLC
Respondent.
ORDER DIRECTING PAYMENT OF CERTAIN FUNDS RECEIVED BY THE COMMISSION AND DIRECTING TRANSFER OF REMAINING FUNDS TO THE U.S. TREASURY
On January 22, 2018, the Commission simultaneously instituted and settled a cease and desist proceeding against Gemini Fund Services, LLC ("Gemini" or the "Respondent").(1) The proceeding arose out of Gemini's role as fund administrator for a Massachusetts-based
... Show Full Article
WASHINGTON, April 19 -- The Securities and Exchange Commission issued the following administrative proceeding (File No. 3-18348) involving Gemini Fund Services:
In the Matter of
GEMINI FUND SERVICES LLC
Respondent.
ORDER DIRECTING PAYMENT OF CERTAIN FUNDS RECEIVED BY THE COMMISSION AND DIRECTING TRANSFER OF REMAINING FUNDS TO THE U.S. TREASURY
On January 22, 2018, the Commission simultaneously instituted and settled a cease and desist proceeding against Gemini Fund Services, LLC ("Gemini" or the "Respondent").(1) The proceeding arose out of Gemini's role as fund administrator for a Massachusetts-basedinvestment company called the GL Beyond Income Fund (the "GL Fund"). Gemini was responsible for calculating the GL Fund's daily share price (also called a "net asset value" or "NAV") and transmitting it to the investing public, via the NASDAQ securities exchange. From February 2013 to December 2014, the NAV that Gemini gave to NASDAQ was inflated because Gemini included in the NAV fake assets that were purportedly worth over $15 million but were actually worth nothing. Although Gemini did not know that these assets were fake at the time it was calculating the NAV, Gemini did know that, for months at a time, the GL Fund's custodian bank (a financial institution that holds customers' securities for safekeeping) did not have adequate proof of the existence of many of these fake assets, and that there were therefore significant discrepancies between Gemini's own records and those of the custodian bank. When confronted with this fact, Gemini failed to take any further steps, such as further investigating the problem with the assets, notifying the investing public or the board of directors of the GL Fund that the custodian bank did not have proof of the validity of the assets, or reducing the share price to reflect this problem.
In the OIP, the Commission found that Gemini was a cause of Thibeault and GL Capital's violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The Commission ordered the Respondent to pay disgorgement of $147,334, prejudgment interest of $14,072, and a civil penalty of $400,000 to the Commission within 10 days of the entry of the OIP and created a Fair Fund pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended. The Commission also ordered Gemini to engage an independent compliance consultant.
After receipt of the disgorgement, interest, and penalty amounts referenced above, the Commission staff will distribute a payment to GL Fund of the amount in the Fair Fund minus a reserve for taxes and related administrative expenses. The Commission staff will issue payment to the GL Fund upon receipt of a certification: (i) that the distribution payment is designated solely for affected investors and will not be used for administrative or management fees; and (ii) that the GL Fund will make commercially reasonable efforts consistent with its legal, fiduciary, and contractual duties, as applicable, to disburse the Fair Fund payment to its victim investors in accordance with this Order. The Trustees of the GL Fund have agreed to make payments to those victim investors, provide a written report and evidence of such payments to Commission staff, and return any undistributed funds to the Commission.
The payment of disgorgement, prejudgment interest, and civil penalty constitutes a qualified settlement fund ("QSF") under section of 468B(g) of the Internal Revenue Code (IRC), 26 U.S.C. Section 468B(g), and related regulations, 26 C.F.R Sections 1.468B-1 through 1.468B-5. The Commission staff will seek the appointment of a tax administrator to establish a reserve for taxes and related administrative expenses. After establishing and withholding the reserve, the remaining amount in the Fair Fund will be transferred to the GL Fund for distribution to affected investors.
Accordingly, it is ORDERED that:
A. After the receipt of the funds simultaneously ordered in this proceeding, a tax administrator will be appointed to establish a reserve for taxes and administrative expenses. B. After withholding the reserve amount, the remaining Fair Fund shall be disbursed to the GL Fund for distribution to affected investors upon receipt of a certification from the GL Fund (i) that the distribution payment is designated solely for affected investors and will not be used for administrative or management fees; and (ii) that the GL Fund will make commercially reasonable efforts consistent with its legal, fiduciary, and contractual duties, as applicable, to disburse the Fair Fund payment to its affected investors. The GL Fund also will provide a written report and evidence of such payments to the Commission staff within 180 days after the receipt of the Fair Fund payment.
C. Any undistributed funds be returned to the Commission for remittance to the general fund of the United States Treasury subject to Exchange Act Section 21F(g)(3).
By the Commission.
Brent J. Fields Secretary
Footnote:
1. Order Instituting Cease-and-Desist Proceedings, Pursuant to Section 203(k) of the Investment Advisers Act of 1940, Making Findings, and Imposing a Cease-and-Desist Order, Adviser Act Rel. No. 4847 (Jan 22, 2018) ("OIP").
FCC Wireless Telecommunications Bureau Issues Public Notice on Expanding Flexible Use of the 3.7 GHZ to 4.2 GHZ Band
WASHINGTON, April 19 -- The Federal Communications Commission's Wireless Telecommunications Bureau issued the following public notice involving expanding flexible use of the 3.7 GHZ to 4.2 GHZ band:
WIRELESS TELECOMMUNICATIONS BUREAU, INTERNATIONAL BUREAU, AND OFFICE OF ENGINEERING AND TECHNOLOGY ESTABLISH GN DOCKET NO.18-122
By this Public Notice, the Wireless Telecommunications Bureau, International Bureau, and the Office of Engineering and Technology establish GN Docket No. 18-122, which is captioned "Expanding Flexible Use of the 3.7 GHz to 4.2 GHz Band." We encourage parties that submit
... Show Full Article
WASHINGTON, April 19 -- The Federal Communications Commission's Wireless Telecommunications Bureau issued the following public notice involving expanding flexible use of the 3.7 GHZ to 4.2 GHZ band:
WIRELESS TELECOMMUNICATIONS BUREAU, INTERNATIONAL BUREAU, AND OFFICE OF ENGINEERING AND TECHNOLOGY ESTABLISH GN DOCKET NO.18-122
By this Public Notice, the Wireless Telecommunications Bureau, International Bureau, and the Office of Engineering and Technology establish GN Docket No. 18-122, which is captioned "Expanding Flexible Use of the 3.7 GHz to 4.2 GHz Band." We encourage parties that submitfilings related to the potential for more intensive use of the 3.7-4.2 GHz Band to submit those filings in this docket.
Presentations are subject to "permit-but-disclose" ex parte rules. See 47 C.F.R. Sections 1.1206, 1.1200(a). Persons making ex parte presentations must file a copy of any written presentation or a memorandum summarizing any oral presentation within two business days after the presentation (unless a different deadline applicable to the Sunshine period applies).Participants in this proceeding should familiarize themselves with the Commission's ex parte rules, including the general prohibition on presentations (written and oral) on matters listed on the Sunshine Agenda, which is typically released a week prior to the Commission's meeting. See 47 CFR Sections 1.1200(a), 1.1203.
Action by Chief, Wireless Telecommunications Bureau, Chief, International Bureau, and Chief, Office of Engineering and Technology.
FCC Media Bureau Issues Public Notice Regarding Posting of Station Licenses
WASHINGTON, April 19 -- The Federal Communications Commission's Media Bureau issued the following public notice (MB Docket No. 18-121):
By this Public Notice, the Media Bureau opens MB Docket No. 18-121, which is captioned "Amendment of Parts 0, 1, 5, 73, and 74 of the Commission's Rules Regarding Posting of Station Licenses and Related Information."
Ex Parte Rules. Presentations are subject to "permit-but-disclose" ex parte rules. See 47 C.F.R. Sections 1.1206, 1.1200(a). Persons making ex parte presentations must file a copy of any written presentation or a memorandum summarizing any oral presentation
... Show Full Article
WASHINGTON, April 19 -- The Federal Communications Commission's Media Bureau issued the following public notice (MB Docket No. 18-121):
By this Public Notice, the Media Bureau opens MB Docket No. 18-121, which is captioned "Amendment of Parts 0, 1, 5, 73, and 74 of the Commission's Rules Regarding Posting of Station Licenses and Related Information."
Ex Parte Rules. Presentations are subject to "permit-but-disclose" ex parte rules. See 47 C.F.R. Sections 1.1206, 1.1200(a). Persons making ex parte presentations must file a copy of any written presentation or a memorandum summarizing any oral presentationwithin two business days after the presentation (unless a different deadline applicable to the Sunshine period applies). Participants in this proceeding should familiarize themselves with the Commission's ex parte rules.
Accessibility Information. To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call the Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY). Action by Chief, Media Bureau.
FCC Media Bureau Issues Order on Leased Commercial Access
WASHINGTON, April 19 -- The Federal Communications Commission's Media Bureau issued the following order (MB Docket No. 07-42):
In the Matter of Leased Commercial Access
ORDER OF DISMISSAL
By the Chief, Media Bureau:
1. On February 1, 2008, the Commission released a Report and Order and Further Notice of Proposed Rulemaking in the above-captioned docket.(1) On July 9, 2008, the Office of Management and Budget (OMB) issued a Notice stating that it disapproved of the information collection requirements associated with the 2008 Leased Access Order.(2) On August 26, 2008, on behalf of the United
... Show Full Article
WASHINGTON, April 19 -- The Federal Communications Commission's Media Bureau issued the following order (MB Docket No. 07-42):
In the Matter of Leased Commercial Access
ORDER OF DISMISSAL
By the Chief, Media Bureau:
1. On February 1, 2008, the Commission released a Report and Order and Further Notice of Proposed Rulemaking in the above-captioned docket.(1) On July 9, 2008, the Office of Management and Budget (OMB) issued a Notice stating that it disapproved of the information collection requirements associated with the 2008 Leased Access Order.(2) On August 26, 2008, on behalf of the UnitedChurch of Christ, Office of Communication, Inc. (UCC), the Media Access Project (MAP) filed a request that the Commission override the OMB Notice, and "that the Commission modify its calculation for leasing a full channel."(3)
2. Due to the passage of time, UCC has agreed to withdraw its request. Therefore, we are dismissing the request without prejudice.
3. Accordingly, IT IS ORDERED that the UCC request filed in this docket IS DISMISSED without prejudice.
4. This action is taken pursuant to authority delegated by section 0.283 of the Commission's rules.(4)
FEDERAL COMMUNICATIONS COMMISSION
Michelle M. Carey
Chief
Media Bureau
Footnotes:
1. Leased Commercial Access, Report and Order and Further Notice of Proposed Rulemaking, 23 FCC Rcd 2909 (2008) (2008 Leased Access Order), appeal pending, United Church of Christ v. FCC, No. 08-3245 (6th Cir.).
2. See Notice of Office of Management and Budget Action, OMB Control No. 3060-0568 (Jul. 9, 2008).
3. UCC, Request to Override the Action of the Office of Management and Budget and to Modify the Commission's Report and Order, MB Docket No. 07-42 (filed Aug. 26, 2008).
4. 47 CFR Section 0.283. Federal Communications Commission DA 15-1096
FCC Commissioner O'Rielly Issues Remarks Before American Enterprise Institute
WASHINGTON, April 19 -- The Federal Communications Commission issued the following remarks by Commissioner Michael O'Rielly before the American Enterprise Institute:
Thank you, Jeff Eisenach, for your kind words and introduction. It is a pleasure to be back with you, and I thank the American Enterprise Institute for the invitation to share some thoughts on policy issues before the Federal Communications Commission.
As some of you may know, I have a reputation of trying to be fairly substantive -- some have said extensively boring -- in my various speeches and remarks. I find comfort deep in the
... Show Full Article
WASHINGTON, April 19 -- The Federal Communications Commission issued the following remarks by Commissioner Michael O'Rielly before the American Enterprise Institute:
Thank you, Jeff Eisenach, for your kind words and introduction. It is a pleasure to be back with you, and I thank the American Enterprise Institute for the invitation to share some thoughts on policy issues before the Federal Communications Commission.
As some of you may know, I have a reputation of trying to be fairly substantive -- some have said extensively boring -- in my various speeches and remarks. I find comfort deep in theweeds of an obscure regulation or ensconced in the details of a policy debate. That may not be all that interesting to some, but if ever there was an audience that may appreciate such an approach, it would be this one. AEI is rightfully recognized as a preeminent think tank for its in-depth policy analysis, economic rigor, and scholarly research through out Washington, D.C.
Nonetheless, if you find yourself dozing off, do give me a wink or a nod to change subjects. As American humorist and legendary toastmaster, Harry Herschfield, was quoted as saying, "My job is to talk; your job is to listen. If you finish first, please let me know."
My goal today is to delve into four apparently unrelated policy issue areas being discussed these days and,hopefully,tie them together to paint a larger picture of this Commission's commitment to sound policy, economic freedom, and fiscal constraint.
Advancing 5G Services
I want to start with one of the highest priorities for the Commission and me personally. Over the last three-plus years, the Commission has rightly focused its time and energy to ensure that next-generation, or 5G, networks come to fruition. Why is this so important? It's not because this is the shiny new technology that can bring stated benefits of higher wireless speeds, lower latency, increased capacity, and many other features, although that is likely all true. Instead, it's about a global race to be the first among many competing nations to 5G. As a regulator, a term I abhor, this is generally not our primary mission, but here, the ramifications are so significant, and our functions are so germane, that it has become a primary focus of mine. Leading the world in 5G will allow U.S. companies to help shape its future growth, standards, and capabilities - all of which have a tremendous impact on our future economic success. The alternative means that we would be dictated to by other regimes, many of which can't be fully trusted, don't believe in capitalism, don't believe in freedom, don't believe in fair play, don't believe in the role of the individual over the government, and rebuke American leadership.
The bottom line is simple: we seek not to set industrial policy but to prevent others from doing so against our interests. That means, the Commission must create the appropriate regulatory environment for the U.S. private sector to undertake the huge capital expenditures critical for success. Key to this is making sure our wireless providers have large swaths of spectrum, both licensed and unlicensed, along with cell infrastructure builds unlike anything we've seen before.
So, let's delve into spectrum policy. Two days ago, the Commission approved a public notice seeking comment on the auction procedures for the 24 and 28 GHz bands. This will help set the stage to make available new millimeter wave spectrum. The next step will be to finalize the rules and set an auction timetable for all the remaining high bands, starting with 37 and 39 GHz. Accordingly, wireless providers need to know when these and other auctions will be held so that they can formulate business plans, create auction strategies, and obtain the financial resources necessary to participate. It still surprises me that some think that money grows on trees and that auction participation is somehow guaranteed. Did we not learn anything after the 600 MHz incentive auction? Indeed, companies have balance sheets, debt-equity ratios, and responsibilities to shareholders, and they need the requisite time to plan.
On that note, the Commission must also be better prepared by updating its auction software. After spending approximately $100 million per year on our auction program, we ought to have greater flexibility and functionality when it comes to our auction procedures. This is especially true since our auctions, for the foreseeable future, are likely to involve more licenses, occur more frequently or even simultaneously, and be more complex. We cannot afford additional delays; the time to start modernizing our capabilities was yesterday.
Further, the Commission must expedite its mid-band efforts, as the international focus on 5G harmonization has centered on these frequencies and there are economic efficiencies from global harmonization. To that end, in the next few months we will complete our review of the 3.5 GHz, or CBRS, priority access license structure and adopt new rules. We will also continue to take the necessary steps to make the technical supporting systems operational so that unused spectrum in the band is available while incumbent users are protected.
Expanding on this success will require accelerating work on bands adjacent to 3.5 GHz, starting with the 3.7 to 4.2 GHz band. I've taken the lead in pushing for a reallocation of this band and now various ideas on how to clear it are on record, including a market-based approach filed by certain wireless and satellite entities. This method provides an attractive option that should be thoroughly considered, particularly because of the speed in which it could bring the spectrum to market. But, there are still some unknowns. To make this worthwhile, an adequate amount of spectrum - at least 200 or 300 megahertz to start - needs to be made available in this band. We also need more information about how the licensing would work. The Commission needs to issue a notice of proposed rule making this summer to explore all the relevant issues.
In the same notice, the Commission should take the next steps to reallocate the 6 GHz band for unlicensed services. This is particularly timely, with the release of a recent technical study demonstrating that such use won't cause harmful interference to incumbents. To the extent necessary, interference mitigation can resolve any arising problems.
On a related issue, just last month Commissioner Carr took the lead to relieve the burdens presented by historic preservation and environmental reviews on infrastructure deployments, particularly small cells. It's a project I've been actively involved in for quite a while and know how messy obtaining approval scan be. In the end, our action will allow for timely and cost-effective network builds, with huge savings available to expand these networks beyond the urban core. Later this summer, you should expect to see a complimentary item to reduce the barriers state and localities place on such deployments.
Closing out this topic, my goal is to secure the ability of U.S. industry to win the 5G race. The tools to make that happen - releasing additional spectrum and dealing with government-laid barriers - are in the Commission's crosshairs.
Proper USF Budgeting
Next, I would like to spend a few minutes on the federal universal service fund (USF) - specifically, setting an overall budget and allocating funding within that budget. These are necessary steps not only to provide certainty for program participants, but also to be able to manage the total impact on the consumers and businesses who pay extra fees on their phone bills to support USF.
Over the past several years, the Commission has conducted ongoing proceedings on each of the four programs - High-Cost, Lifeline, E-rate, and Rural Healthcare - to update our rules and ensure that they support broadband service. Not surprisingly, commenters in each of the proceedings have used these opportunities to advocate for more funding.
At present, the Commission has authorized spending of approximately $11 billion for universal service. That's $4.5 billion for High-Cost, $3.94 billion (plus annual inflation) for E-rate, $2.25 billion or more for Lifeline, and $400 million for Rural Healthcare. But those numbers are not final. The Commission is currently considering additional increases for High-Cost and Rural Healthcare, and E-rate commenters have requested additional dollars to further expand that program, which, by the way, was doubled under the last Commission. Additionally, as program budgets are increasingly tied to inflation, some additional growth will happen automatically.
Without an overall budget across all four programs, there has been little impetus to control individual program spending. Or, to attempt some economic terminology, why choose "guns or butter" when you can have more of both! Of course, that's ultimately unsustainable. There must be a limit on the total amount we are willing to take out of the pockets of hardworking Americans.
In fact, the D.C. Circuit recently reiterated in a case involving AT&T that the statutory goal of providing "sufficient" funding is not simply "a means to sweeten the pot for providers" but rather is intended "to strike an appropriate balance between the interests of consumers and industry." In fact, "[t]oo-ample funding . . . may even itself violate the sufficiency requirements of the Act by so detracting from universal service by causing rates unnecessarily to rise, thereby pricing some consumers out of the market."
If the total budget cannot be increased beyond $11 billion, and I don't think it should be, then it is time to decide how to apportion funding within the overall budget. Fortunately, the Commission has some flexibility within this topline figure.
According to the USF Administrator's annual report for 2017, actual program disbursements totaled $8.85 billion. Of course, there is always some amount of adjustment that occurs after the fact, but that is an approximate figure for actual spending, and it is generally consistent with the prior year's disbursements of $8.75 billion. That means there is about a $2 billion difference between authorized spending and actual disbursements that could be shifted amongst the four programs.
How to allocate funding within the overall budget is a conversation I've wanted to have for a long time. There seems to have been an informal detente amongst different program stakeholders such that increases to one program are not opposed - or even commented on - by stakeholders from another program. That may have worked while the Commission was willing to spend more on each program. But with authorized spending topping $11 billion, it is time to institute the practice that any further increases in one program must be paired with offsets from another. That's not intended to favor or penalize a specific program. Rather, it should prompt a holistic and fulsome discussion in the record of whether particular funding increases are warranted. Viewed in isolation, discrete funding requests may seem appropriate, but once all program stakeholders have an incentive to highlight the costs and benefits, and identify any trade offs, the Commission may choose to prioritize other funding needs. In short, engaging in this type of discussion and analysis will produce better reasoned and more consistent funding decisions across the four programs.
Reviewing FCC's Children Television Rules
Another issue I have been working on is a broad review of the Commission's rules regarding the airing of children's programming, commonly referred to as Kid Vid. Essentially, by law, broadcasters are required to provide educational and informational programming to children in order to get their broadcast licenses renewed. In 1996, the FCC fleshed out a series of regulations on what exactly this requirement entailed. Specifically, broadcasters must air 3 hours of informational and educational programming for children that is at least 30 minutes in length, regularly scheduled, and aired between the hours of 7am to 10pm.
Unfortunately, the Commission's rules, while well intentioned, have not worked in delivering high quality content for children. There are a number of reasons for this. At its core, the Commission found a market failure in the delivery of children's programming and responded by trying to create a market through regulations. And, as is often the case when government tries to create a market, this endeavor failed spectacularly.
In fact, in data presented to me on the combined viewership of all four networks, there has been a 99 percent decline in children viewership ages 2 to 11 on Saturday mornings. That's an important segment of children that are simply not watching the Commission's mandated Kid Vid programming. What are they watching? Ironically, some are turning to online sites like YouTube - a completely unregulated platform that may deliver high quality programming to children, or, may label content as children's programming but instead offer something quite different. I have seen this firsthand as a father of a two-year-old.
Even worse, while the market the government sought to create never took off, other markets were killed in the process. For example, prior to our Kid Vid requirements, broadcasters aired programming under thirty minutes in length - like School House Rock - and unique programming that was not regularly scheduled - like After School Specials - that were oftentimes popular with children. Once the FCC determined that this would not count towards the broadcaster's "core programming" requirement, interest in producing such shows ceased.
Despite these shortcomings, I also understand that while the market has significantly changed and children like mine are fortunate enough to have a host of programming options at their fingertips - and I really mean fingertips - not all children are so lucky. While figures vary, we believe somewhere between 7 and 10 percent of the American population are over-the-air only families. These children's access to informational and educational programming is solely through their local broadcaster.
So where do we go from here? This summer, I expect the Commission to tee-up a rulemaking, based upon my recommendations, that will explore ways to breathe flexibility into our rules. In this rulemaking, we should eliminate the elements of our rules that have had unintended consequences and streamline the reporting requirements our rules currently impose. Further, we need to find a way to focus our efforts on over-the-air only households that truly do not have other options. Finally, and most importantly, I am hopeful that throughout this process more people will weigh in on the costs and benefits of the Commission's Kid Vid requirements,so we can build a robust record on this topic.
FCC Process Reform
Finally, turning to one of my favorite topics at the Commission, I'd like to spend a few moments today discussing FCC process reform. Since joining the Commission, improving the general workings of the agency has been a top priority of mine. For example, having worked on a number of bills during my time on the Hill, it came as a surprise to me that the Commission voted on rules impacting major sectors of the economy without making the rulemakings or report and orders publicly available until after the vote. When I suggested changes to this practice, then-Chairman Wheeler and others suggested that such an idea was a non-starter and would bring about a regulatory Armageddon at the Commission.
Fortunately, shortly after Chairman Pai took the reins at the Commission, he began a pilot program to make Commission Meeting items publicly available in advance of our vote. After an early success, he made this practice permanent. And the dooms-day scenarios never materialized. In fact, transparency has resulted in more informative discussions, fewer unnecessary meetings, and, overall, a better work product. Who would have guessed it?
I believe this process reform has been a resounding success. So much so that we need to apply more transparency to our other items, including those on the Commission's circulation list. Otherwise, the Commission riskscreating a secretive, potentially abusive path ripe for considering documents of any length and importance.
And, while I am giving the Chairman kudos, I would be remiss not to mention the establishment of the Office of Economics and Analytics (OEA), which will bring a more fulsome cost-benefit analysis discussion to our items. I know that this item in particular was near and dear to many people here today. Importantly, if the Commission doesn't know or understand the real economic costs and benefits of our decisions, we cannot fulfill our Congressional mandate to make reasoned and justified decisions.
It is my understanding that setting up this office is underway, and the Commission is currently undergoing hiring for key leadership positions. Once these positions are filled and the office is up and running, we should be able to quickly integrate its work into that of the Commission. To achieve this, in our item establishing OEA, I worked with the Chairman to ensure that the office will undertake a rigorous, economically-grounded cost-benefit analysis for any rulemaking deemed to have an annual effect on the economy of $100 million or more. We also adopted a requirement that OEA, similar to the Office of General Counsel, will need to sign off on an item prior to its release to the public. Equally important, we must also ensure that such an analysis is credible and accurate. Therefore, I secured the Chairman's commitment that the Commission will move a separate rulemaking in the very near future for purposes of requiring OEA to follow the guidelines of OMB Circular A-4, which standardizes the way benefits and costs are measured and reported across executive agencies.
Ultimately, making meeting items publicly available three weeks in advance of a vote and establishing the OEA are key reforms that will certainly improve the interworking of the agency. I have a few additional ideas - 40 to 50 to be exact - that I hope to share with the Chairman shortly. Some of these are new, and some - like making circulation items public - you have heard from me before. Overall, my ultimate goal remains: to leave the Commission in a better procedural place than I found it.
In conclusion, I am hopeful that the four issue areas I've just outlined today give you some comfort that this Commission is following the right course of action. Key, coreprinciples - such as complying with the underlying law, reviewing the submitted record, and abiding by sound economics rather than political calculations -will continue to guide this Commission's outcomes.
I thank you for your attention and I'd be happy answer any question you may have.
