Horseracing Integrity and Safety Authority Oversight

FEDERAL TRADE COMMISSION <CFR>16 CFR Part 1</CFR> <RIN>RIN 3084-AB79</RIN> <SUBJECT>Horseracing Integrity and Safety Authority Oversight</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Federal Trade Commission. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rule; request for comment. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Federal Trade Commission (“FTC” or “Commission”) announces proposed rules regarding oversight of the Horseracing Integrity and Safety Authority (“Authority”). The proposed rules include new oversight provisions to ensure that the Authority remains publicly accountable and operates in a fiscally prudent, safe, and effective manner. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Comments must be received by April 8, 2024. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Interested parties may file a comment online or on paper by following the instructions in the Request for Comment part of the <E T="02">SUPPLEMENTARY INFORMATION</E> section below. Write “HISA Oversight Rulemaking, Matter No. P222100” on your comment and file your comment online at <E T="03">https://www.regulations.gov</E> by following the instructions on the web-based form. If you prefer to file your comment on paper, mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Mail Stop H-144 (Annex H), Washington, DC 20580. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Sarah Botha (202-326-2036, <E T="03">sbotha@ftc.gov</E> ), Office of the Executive Director, Federal Trade Commission. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Background</HD> The Horseracing Integrity and Safety Act of 2020 (“HISA” or “the Act”), Public Law 116-260, Title XII, 134 Stat 1182, 3252 (2020) (codified as amended at 15 U.S.C. 3051-3060), recognizes the Authority as a self-regulatory nonprofit organization charged with developing and enforcing rules relating to racetrack safety, anti-doping, and medication control. <E T="03">See</E> 15 U.S.C. 3052. The Act expressly provides for Commission oversight of several aspects of the Authority's operations. For example, the Commission must approve any proposed rule or rule modification by the Authority relating to the Authority's bylaws, racetrack safety standards, anti-doping and medication control, and the formula or methodology for determining assessments. <E T="03">See id.</E> In December 2022, Congress amended HISA to expand the Commission's oversight role over the Authority. <E T="03">See</E> Consolidated Appropriations Act, 2023, Public Law 117-328, Sec. 701, 136 Stat. 4459, 5231 (2022). As amended, the Act gives the Commission the power to issue rules under the procedures set forth in the Administrative Procedure Act, 5 U.S.C. 553, “as the Commission finds necessary or appropriate to ensure the fair administration of the Authority . . . or otherwise in furtherance of the purposes of this Act.” 15 U.S.C. 3053(e). In light of the Commission's experience in overseeing the Authority's operations to date, the Commission is exercising its rulemaking authority to propose several new rule provisions to ensure effective Commission oversight over the Authority. The proposed new provisions are designed to ensure that the Authority is promoting transparency and integrity in its operations. For example, new rule sections would require the Authority to submit and publish annual and midyear reports about its performance and financial position. The proposed rules would also require the Authority to develop, maintain, and publish a multi-year strategic plan, after taking public comments on the draft plan. The proposed rules would require the Authority to effectively manage risk and take steps to prevent conflicts of interest, waste, fraud, embezzlement, and abuse. The proposed rules would also mandate other operational requirements and identify best practices for the Authority to follow, as explained in the section-by-section analysis below. The Commission would add the proposed new rules as 16 CFR 1.153 through 1.156 in Subpart U of part 1 of its Rules of Practice. Subpart U would be renamed “Oversight of the Horseracing Integrity and Safety Authority” to reflect more accurately the content of the amended subpart. <HD SOURCE="HD1">Section by Section Analysis</HD> <E T="03">§ 1.153 Submission of the Authority's annual reports, midyear reports, and strategic plans.</E> This proposed new section imposes certain requirements on the Authority to report on its finances for the preceding calendar year by May 15. This includes a complete accounting of the Authority's budget (as audited by a qualified, independent, registered public accounting firm and in accordance with Generally Accepted Accounting Principles), a discussion of budgetary line items, a summary of travel expenses, and a summary of any new or continuing risks or issues raised by audits or other reviews. The proposed section also imposes certain requirements on the Authority to report by March 31 on its performance for the prior calendar year, with such report to include efforts made to carry out the requirements of the Act, a description of the cooperation with the states as set forth in 15 U.S.C. 3060(b), a summary of final civil sanctions, an assessment of the Authority's progress in meeting or not meeting its performance measures contained in its strategic plan per § 1.153(d), a summary of Board of Directors committee recommendations and activities, information about any changes in the composition of the Authority's Board of Directors or standing committees, information about the relationship between the Authority and the anti-doping and medication control enforcement agency, a summary of all litigation to which the Authority is a party (including actions commenced by the Authority under 15 U.S.C. 3054(j)), a summary of all subpoenas issued by the Authority under 15 U.S.C. 3054(c), a description of any areas in which the Authority believes improvements to its operations are warranted, and the Authority's plans to achieve those improvements. The proposed section also requires the Authority to submit to the FTC by August 15 a same year midyear report covering January to June that describes spending and staffing levels and budgetary information. This midyear report would provide operational insight about the Authority's budget execution and risk management activities. Under the proposed section, the Authority also must develop and publish for public comment a multi-year strategic plan by June 30, 2024. The Authority must re-evaluate its strategic plan no less frequently than every five years. The strategic plan must align with the Authority's annual budget, discuss its priority initiatives, and set forth a set of performance measures. The Authority must publish its annual financial reports, annual performance reports, and strategic plans on its website. <E T="03">§ 1.154 Enterprise risk management.</E> This proposed new section imposes certain requirements on the Authority to ensure that it effectively manages risk to prevent conflicts of interest, waste, fraud, embezzlement, or abuse. Paragraph (a) sets forth guiding principles around separation of duties and corrective action plans, and notes that risk management activities must ensure compliance, the avoidance of conflicts of interest or the appearance thereof, and the appropriate handling of funds received and expended by the Authority. Given the confidential nature of much of the Authority's work and the data that it collects, paragraph (b) would require the Authority to ensure the privacy and security of its data in its systems, including those operated by third-party contractors, and require a complete annual evaluation of the status of its overall information technology program and practices as audited by a qualified, independent, third-party auditor. Given that the Authority leverages contractor resources in its operations, paragraph (c) would require the Authority to document its market research for any action estimated at over $10,000 to ensure the lowest cost or best value for goods and services to be provided, and to develop policies and procedures covering procurement activities. Given the FTC's need for regular communication and awareness of the Authority's activities, paragraph (d) would require the Authority to provide advance notice to Commission staff of all significant Authority-planned events ( <E T="03">e.g.,</E> press conferences, media events, summits, etc.) via a calendar, list, email, or other reasonable means, to summarize key aspects of all such events on its website, and to give Commission staff prompt notice after significant adverse events in the horseracing industry that might reasonably lead to sanctions or track closures. <E T="03">§ 1.155 Other best practices.</E> This proposed new section includes a set of best practices that the Authority is encouraged to adopt to promote accountability, transparency of operations, and effective resource stewardship. These proposals include holding regular monitoring meetings with the FTC; recommendations for how the Authority may maintain its records and information; recommendations for how the Authority should treat confidential information; a standing data request from the FTC for the Authority's Board of Directors minutes; recommendations about the Authority's personnel and compensation policies and practices; recommendations about the Authority's customer service program (and the development of associated metrics); and recommendations regarding the Authority's travel policies. <E T="03">§ 1.156 Severability.</E> This proposed new section notes that provisions of this subpart are separate and severable from one another. If any provision is stayed or determined to be invalid, it is the Commission's intention that the rema ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 33k characters. 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