• 29 CFR 1910.110 -- Storage and Handling of Liquefied Petroleum Gases. This regulation in the federal Department of Labor applies to the design, construction, location, installation and operation of liquefied petroleum gas systems.
• 33 CFR 127 Subpart B -- Waterfront Facilities Handling Liquefied Natural Gas. This regulation in the federal Department of Homeland Security applies to the marine transfer area of waterfront facilities handling liquefied natural gas.
• 29 CFR 1910.103 -- Hydrogen. This regulation in the federal Department of Labor applies to the installation of gaseous hydrogen systems and liquefied hydrogen systems on consumer premises.
These federal regulations appear to be very similar to the proposed rules. In addition to containing specific requirements for the various gas systems, the federal regulations incorporate by reference several national standards published by the NFPA, the American National Standards Institute, the Compressed Gas Association, and the American Society of Mechanical Engineers.
An Internet-based search of the 2003 and 2004 issues of the Federal Register did not find any proposed regulations relating to gas systems as covered in the proposed update of chapter Comm 40.
State Comparison
An Internet-based search of adjacent states' rules found the following regulations that include requirements relating to liquefied petroleum gas, liquefied natural gas, compressed natural gas, gaseous hydrogen, and liquefied hydrogen.
•
Minnesota incorporates by reference the 2000 edition of the International Fire Code (IFC) into the Minnesota State Fire Code. The IFC references NFPA standard numbers 50A, 50B, 52, 58 and 59A. These are the same NFPA standards that are included in the proposed rules.
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Michigan's Department of Environmental Quality administers rules relating to liquefied petroleum gas and liquefied natural gas. These rules adopt NFPA 58 and NFPA 59A. Michigan's Department of Consumer and Industry Services administers rules for compressed natural gas and hydrogen. These rules adopt NFPA 52 and federal Occupational Safety and Health Administration regulations
29 CFR 1910.103 for gaseous and liquefied hydrogen. These regulations cover the same gas systems as the proposed rules.
•
Iowa's Division of the State Fire Marshal is responsible for the regulation of liquefied petroleum gas and liquefied natural gas in Iowa Administrative Code Chapter
51. That chapter adopts by reference NFPA standard numbers 54, 58 and 59A. The state of Iowa does not have rules for compressed natural gas or hydrogen.
•
Illinois' Office of the State Fire Marshal has adopted rules relating to liquefied petroleum gas under Title 41, Chapter I Part 200. That part incorporates by reference NFPA standard numbers 54, 58, 59 and 501C, and API standard 2510. The state of Illinois does not have rules for liquefied natural gas, compressed natural gas or hydrogen.
Advisory Council
The proposed rules have been developed with the assistance of the Gas Systems Code Advisory Council. The members of that citizen advisory council are as follows:
Name Representing
Ed Aldridge Growmark, Inc.
Bruce Barganz Wisconsin Fertilizer & Chemical Assn.
Tim Clay Wisconsin Federation of Cooperatives
David A. Duey ANGI International
Kingsley H. Forbes National Propane Gas Association
Art Herschberger Wisconsin Propane Gas Association
Gary Puljas Wisconsin Fire Inspectors Association
Gene Reece Wisconsin State Fire Chiefs Association
Timothy Temperly City of Milwaukee
John Wehmeier Wisconsin Utilities Association
Bob Willder Wisconsin Agri-Service Association
The proposed rules and an analysis of the proposed rules are available on the Internet at the Safety and Buildings Division Web site at
www.commerce.wi.gov/SB/. Paper copies may be obtained without cost from Roberta Ward, at the Department of Commerce, Program Development Bureau, P.O. Box 2689, Madison, WI 53701-2689, or Email at
rward@commerce.state.wi.us, or at telephone (608) 266-8741 or (608) 264-8777 (TTY). Copies will also be available at the public hearing.
Initial Regulatory Flexibility Analysis
1. Types of small businesses that will be affected by the rules.
The rules will affect any business involved with the design, construction, installation, operation, inspection, repair or maintenance of liquefied petroleum gas systems, liquefied natural gas systems, compressed natural gas systems, gaseous hydrogen systems or liquefied hydrogen systems.
2. Reporting, bookkeeping and other procedures required for compliance with the rules.
The rules require some additional plan submittal information to be provided to the Department for those gas system installations that require plan approval.
The rules contain a new requirement for reporting of accidents whenever gas system equipment or system components fail and cause injury to any person.
3. Types of professional skills necessary for compliance with the rules.
There are no types of professional skills necessary for compliance with the rules.
Fiscal Impact
The Safety and Buildings Division is responsible for administering and enforcing the current rules for gas systems. The proposed rules do not contain any changes in the Division's fees charged for administering and enforcing those rules. Any additional workload as the result of adding gaseous hydrogen and liquefied hydrogen will be handled by existing staff. It is estimated that 2 plans for hydrogen systems will be submitted for review on an annual basis. This will result in a revenue increase of $480 per year, assuming 4 hours per plan for review at $60 per hour. Therefore, the proposed rules will not have a significant fiscal effect on the Division.
Local municipalities may voluntarily enforce the rules for gas systems, and they have the authority to offset any costs by charging appropriate fees.
The proposed rules will not have a significant fiscal effect on the private sector. The anticipated costs that will be incurred by the private sector are the plan review and site inspection fees as the result of adding gaseous hydrogen and liquefied hydrogen to chapter Comm 40.
Environmental Analysis
Notice is hereby given that the Department has considered the environmental impact of the proposed rules. In accordance with chapter Comm 1, the proposed rules are a Type III action. A Type III action normally does not have the potential to cause significant environmental effects and normally does not involve unresolved conflicts in the use of available resources. The Department has reviewed these rules and finds no reason to believe that any unusual conditions exist. At this time, the Department has issued this notice to serve as a finding of no significant impact.
The proposed rules and an analysis of the proposed rules are available on the Internet at the Safety and Buildings Division Web site at
www.commerce.wi.gov/SB/. Paper copies may be obtained without cost from Roberta Ward, at the Department of Commerce, Program Development Bureau, P.O. Box 2689, Madison, WI 53701-2689, or Email at
rward@commerce.state.wi.us, or at telephone (608) 266-8741 or (608) 264-8777 (TTY). Copies will also be available at the public hearing.
Notice of Hearing
Financial Institutions - Securities
NOTICE IS HEREBY GIVEN that pursuant to section
551.63 (1) and
(2), Stats., the Division of Securities of the Department of Financial Institutions will hold a public hearing at 345 West Washington Avenue, 4
th Floor Conference Room, at 3:00 PM. on Wednesday,
August 11, 2004 to consider the repeal and recreation and the amendment of certain Wisconsin Securities Law investment adviser licensing rules relating to custody of customer funds and/or securities.
Analysis Prepared by the Department of Financial Institutions, Division of Securities
Explanation of agency authority:
The agency has authority to license and regulate the business conduct of securities investment advisers doing business with Wisconsin customers. That authority includes the ability to establish rules for the conduct of business by investment advisers [551.33(6)], and to cooperate with the securities administrators of other states as well as the U.S. Securities & Exchange Commission (“SEC") to achieve uniformity in regulatory requirements [551.32(1s) and 551.63(2)].
Related statute or rule: DFI-Sec 5.035, Wis. Adm. Code.
Plain language analysis
The rulemaking procedures under Chapter
227 of the Wisconsin Statutes are being implemented for the purpose of replacing Wisconsin's existing Securities Law rule requirements applicable to Wisconsin-licensed investment advisers that have custody of customer funds and/or securities, with amended Model Rules on that subject recently developed and adopted by the North American Securities Administrators Association (“NASAA").
Current rule DFI-Sec 5.035, Wis. Adm. Code, under the Wisconsin Securities Law sets forth the regulatory requirements for state-licensed investment advisers who have custody of customer funds or securities. In 1999, NASAA previously developed Model.
Investment Adviser Custody Rules that could be used by any state jurisdiction in connection with their regulation of state-licensed investment advisers. (Wisconsin's current rule DFI-Sec 5.035, amended most recently in 2000, incorporated some of the elements of the NASAA Model Rules.)
Summary of, and comparison with existing or proposed federal regulations:
Recently, the U.S. Securities & Exchange Commission adopted for effectiveness on September 25, 2003, amendments to the federal custody rule under the Investment Advisers Act of 1940 applicable to federally-registered investment advisers. However, pursuant to the National Securities Markets Improvement Act of 1996, such federal changes are not applicable to investment advisers licensed solely in state jurisdictions.
The amended SEC rules for the first time define “custody" and require federally-registered advisers having “custody" to maintain client funds or securities with a "qualified custodian." Because the prior NASAA Model Rules were drafted based on the predecessor federal rules that did not contain a definition of custody, the September 2003 federal custody rule changes necessitated changes in the NASAA Model rules to provide needed uniformity on that issue between the regulation of federal-registered and non-federal registered investment advisers, as well as to provide equivalent levels of investor protection.
Accordingly, the NASAA Investment Adviser Regulatory Policy and Review Project Group was charged with developing amendments to the NASAA Custody Rules to bring them into alignment with the September 2003 federal custody rule. That Project Group completed its development of needed amendments to the NASAA Custody Rules, and those amendments were adopted by vote of the NASAA state member jurisdictions at the 2004 NASAA Spring Conference in Washington D.C. on April 18, 2004.
Comparison with rules in adjacent states:
Similar to Wisconsin, the adjacent states of Iowa, Illinois and Minnesota have existing regulatory requirements for state licensed investment advisers that have custody over customer funds and/or securities based on the NASAA Model Custody Rules as they existed prior to the recent April 2004 amendments. Michigan does not have any custody rules because their regulations prohibit investment advisers from having custody of customer assets. Among the Midwest states in this region, Wisconsin is the first state to commence adoption of the newly-amended NASAA Custody Rules.
Summary of factual data and analytical methodologies:
No factual data or analytical methodologies were used because the proposed rules are revisions/amendments to existing Wisconsin Securities Law regulatory requirements applicable to Wisconsin-licensed investment advisers having custody of customer assets, and are necessary to reflect parallel changes recently made at the federal level to federally-regulated investment advisers.
Analysis and supporting documentation used to determine effect on small business:
Because the proposed rules are revisions/amendments to existing Wisconsin Securities Law regulatory requirements applicable solely to Wisconsin-licensed investment advisers having custody of customer assets -- which requirements those licensees should already be in compliance with -- the proposed rules will not have an effect on "small-business" in general (outside the investment advisory business). Also, see the Initial Regulatory Flexibility Analysis below.
A summary of the proposed rules follows:
1. The NASAA Project Group determined that amendments were required to five NASAA Model Rules pertaining to Custody. Accordingly, substantive amendments were made to the Asset Audit Rule [Rule 102(e)(1)-1], a books and records-related rule [Rule 203(a)2], and to the Minimum Financial Requirements for Investment Advisers rule [Rule 202(d)-1]. Less substantive amendments were made to a separate rule regarding bonding requirements [Rule 202(e)-1, and an Unethical Practices provision [Rule 102(a)(4)-1]. The April 2004 amended NASAA Model Custody Rules incorporate the changes to all five of those rules and will be included in a repealed and re-created rule DFI-Sec 5.035, Wis. Adm. Code.
2. The existing Wisconsin rule defining “custody" in DFI-Sec 1.02 (17), Wis. Adm. Code, will be amended.
3. The existing Wisconsin net capital rule in DFI-Sec 5.02 (2), Wis. Adm. Code, applicable to investment advisers having custody of customer assets will be amended.
4. The existing Wisconsin rule in DFI-Sec 5.03 (2), Wis. Adm. Code, prescribing certain books and recordkeeping requirements for investment advisers having custody of customer assets will be repealed and re-created.
5. The existing Wisconsin business practices rule in DFI-Sec 5.06 (12), Wis. Adm. Code, applicable to investment advisers having custody of customer assets will be amended.
Initial Regulatory Flexibility Analysis
Types of small businesses that could be affected by certain of the rule revisions are:
1. Investment adviser licensees under the Wisconsin Securities Law with fewer than 25 full-time employees who meet the other criteria of sec. 227.114(l)(a), Wis. Stats. The proposed revisions to the securities investment adviser custody requirements will be applicable equally to all licensed investment advisers because the requirements involved are for the protection and benefit of all Wisconsin customers of those firms. All Wisconsin customers of Wisconsin-licensed securities investment advisers are entitled to the public investor protection benefits of the licensing requirements and Rule of Conduct provisions, irrespective of the size of the firm providing the investment advisory services. Under the rule-making procedures used by the Division of Securities, a copy of the proposed rules is mailed to each investment adviser licensed or notice-filed in Wisconsin, as well as to each broker-dealer licensed in Wisconsin, notifying them of the proposed revisions and soliciting written comments or attendance at the public hearing regarding the proposed rules.
Also, repeating what was stated in a preceding section, because the proposed rules are revisions/amendments to existing Wisconsin Securities Law regulatory requirements applicable solely to Wisconsin-licensed investment advisers having custody of customer assets -- which requirements those licensees should already be in compliance with -- the proposed rules will not have an effect on "small-business" in general (outside the investment advisory business).
2. Reporting, bookkeeping and other procedures required for compliance with the rules.
See numbered Item 4 of the Summary above.
Fiscal Estimate Summary
A summary of the fiscal effects of the proposed rule revisions is as follows: (i) No one-time revenue fluctuations; (ii) No annual fiscal effects; (iii) No long-range fiscal implications; (iv) No fiscal effect on local units of government.
Contact Person
A copy of the full text of the proposed rule revisions and fiscal estimate may be obtained from:
Randall E. Schumann (608) 266-3414
Legal Counsel for the Division of Securities
Department of Financial Institutions
345 West Washington Avenue, 4th Floor
P. O. Box 1768
Madison, WI 53701
Place where comments are to be submitted and deadline for submission:
