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2013-07755

  • Federal Register, Volume 78 Issue 67 (Monday, April 8, 2013)[Federal Register Volume 78, Number 67 (Monday, April 8, 2013)]

    [Rules and Regulations]

    [Pages 20788-20792]

    From the Federal Register Online via the Government Printing Office [www.gpo.gov]

    [FR Doc No: 2013-07755]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Parts 3 and 23

    RIN 3038-AD66

    Dual and Multiple Associations of Persons Associated With Swap

    Dealers, Major Swap Participants and Other Commission Registrants

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Final rules.

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    SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC)

    is adopting regulations to make clear that each swap dealer (SD), major

    swap participant (MSP), and other Commission registrant with whom an

    associated person (AP) is associated is required to supervise the AP

    and is jointly and severally responsible for the activities of the AP

    with respect to customers common to it and any other SD, MSP or other

    Commission registrant.

    DATES: Effective June 7, 2013.

    FOR FURTHER INFORMATION CONTACT: Israel J. Goodman, Special Counsel, or

    Barbara S. Gold, Associate Director, Division of Swap Dealer and

    Intermediary Oversight, 1155 21st Street NW., Washington, DC 20581.

    Telephone number: 202-418-6700 and electronic mail: igoodman@cftc.gov

    or bgold@cftc.gov.

    SUPPLEMENTARY INFORMATION:

    I. Introduction

    A. Background

    On July 21, 2010, President Obama signed the Dodd-Frank Act.\1\

    Section 731 of the Dodd-Frank Act amended the Commodity Exchange Act

    (CEA) \2\ by adding Section 4s, which, among other things, prohibits

    any person from acting as a ``swap dealer'' or ``major swap

    participant'' unless the person is registered with the Commission.\3\

    To effectuate the Congressional directive that an SD or MSP apply for

    registration in such form and manner as prescribed by the

    Commission,\4\ on November 23, 2010, the Commission proposed

    regulations to establish a registration process for SDs and MSPs

    (Proposed Registration Regulations),\5\ and on January 19, 2012, the

    Commission adopted regulations that establish a registration process

    for SDs and MSPs (Final Registration Regulations).\6\

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    \1\ See Dodd-Frank Wall Street Reform and Consumer Protection

    Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010). The text of the

    Dodd-Frank Act may be accessed through the Commission's Web site,

    http://www.cftc.gov.

    \2\ 7 U.S.C. 1 et seq. (2006). The Commission's regulations are

    found at 17 CFR Part 1 et seq. (2012). Both the CEA and the

    Commission's regulations also may be accessed through the

    Commission's Web site.

    \3\ CEA Section 4s(a).

    \4\ CEA Section 4s(b).

    \5\ 75 FR 71379.

    \6\ 77 FR 2613. Concurrently, through a separate Notice and

    Order, the Commission delegated to the National Futures Association

    (NFA) the authority to perform the full range of registration

    functions with respect to SDs and MSPs. 77 FR 2708 (Jan. 19, 2012).

    Subsequently, the Commission issued regulations that further

    define the terms ``swap dealer'' and ``major swap participant.'' 77

    FR 30596 (May 23, 2012). In this regard, the Commission notes that

    pursuant to CEA Section 1a(49)(D), CFTC Regulation 1.3(ggg)(4)

    establishes a de minimis exception from the SD definition, thereby

    allowing a person who otherwise meets the criteria for being an SD

    to engage in a certain amount of swap dealing activity without being

    required to register as an SD. If a person exceeds the de minimis

    amount of swap dealing at the effective date of the swap definition,

    then CFTC Regulation 1.3(ggg)(4)(iii) provides that the person must

    register as an SD by no later than two months from the end of the

    month in which it exceeded the de minimis threshold, i.e., December

    31, 2012. Similarly, the definition of MSP in CFTC Regulation

    1.3(hhh)(3) generally requires a person that meets the MSP

    definition as a result of its swaps activity in a fiscal quarter to

    register as an MSP no later than two months after the end of that

    quarter, with the earliest possible date by which the person should

    be registered as an MSP being February 28, 2013 (i.e., two months

    from the quarter end on December 31, 2012).

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    Although APs of other Commission registrants are generally required

    to register with the Commission,\7\ APs of SDs and MSPs \8\ are not

    required to register as such.\9\ However, an SD or MSP is prohibited

    from permitting any

    [[Page 20789]]

    person associated with it to effect or be involved in effecting swaps

    on its behalf if such person is subject to a statutory

    disqualification.\10\

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    \7\ See, e.g., CEA Section 4k and Commission Regulation 3.12(a).

    Regulation 3.12(c) provides that application is made through the

    filing of a Form 8-R, accompanied by a specified certification from

    the registrant who will be employing the AP--i.e., the AP's sponsor.

    \8\ As is the case for other categories of Commission

    registrants, the term ``associated person,'' when used with respect

    to an SD or MSP, means a natural person (as opposed to an entity,

    such as a partnership or corporation). See Regulation 1.3(aa)(6) for

    a definition of the term ``associated person'' of an SD or MSP to

    mean a natural person who is associated with an SD or MSP as a

    partner, officer, employee, agent (or any natural person occupying a

    similar status or performing similar functions), in any capacity

    that involves the solicitation or acceptance of swaps (other than in

    a clerical or ministerial capacity); or the supervision of any

    person or persons so engaged.

    \9\ Section 731 did not direct the Commission to adopt

    regulations that provide for the registration of APs of SDs and

    MSPs, and, thus, the Commission has not done so. See 77 FR at 2613.

    \10\ See CEA Section 4s(b)(6) and Regulation 23.22(b).

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    B. The Proposed Regulations

    The Commission adopted the Final Registration Regulations after

    considering the comments it received from the public on the Proposed

    Registration Regulations. One commenter recommended that the Commission

    expand the scope of the provisions on dual and multiple associations in

    Regulation 3.12(f), or adopt a new regulation, ``to address the

    situations in which an individual conducts swaps-related activity on

    behalf of more than one Swap Entity [i.e., an SD and/or MSP] or

    conducts swaps activity on behalf of a Swap Entity and is also

    registered as an AP of a different firm.'' \11\ When adopting the Final

    Registration Regulations, the Commission stated that ``[w]hile the

    Commission agrees with the commenter's recommendation, it anticipates

    promptly addressing this issue in a future rulemaking.'' \12\

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    \11\ Comment letter from the National Futures Association at

    page 10 (Jan. 24, 2011).

    \12\ 77 FR at 2616.

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    Regulation 3.12(f)(1)(i) permits dual and multiple associations of

    a person registered as an AP.\13\ Regulation 3.12(f)(1)(iii) provides

    that each sponsor \14\ of the AP is required to supervise the AP, and

    that each sponsor is jointly and severally responsible for the AP's

    activities with respect to any customers common to it and any other

    sponsor with which the AP is associated.\15\ This joint and several

    responsibility provision is intended to prevent situations where each

    sponsor might disclaim responsibility for the AP's activities--that is,

    that each sponsor would claim that the dually associated AP was not

    acting on its behalf but, rather, for the other sponsor, and therefore

    the other sponsor should be held responsible for the conduct in

    question.\16\ However, because, as noted above, the Commission has not

    adopted regulations requiring the registration of APs of SDs and MSPs,

    the provisions of Regulation 3.12(f)(1), which apply to a sponsoring

    registrant with respect to its APs who are registered or seeking to

    register as such, do not apply to SDs and MSPs and their APs.

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    \13\ Regulation 3.12(f)(1)(i) provides that a person who is

    already registered as an AP in any capacity may become associated

    with another sponsor if the new sponsor files with the NFA a Form 8-

    R.

    \14\ The term ``sponsor'' is defined in Regulation 3.1(c) to

    mean ``the futures commission merchant, retail foreign exchange

    dealer, introducing broker, commodity trading advisor, commodity

    pool operator or leverage transaction merchant which makes the

    certification required by Sec. 3.12 of [Part 3] for the

    registration of an associated person of such sponsor.''

    \15\ The Commission adopted this joint and several

    responsibility provision in 1992 in connection with amendments to

    Regulation 3.12(f) that eliminated then-existing restrictions on

    dual and multiple associations in many circumstances. 57 FR 23136

    (June 2, 1992) (1992 Amendments). The Commission first adopted a

    prohibition on dual and multiple associations in 1980, with respect

    to APs of futures commission merchants (FCMs), explaining that it

    was necessary ``[i]n view of the obvious difficulties of supervision

    in such a situation and in view of the inherent possibilities for

    conflicts of interest that might arise if an AP were to have more

    than one sponsor.'' 45 FR 80485, 80489 (Dec. 5, 1980) (footnote

    omitted).

    Subsequently, the Commission amended and broadened the scope of

    Regulation 3.12(f) such that, prior to the 1992 Amendments,

    Regulation 3.12(f) prohibited a person from associating as an AP

    with: (1) MORe than one FCM or more than one introducing broker

    (IB); (2) an FCM and an IB or a leverage transaction merchant (LTM);

    and (3) an IB and an LTM. Subject to certain exceptions, the

    regulations also prohibited a person from associating as an AP with:

    (1) An FCM and a commodity trading advisor (CTA); (2) an FCM and a

    commodity pool operator (CPO); (3) an IB and a CTA; and (4) an IB

    and a CPO. See 56 FR 37026, 37033 (Aug. 2, 1991). In proposing to

    eliminate most of these restrictions, the Commission explained that,

    in its experience, these regulations had been ``difficult to

    understand and follow, even for experienced practitioners'' and

    that, in certain cases, they could have perverse effects, such as

    limiting the choice of which FCM a customer could use to carry his

    managed account. Id. Moreover, the Commission explained, the

    concerns raised by dual and multiple associations could be better

    addressed through an alternative approach, as further discussed

    below. Id.

    \16\ See 56 FR at 37033; see, e.g., In Re Global Telecom, et

    al., [2005-2007 Transfer Binder] Comm. Fut. L. Rep. (CCH) ] 30,143

    (CFTC Oct. 4, 2005) (holding an FCM liable for the activities of its

    APs who were also APs of a CTA, and noting that holding otherwise

    would ``bring about the very situation the rule is aimed at

    preventing--one in which a futures customer who contracts with two

    entities to receive two products or services is left with nobody

    minding the store'').

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    To address this issue, on June 15, 2012, the Commission proposed

    amendments to Regulation 3.12(f) and Regulation 23.22 (Proposal) to

    provide that an AP of an SD or MSP may associate with one or more other

    SDs, MSPs or other Commission registrants (i.e., FCMs, retail foreign

    exchange dealers (RFEDs), IBs, CTAs, CPOs, and LTMs), and that each SD,

    MSP or other Commission registrant with whom the AP is associated is

    required to supervise the AP and is jointly and severally responsible

    for the conduct of the AP with respect to customers common to it and

    any other SD, MSP or other Commission registrant with whom the AP is

    associated.\17\

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    \17\ 77 FR 35892.

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    II. Comments on the Proposal

    In the Proposal, the Commission requested comment on all aspects of

    the Proposal and, in particular, on whether it should adopt a provision

    (in both new Regulation 3.12(f)(5) and new Regulation 23.22(c)) that

    would provide a mechanism to notify SDs, MSPs and existing sponsors of

    registered APs when one of their APs seeks to become associated with

    another SD or MSP (or, in the case of an AP of an SD or MSP, seeks to

    register as an AP of another Commission registrant).\18\

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    \18\ Under Regulation 3.12(f)(1), a person registered as an AP

    may become an AP of another sponsor if the new sponsor files a Form

    8-R with NFA, and NFA, in turn, is required to notify any existing

    sponsor of the AP that the person has applied to become associated

    with another sponsor. This notification puts sponsors on notice that

    their registered APs will subject them to additional supervisory and

    joint and several responsibility requirements under Regulation

    3.12(f). Employment as an AP of an SD or MSP, however, does not

    require registration with the Commission and, thus, the filing of a

    Form 8-R with NFA.

    More recently (and subsequent to the Proposal), NFA amended NFA

    Bylaw 301 to add a new paragraph 301(l) (Eligibility to Conduct

    Swaps Activities), which requires NFA Member FCMs, IBs, CPOs and

    CTAs and their APs that engage in swaps activity that is subject to

    Commission jurisdiction to be approved by NFA as a ``swaps firm'' or

    ``swaps associated person,'' as applicable. The amendments also

    provide that in order to obtain NFA approval as a swaps firm, at

    least one of the firm's principals must be registered as an AP and

    approved as a swaps associated person. The amendments are intended

    to enable NFA to identify entities and individuals that are engaging

    in swaps activities. However, these requirements do not apply to

    SDs, MSPs or their APs, nor do they apply with respect to APs of an

    FCM that is also registered as an SD if the APs do not engage in

    swaps activity on behalf of the firm in its capacity as an FCM. See

    NFA Notice to Members I-12-24 (Oct. 3, 2012).

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    The Commission received one comment letter on the Proposal. The

    letter supported the Proposal, stating that:

    [The] proposal will help to ensure that SDs, MSPs and other

    Commission registrants do not avoid supervision of and

    responsibility for the activities of their APs with such dual or

    multiple associations; increase transparency of lines of

    responsibility and promote accountability thereon; improve internal

    consistency with the other Commission regulations pertaining to such

    dual or multiple associations; and improve protection for both

    market participants and the public by obligating each SD, MSP or

    other Commission registrant to supervise its APs who have such dual

    or multiple associations.\19\

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    \19\ Comment letter from Chris Barnard at page 1 (July 24,

    2012).

    The comment letter also supported the adoption of a regulation that

    would provide a mechanism to notify SDs, MSPs and existing sponsors of

    registered APs when one of their APs seeks to become associated with

    another SD or MSP. After further considering this issue, the Commission

    has determined not to adopt such a regulation. The Commission believes

    [[Page 20790]]

    that each SD, MSP and other Commission registrant is best positioned to

    determine the policies and procedures it will need to implement in

    order to determine whether any of its APs are associated with another

    SD or MSP.

    III. The Final Regulations

    A. Regulations 3.12(f)(5) and 23.22(c)

    In light of the foregoing, the Commission is adopting as proposed

    regulations to provide for dual and multiple associations of persons

    associated with SDs, MSPs and other Commission registrants.

    Specifically, Regulation 3.12(f)(5)(i)(A) applies where a person

    associated as a registered AP of one or more (other) Commission

    registrants seeks to become associated as an AP of one or more SDs or

    MSPs; Regulation 3.12(f)(5)(i)(B) applies where a person associated as

    an AP of one or more SDs or MSPs seeks to become associated as a

    registered AP of one or more other Commission registrants; and

    Regulation 23.22(c) applies where a person associated as an AP of an SD

    or MSP seeks to become associated as an AP of one or more other SDs or

    MSPs.\20\ The regulations make clear that each SD, MSP and other

    Commission registrant with whom the AP is associated is required to

    supervise the AP and is jointly and severally responsible for the

    activities of the AP with respect to customers common to it and any

    other SD, MSP or other Commission registrant. As proposed and as

    adopted, the regulations are based on the form and text of current

    Regulation 3.12(f)(1).\21\

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    \20\ As discussed in the Proposal, two separate regulations

    addressing dual and multiple associations of APs of SDs and MSPs are

    necessary because, as noted above, the term ``sponsor'' and the

    provisions of Regulation 3.12(f) do not apply to SDs and MSPs with

    respect to their APs (who are not subject to a registration

    requirement).

    \21\ Thus, for example, Regulation 3.12(f)(5)(i)(B) provides

    that where an AP of an SD or MSP seeks to register as an AP of

    another Commission registrant, the new sponsor must meet the

    requirements of Regulation 3.60(b)(2)(i)(A) and (B), as is required

    of a new sponsor under current Regulation 3.12(f)(1). However,

    Regulation 3.12(f)(5)(i)(A) provides that an SD or MSP seeking to

    associate with an already registered AP must meet the requirements

    of Regulation 3.60(b)(2)(i)(A), but not also the requirements of

    Regulation 3.60(b)(2)(i)(B). This is because the requirements of the

    former regulation concern specified adjudicatory proceedings which

    would be applicable to SDs and MSPs while the requirements of the

    latter regulation concern financial requirements which are not

    applicable to SDs and MSPs.

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    IV. Related Matters

    A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) \22\ requires federal

    agencies, in promulgating regulations, to consider whether those

    regulations will have a significant economic impact on a substantial

    number of small entities and, if so, to provide a regulatory

    flexibility analysis respecting the impact. A regulatory flexibility

    analysis or certification typically is required for ``any rule for

    which the agency publishes a general notice of proposed rulemaking

    pursuant to'' the notice-and-comment provisions of the Administrative

    Procedure Act, 5 U.S.C. 553(b).\23\ As discussed in the Proposal, the

    Commission has previously established certain definitions of ``small

    entities'' to be used by the Commission in evaluating the impact of its

    regulations on small entities in accordance with the RFA.\24\ The

    Commission previously has determined that FCMs, registered CPOs,\25\

    LTMs and RFEDs are not small entities for purposes of the RFA, and,

    thus, the requirements of the RFA do not apply to those entities.\26\

    In addition, in connection with its adoption of the Final Registration

    Regulations, the Commission determined that SDs and MSPs are not small

    entities for purposes of the RFA.\27\ Therefore, the requirements of

    the RFA do not apply to SDs and MSPs. With respect to CTAs and IBs, the

    Commission previously has stated that it would evaluate within the

    context of a particular rule proposal whether all or some of the

    affected CTAs and IBs would be considered to be small entities and, if

    so, the economic impact on them of the particular regulation.\28\ The

    Commission notes that the regulations being published by this Federal

    Register release will only impact, potentially, registered CTAs and

    registered IBs,\29\ and the number of such impacted entities, if any,

    should likely be very small.\30\

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    \22\ 5 U.S.C. 601 et seq.

    \23\ 5 U.S.C. 601(2), 603, 604 and 605.

    \24\ 47 FR 18618 (Apr. 30, 1982).

    \25\ To the extent the regulations being published by this

    Federal Register release (specifically, new Regulation 3.12(f)(5))

    would have an impact on CPOs, it would only impact registered CPOs,

    since Regulation 3.12(f), by its terms, would not apply where an

    AP's new or existing association is with a person who is not

    registered with the Commission.

    \26\ See 47 FR at 18619-20 (discussing FCMs and CPOs); 54 FR

    19556, 19557 (May 8, 1989) (discussing LTMs); 75 FR 55410, 55416

    (Sept. 19, 2010) (discussing RFEDs).

    \27\ See 77 FR 2613, 2620 (Jan. 19, 2012) (adopting the Final

    Registration Regulations).

    \28\ See 47 FR at 18619 (discussing CTAs); 48 FR 35248, 35276-77

    (Aug. 3, 1983) (discussing IBs).

    \29\ This is because, as noted above, Regulation 3.12(f) would

    not apply where an AP's new or existing association is with a person

    (e.g., a CTA or an IB) who is not registered with the Commission.

    \30\ See Amendments to Commodity Pool Operator and Commodity

    Trading Advisor Regulations Resulting from the Dodd-Frank Act, 76 FR

    11701, 11703 (Mar. 3, 2011) (noting with regard to RFA

    considerations that the regulations proposed therein would only

    impact registered CTAs). As of October 19, 2012, less than three

    percent of all registered APs (or approximately 1500 APs) were

    associated on a dual or multiple basis with Commission registrants.

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    The Commission did not receive any comments regarding its RFA

    analysis in the Proposal. Accordingly, pursuant to 5 U.S.C. 605(b), the

    Chairman, on behalf of the Commission, certifies that the regulations

    being published today by this Federal Register release will not have a

    significant economic impact on a substantial number of small entities.

    B. Paperwork Reduction Act

    The Paperwork Reduction Act (PRA) \31\ imposes certain requirements

    on federal agencies (including the Commission) in connection with their

    conducting or sponsoring any collection of information as defined by

    the PRA. The regulations being published by this Federal Register

    release expressly obligate each SD, MSP and other Commission registrant

    to supervise their APs who have dual and multiple associations and make

    each SD, MSP and other Commission registrant jointly and severally

    responsible for the activities of such APs with respect to customers

    common to it and any other SD, MSP or other Commission registrant. As

    discussed in the Proposal, the regulations contain no provision that

    would impose a ``burden'' or ``collection of information'' as those

    terms are defined in the PRA.\32\

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    \31\ 44 U.S.C. 3501 et seq.

    \32\ 77 FR 35892, 35895 (June 15, 2012).

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    The Commission did not receive any comments regarding its PRA

    analysis in the Proposal. Accordingly, for purposes of the PRA, the

    Chairman, on behalf of the Commission, certifies that the regulations

    being published today by this Federal Register release will not impose

    any new reporting or recordkeeping requirements.

    C. Cost-Benefit Considerations

    Section 15(a) of the CEA \33\ requires the Commission to consider

    the costs and benefits of its actions before promulgating a regulation

    under the CEA or issuing certain orders. Section 15(a) further

    specifies that the costs and benefits shall be evaluated in light of

    five broad areas of market and public concern: (1) Protection of market

    [[Page 20791]]

    participants and the public; (2) efficiency, competitiveness and

    financial integrity of futures markets; (3) price discovery; (4) sound

    risk management practices; and (5) other public interest

    considerations. The Commission considers the costs and benefits

    resulting from its discretionary determinations with respect to the

    section 15(a) factors.

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    \33\ 7 U.S.C. 19(a).

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    As discussed above, the Commission is adopting regulations to

    specify the responsibilities applicable with respect to dual and

    multiple associations of APs of SDs and MSPs, and particularly, that

    such associations are permitted, but that they implicate the joint and

    several supervisory and responsibility provisions applicable with

    respect to such associations under Regulation 3.12(f). As noted above,

    prior to the adoption of these regulations, no regulations addressed

    dual and multiple associations of APs of SDs and MSPs and the

    obligations of those persons with whom they are associated concerning

    common customers.

    Thus, the primary benefits of the regulations being adopted by the

    Commission include the same benefits noted by the Commission when it

    first adopted the supervisory and joint and several responsibility

    provisions under Regulation 3.12(f), namely, the prevention of

    circumstances where an SD, MSP or other Commission registrant seeks to

    avoid responsibility for the activities of an AP who has dual or

    multiple associations by asserting the conduct in question was not

    within the purview of its supervisory responsibilities with respect to

    the AP. Therefore, the Commission believes the regulations being

    published by this Federal Register release will provide protection to

    market participants and the public by ensuring that such APs will be

    adequately supervised, and those charged with supervising them will be

    held responsible for failing to do so. The Commission does not believe

    that compliance with the regulations being adopted will impose any

    significant, new cost on SDs or MSPs.

    By this rulemaking, APs of SDs and MSPs that have dual or multiple

    associations will be subject to the same regulatory regime as APs of

    other Commission registrants that have dual or multiple associations,

    and SDs and MSPs (or other Commission registrants) employing an AP with

    dual or multiple associations will be prevented from attempting to

    disclaim responsibility for the activities of the AP by asserting that

    the AP was not acting on its behalf, but rather on behalf of another SD

    or MSP with whom the AP was associated (with respect to their common

    customers). These amendments will yield a substantial if unquantifiable

    benefit to the public because they will prevent SDs, MSPs and other

    Commission registrants from seeking to avoid supervision of and

    responsibility for the activities of their APs who have dual or

    multiple associations with respect to their common customers.

    Section 15(a) Factors

    Section 15(a) specifies that the costs and benefits shall be

    evaluated in light of the following five broad areas of market and

    public concern: (1) Protection of market participants and the public;

    (2) efficiency, competitiveness, and financial integrity of the futures

    markets; (3) price discovery; (4) sound risk management practices; and

    (5) other public interest considerations.

    (1) The Protection of Market Participants and the Public

    As discussed above, the Commission believes the regulations it is

    adopting by this Federal Register release will provide protection to

    market participants and the public by expressly obligating each SD, MSP

    or other Commission registrant to supervise its APs who have dual or

    multiple associations and by subjecting each SD, MSP and other

    Commission registrant to joint and several responsibility for the

    activities of such APs with respect to customers common to it and any

    other SD, MSP or other Commission registrant. More specifically, the

    regulations will prevent SDs, MSPs and other Commission registrants

    from disclaiming responsibility for the activities of their APs who

    have dual and multiple associations.

    (2) The Efficiency, Competitiveness, and Financial Integrity of the

    Futures Markets

    The Commission does not expect the regulations to have an impact on

    the efficiency, competitiveness and financial integrity of the futures

    market.

    (3) The Market's Price Discovery Functions

    The Commission does not expect the regulations to have an impact on

    the market's price discovery functions.

    (4) Sound Risk Management Practices.

    The Commission does not expect the regulations to have an impact on

    risk management practices by SDs, MSPs and other Commission

    registrants.

    (5) Other Public Interest Considerations.

    The Commission has not identified any other public interest

    considerations in light of which it should consider the costs and

    benefits of the regulations.

    List of Subjects

    17 CFR Part 3

    Associated persons, Brokers, Commodity futures, Customer

    protection, Major swap participants, Registration, Swap dealers.

    17 CFR Part 23

    Associated persons, Commodity futures, Customer protection, Major

    swap participants, Registration, Reporting and recordkeeping

    requirements, Swap dealers.

    For the reasons presented above, the Commission hereby amends

    Chapter I of Title 17 of the Code of Federal Regulations as follows:

    PART 3--REGISTRATION

    0

    1. The authority citation for part 3 continues to read as follows:

    Authority: 5 U.S.C. 522, 522b; 7 U.S.C. 1a, 2, 6, 6a, 6b, 6c,

    6d, 6e, 6f, 6g, 6h, 6i, 6k, 6m, 6n, 6o, 6p, 6s, 8, 9, 9a, 12, 12a,

    13b, 13c, 16a, 18, 19, 21, and 23, as amended by Title VII of the

    Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L.

    111-203, 124 Stat. 1376 (July 21, 2010).

    0

    2. Section 3.12 is amended by adding new paragraph (f)(5) to read as

    follows:

    Sec. 3.12 Registration of associated persons of futures commission

    merchants, retail foreign exchange dealers, introducing brokers,

    commodity trading advisors, commodity pool operators and leverage

    transaction merchants.

    * * * * *

    (f) * * *

    (5)(i)(A) A person who is already registered as an associated

    person in any capacity whose registration is not subject to conditions

    or restrictions may become associated as an associated person of a swap

    dealer or major swap participant if the swap dealer or major swap

    participant meets the requirements set forth in Sec. 3.60(b)(2)(i)(A).

    (B) A person who is already associated as an associated person of a

    swap dealer or major swap participant may become registered as an

    associated person of a futures commission merchant, retail foreign

    exchange dealer, introducing broker, commodity trading advisor,

    commodity pool operator, or leverage transaction merchant if the

    futures commission merchant, retail foreign exchange dealer,

    introducing broker, commodity trading advisor, commodity pool operator,

    or leverage transaction merchant with which the person intends to

    associate meets the

    [[Page 20792]]

    requirements set forth in Sec. 3.60(b)(2)(i)(A) and (B).

    (ii) Each sponsor and each swap dealer and/or major swap

    participant with whom the person is associated shall supervise that

    associated person, and each sponsor and each swap dealer and/or major

    swap participant is jointly and severally responsible for the conduct

    of the associated person with respect to the:

    (A) Solicitation or acceptance of customer orders,

    (B) Solicitation of funds, securities or property for a

    participation in a commodity pool,

    (C) Solicitation of a client's or prospective client's

    discretionary account,

    (D) Solicitation or acceptance of leverage customers' orders for

    leverage transactions,

    (E) Solicitation or acceptance of swaps, and

    (F) Associated person's supervision of any person or persons

    engaged in any of the foregoing solicitations or acceptances, with

    respect to any customers common to it and any futures commission

    merchant, retail foreign exchange dealer, introducing broker, commodity

    trading advisor, commodity pool operator, leverage transaction

    merchant, swap dealer, or major swap participant with which the

    associated person is associated.

    * * * * *

    PART 23--SWAP DEALERS AND MAJOR SWAP PARTICIPANTS

    0

    3. The authority citation for Part 23 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6c, 6p, 6s, 9, 9a, 13b,

    13c, 16a, 18, 19, 21 as amended by Title VII of the Dodd-Frank Wall

    Street Reform and Consumer Protection Act, Pub. L. 111-203, 124

    Stat. 1376 (July 21, 2010).

    0

    4. Section 23.22 is amended by adding paragraph (c) to read as follows:

    Sec. 23.22 Associated persons of swap dealers and major swap

    participants.

    * * * * *

    (c) Dual and multiple associations. (1) A person who is already

    associated as an associated person of a swap dealer or major swap

    participant may become associated as an associated person of another

    swap dealer or major swap participant if the other swap dealer or major

    swap participant meets the requirements set forth in Sec.

    3.60(b)(2)(i)(A) of this chapter.

    (2) Each swap dealer and major swap participant associated with

    such associated person shall supervise that associated person, and each

    swap dealer and major swap participant is jointly and severally

    responsible for the conduct of the associated person with respect to

    the:

    (i) Solicitation or acceptance of customer orders,

    (ii) Solicitation of funds, securities or property for a

    participation in a commodity pool,

    (iii) Solicitation of a client's or prospective client's

    discretionary account,

    (iv) Solicitation or acceptance of leverage customers' orders for

    leverage transactions,

    (v) Solicitation or acceptance of swaps, and

    (vi) Associated person's supervision of any person or persons

    engaged in any of the foregoing solicitations or acceptances, with

    respect to any customers common to it and any other swap dealer or

    major swap participant.

    Issued in Washington, DC, on March 29, 2013, by the Commission.

    Christopher J. Kirkpatrick,

    Deputy Secretary of the Commission.

    [FR Doc. 2013-07755 Filed 4-5-13; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: April 8, 2013



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