2016-07304

Federal Register, Volume 81 Issue 63 (Friday, April 1, 2016)

[Federal Register Volume 81, Number 63 (Friday, April 1, 2016)]

[Rules and Regulations]

[Pages 18743-18747]

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

[FR Doc No: 2016-07304]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 3

RIN 3038-AE16

Alternative to Fingerprinting Requirement for Foreign Natural

Persons

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or

``CFTC'') is amending existing Commission regulations to establish an

alternative to fingerprinting to evaluate the fitness of natural

persons who are required to submit fingerprints under the Commission's

regulations and who have not resided in the United States since

reaching 18 years of age (``Final Rule'').

DATES: The Final Rule is effective on May 2, 2016.

FOR FURTHER INFORMATION CONTACT: Katherine Driscoll, Associate Chief

Counsel, 202-418-5544, [email protected]; Jacob Chachkin, Special

Counsel, 202-418-5496, [email protected]; or Adam Kezsbom, Special

Counsel, 202-418-5372, [email protected], Division of Swap Dealer and

Intermediary Oversight, Commodity Futures Trading Commission, Three

Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Proposal

On January 12, 2016, the Commission published a Notice of Proposed

Rulemaking (``Proposal'') \1\ to amend the requirement that, pursuant

to the registration process for determining a registrant's fitness in

part 3 of the Commission's regulations, natural persons \2\ that wish

to be principals \3\ or associated persons \4\ of Commission

registrants,\5\ or who are responsible for entry of orders from an FB's

or FT's own account, submit their fingerprints (the ``Fingerprinting

Requirement'').\6\ The Proposal contemplated adding a new paragraph (e)

to the existing list of exemptions from the Fingerprinting Requirement

in Sec. 3.21 \7\ to, among other things, codify and clarify the

alternative to the Fingerprinting Requirement provided by CFTC Staff

Letter No. 12-49 \8\ and CFTC Staff Letter No. 13-29 \9\ (``DSIO No-

Action Letters''). In particular, the Commission proposed

[[Page 18744]]

adding an alternative to the requirement to provide fingerprints when

applying for Commission registration for natural persons who have not

resided in the United States since reaching 18 years of age. The

Proposal allowed any such person's registered firm to complete a

criminal history background check in lieu of submitting fingerprints

for such person.\10\

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\1\ Alternative to Fingerprinting Requirement for Foreign

Natural Persons, 81 FR 1359 (Jan. 12, 2016).

\2\ As used herein, the terms ``natural person'' and

``individual'' have the same meaning.

\3\ See the definition of principal in Commission regulation

3.1(a). 17 CFR 3.1(a).

\4\ An ``associated person'' is any natural person who is

associated in certain capacities with a futures commission merchant

(``FCM''), retail foreign exchange dealer (``RFED''), introducing

broker (``IB''), commodity pool operator (``CPO''), commodity

trading advisor (``CTA''), swap dealer (``SD''), major swap

participant (``MSP''), or leverage transaction merchant (``LTM'').

17 CFR 1.3(aa).

For the definitions of these registration categories (other than

RFED), see Section 1a of the Commodity Exchange Act (``CEA'' or

``Act'') and Commission regulation 1.3. 7 U.S.C. 1a and 17 CFR 1.3.

For the definition of RFED, see Commission regulation 5.1(h). 17 CFR

5.1(h).

\5\ Subject to certain exceptions and exclusions, persons

engaging in specified activities involving commodity interests are

required pursuant to the CEA and/or Commission regulations to

register with the Commission in certain registration categories.

These include registration as an FCM, RFED, IB, CPO, CTA, SD, MSP,

LTM, floor broker (``FB''), and floor trader (``FT''). For the

definitions of FB and FT, see Section 1a of the CEA and Commission

regulation 1.3. 7 U.S.C. 1a and 17 CFR 1.3.

\6\ Currently, the Commission may, directly or indirectly,

require fingerprinting pursuant to Commission regulations

3.10(a)(2); 3.11(a)(1); 3.12(c)(3), d(2), f(3), or (i)(3);

3.40(a)(1), (a)(2), or (b); 3.44(a)(5) or (c); or 3.46(a)(3). 17 CFR

3.10(a)(2); 3.11(a)(1); 3.12(c)(3), d(2), f(3), and (i)(3);

3.40(a)(1), (a)(2), and (b); 3.44(a)(5) and (c); and 3.46(a)(3).

In support of its initial promulgation of the fingerprinting

requirements, the Commission stated that these requirements ``are

necessary to permit improvements in the Commission's background

checking of applicants for registration, to permit positive

identification of certain individuals with common names, to reduce

the number of applications filed by individuals who are unfit for

registration, and to facilitate fitness reviews of registrants on a

spot and periodic basis.'' See Revision of Registration Regulations;

Final Rules; Designation of New Part, 45 FR 80485, 80485 (Dec. 5,

1980).

\7\ Commission regulation 3.21 provides exemptions to the

Fingerprinting Requirement, subject to certain conditions, for

persons whose fingerprints have recently been identified and

processed by the Federal Bureau of Investigation, for persons whose

application for initial registration with the Commission in any

capacity was recently granted, for persons that have a current Form

8-R on file with the Commission or National Futures Association

(``NFA''), and for principals that are outside directors. 17 CFR

3.21.

\8\ CFTC Staff Letter No. 12-49 (Dec. 11, 2012), available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/12-49.pdf.

\9\ CFTC Staff Letter No. 13-29 (Jun. 21, 2013), available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-29.pdf.

\10\ The Commission has delegated to NFA, a registered futures

association under Section 17 of the CEA, the registration functions

set forth in subparts A, B, and C of part 3 of the Commission's

regulations, including the collection and review of a completed Form

8-R and related fingerprint submissions from each natural person

completing a Form 8-R. See 17 CFR 3.2(a).

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The Commission generally requested comments on the Proposal and

also solicited comments on a number of specific matters.\11\ For

example, the Commission solicited comments on potential changes to its

proposed definition of a foreign natural person, on the scope and

effectiveness of the criminal history background check required by the

Proposal and any alternatives thereto, and on the Commission's analysis

of the costs and benefits of the Proposal. The comment period for the

Proposal ended on February 11, 2016.

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\11\ Proposal, 81 FR at 1361.

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II. Summary of Comments

The Commission received two relevant comments in response to the

Proposal--one from Sutherland Asbill & Brennan LLP on behalf of The

Commercial Energy Working Group (``The Working Group'') and one from

Joyce Dillard (``Dillard'').\12\ The Working Group supported the

Proposal as a means of alleviating some of, what The Working Group

described as, ``the undue burdens associated with providing a

fingerprint card pursuant to Part 3 of the Commission's regulations.''

However, The Working Group requested that the Commission expand the

Proposal to all natural persons that are principals or associated

persons of registrants subject to the Fingerprinting Requirement. The

Working Group stated that ``[t]his approach, rooted in fairness, would

provide equal treatment to U.S. residents and non-U.S. residents

alike,'' but provided no further rationale for its approach.

Conversely, Dillard did not support the Proposal, and stated that

fingerprinting should be required without alternative.

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\12\ The Commission also received two comments that were not

relevant to the Proposal. All of the comments are available at

http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1657.

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III. Final Rule

After careful consideration, the Commission is adopting the Final

Rule as proposed. The Commission is not expanding the Final Rule to

cover persons other than Foreign Natural Persons (as defined below) as

requested by The Working Group because, while there are limitations on

the usefulness of fingerprints of foreign nationals, fingerprinting is

an expedient way to investigate whether someone has a criminal record

in the United States. For instance, in the United States, fingerprints

may be checked for possible matches against existing repositories of

fingerprints quickly and efficiently.

As discussed in the Proposal, the Commission believes the Final

Rule, in providing certainty to market participants by way of

Commission regulation, makes the commodity interest markets it oversees

more liquid, competitive, and accessible by enabling Foreign Natural

Persons to demonstrate that they meet the minimum standards for fitness

and competency without undue burden. The alternative to fingerprinting

removes an impediment to participation in United States' markets by

Foreign Natural Persons while also ensuring the continued protection of

market participants and the public. Further, the Commission believes

that, by providing an alternative for Foreign Natural Persons, the

Final Rule is consistent with the principles of international comity.

Section 3.21(e)(2) provides that the obligation to provide a

fingerprint card for a Foreign Natural Person under part 3 of the

Commission's regulations shall be deemed satisfied for a Certifying

Firm (as defined below) if: (a) Such Certifying Firm causes a criminal

history background check of such Foreign Natural Person to be

performed; (b) such criminal history background check does not reveal

any matters that constitute a disqualification under Sections 8a(2) or

8a(3) of the CEA,\13\ other than those disclosed to NFA; and (c) a

person authorized by such Certifying Firm submits, in reliance on such

criminal history background check, a certification by such Certifying

Firm to NFA.

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\13\ 7 U.S.C. 12a(2) and (3).

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The certification must: (i) State that the conditions described

above have been satisfied; and (ii) be signed by a person authorized by

such Certifying Firm to make such certification. In addition, each

criminal history background check must: (a) Be of a type that would

reveal all matters listed under Sections 8a(2)(D) or 8a(3)(D), (E), or

(H) of the CEA \14\ relating to the Foreign Natural Person and (b) be

completed not more than one calendar year prior to the date that such

Certifying Firm submits the certification to NFA described in the Final

Rule.

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\14\ 7 U.S.C. 12a(2)(D) and 12a(3)(D), (E), and (H). These

provisions of Sections 8a(2) and (3) of the CEA generally relate to

criminal convictions.

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In terms of definitions, Sec. 3.21(e)(1)(i) defines Foreign

Natural Person, solely for purposes of paragraph (e), as any natural

person who has not resided in the United States since reaching the age

of 18 years. Also, Sec. 3.21(e)(1)(ii) defines Certifying Firm, also

solely for purposes of paragraph (e), with respect to natural persons

acting in certain specified capacities in relation to the firm.

By way of recordkeeping, Sec. 3.21(e)(3) requires that the

Certifying Firm maintain, in accordance with Commission regulation

1.31, records documenting each criminal history background check and

the results thereof.\15\

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\15\ 17 CFR 1.31.

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As discussed in the Proposal, the Final Rule supersedes the DSIO

No-Action Letters without prejudice to those that were relying on

either of the DSIO No-Action Letters and had satisfied the requirements

thereof prior to January 12, 2016, the date the Proposal was published

in the Federal Register.

V. Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (``RFA'') \16\ requires Federal

agencies, in promulgating regulations, to consider whether the rules

they propose will have a significant economic impact on a substantial

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

flexibility analysis regarding the economic impact on those entities.

In the Proposal, the Commission certified that the Proposal would not

have a significant economic impact on a substantial number of small

entities. The Commission received no comments with respect to the RFA.

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\16\ 5 U.S.C. 601 et seq.

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As discussed in the Proposal, the Final Rule affects certain FCMs,

RFEDs, IBs, CPOs, CTAs, SDs, MSPs, LTMs, FBs, and FTs that wish to take

advantage of the alternative to fingerprinting to evaluate the fitness

of their Foreign Natural Persons for which fingerprints must be

submitted to NFA.\17\ The Commission has previously

[[Page 18745]]

determined that FCMs, RFEDS, CPOs, SDs, MSPs, and LTMs are not small

entities for purposes of the RFA.\18\ Therefore, the requirements of

the RFA do not apply to those entities. With respect to CTAs, FBs, FTs,

and IBs, the Commission has found it appropriate to consider whether

such registrants should be deemed small entities for purposes of the

RFA on a case-by-case basis, in the context of the particular

Commission regulation at issue.\19\ As certain of these registrants may

be small entities for purposes of the RFA, the Commission considered

whether the Final Rule would have a significant economic impact on such

registrants. As discussed in the Proposal, the Final Rule solely

provides an optional alternative to complying with the Fingerprinting

Requirement, which already applies to such registrants, and will,

therefore, not impose any new regulatory obligations on affected

registrants. The Final Rule is not expected to impose any new burdens

on market participants. Rather, to the extent that the Final Rule

provides an alternative means to comply with the Fingerprinting

Requirement and is elected by a market participant, the Commission

believes it is reasonable to infer that the alternative is less

burdensome to such participant. The Commission does not, therefore,

expect small entities to incur any additional costs as a result of the

Final Rule. Consequently, the Commission finds that no significant

economic impact on small entities will result from the Final Rule.

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\17\ The Final Rule also directly affects certain of such

individuals; however, the Commission has noted that the RFA, by its

terms, does not apply to individuals. See 48 FR 14933, 14954 n.115

(Apr. 6, 1983). Therefore, no analysis on the economic impact of

this rule on individuals is provided.

\18\ See Policy Statement and Establishment of Definitions of

``Small Entities'' for Purposes of the Regulatory Flexibility Act,

47 FR 18618 (Apr. 30, 1982) (FCMs and CPOs); Leverage Transactions,

54 FR 41068 (Oct. 5, 1989) (LTMs); Regulation of Off-Exchange Retail

Foreign Exchange Transactions and Intermediaries, 75 FR 55410, 55416

(Sept. 10, 2010) (RFEDs); and Registration of Swap Dealers and Major

Swap Participants, 77 FR 2613, 2620 (Jan. 19, 2012) (SDs and MSPs).

\19\ See 47 FR at 18620 (CTAs and FBs); Registration of Floor

Traders; Mandatory Ethics Training for Registrants; Suspension of

Registrants Charged With Felonies, 58 FR 19575, 19588 (Apr. 15,

1993) (FTs); and Introducing Brokers and Associated Persons of

Introducing Brokers, Commodity Trading Advisors and Commodity Pool

Operators; Registration and Other Regulatory Requirements, 48 FR

35248, 35276 (Aug. 3, 1983) (IBs).

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Accordingly, for the reasons stated above, the Commission believes

that the Final Rule will not have a significant economic impact on a

substantial number of small entities. Therefore, the Chairman, on

behalf of the Commission, hereby certifies, pursuant to 5 U.S.C.

605(b), that the Final Rule 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

1. Background

The Paperwork Reduction Act of 1995 (``PRA'') \20\ imposes certain

requirements on Federal agencies (including the Commission) in

connection with conducting or sponsoring any collection of information

as defined by the PRA.

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\20\ 44 U.S.C. 3501 et seq.

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As discussed in the Proposal, the Final Rule contains collections

of information for which the Commission has previously received control

numbers from the Office of Management and Budget (``OMB''). The titles

for these collections of information are ``Registration under the

Commodity Exchange Act, OMB control number 3038-0023'' \21\ and

``Registration of Swap Dealers and Major Swap Participants, OMB control

number 3038-0072.'' \22\

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\21\ See OMB Control No. 3038-0023, http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0023# (last visited

Feb. 24, 2016).

\22\ See OMB Control No. 3038-0072, http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0072# (last visited

Feb. 24, 2016).

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The responses to these collections of information are mandatory. An

agency may not conduct or sponsor, and a person is not required to

respond to, a collection of information unless it displays a currently

valid control number issued by OMB.

The collection of information in the Final Rule provides an

optional alternative to complying with the Fingerprinting Requirement

(as described above). Eligible persons have the option to elect the

certification process, but no obligation to do so. For this reason,

except to the extent that the Commission has amended the subject OMB

control numbers for PRA purposes to reflect the alternative

certification process, the Final Rule is not expected to impose any new

burdens on market participants. Rather, to the extent that the Final

Rule provides an alternative means to comply with the Fingerprinting

Requirement and is elected by market participants, it is reasonable for

the Commission to infer that the alternative is less burdensome to such

participants.

2. Revisions to Collections 3038-0023 and 3038-0072

Collections 3038-0023 and 3038-0072 are currently in force with

their control numbers having been provided by OMB.

As discussed above, the Final Rule incorporates an alternative to

fingerprinting to evaluate the fitness of certain Foreign Natural

Persons. In order to qualify for this alternative, the Certifying Firm

must take the steps required pursuant to the Final Rule, including

submitting the required certification to NFA and maintaining records of

the criminal history background check and the results thereof.

Requiring such actions requires revisions to collections 3038-0023 and

3038-0072. Accordingly, the Commission submitted a request to amend

each of collections 3038-0023 and 3038-0072 to OMB and invited public

comment on its paperwork burdens in the Proposal. In particular, as

further described in the Proposal, the Commission estimates that

approximately 198 FCMs, RFEDs, IBs, CPOs, CTAs, LTMs, FBs, and FTs and

2 SDs and MSPs will submit the required certification \23\ and,

accordingly, estimates the additional hour burdens below.

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\23\ Proposal, 81 FR at 1362.

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a. Estimated Additional Hour Burden for Collection 3038-0023

Collection 3038-0023 relates to collections of information from

FCMs, RFEDs, IBs, CPOs, CTAs, LTMs, FBs, and FTs. The estimated

additional hour burden for collection 3038-0023 of 495 hours is

calculated as follows:

Number of registrants: 198.

Frequency of collection: As needed.

Estimated annual responses per registrant: 1.

Estimated aggregate number of annual responses: 198.

Estimated annual hour burden per registrant: 2.5.\24\

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\24\ This collection's burdens are restricted to (i) registrants

providing necessary information to commercial service provider(s) to

conduct a criminal history background check for a Foreign Natural

Person; (ii) registrants preparing and submitting the certification

described herein; and (iii) registrants maintaining, in accordance

with Commission regulation 1.31, records documenting that the

criminal history background check was completed and the results

thereof. To the extent that a market participant instead elects to

conduct the background check internally, it is reasonable for the

Commission to infer that doing so is less burdensome to such

participant.

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Estimated aggregate annual hour burden: 495 (198 registrants x 2.5

hours per registrant).

b. Estimated Additional Hour Burden for Collection 3038-0072

Collection 3038-0072 relates to collections of information from SDs

and MSPs. The estimated additional hour

[[Page 18746]]

burden for collection 3038-0072 of 5 hours is calculated as follows:

Number of registrants: 2.

Frequency of collection: As needed.

Estimated annual responses per registrant: 1.

Estimated aggregate number of annual responses: 2.

Estimated annual hour burden per registrant: 2.5.\25\

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\25\ See n. 24, supra.

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Estimated aggregate annual hour burden: 5 (2 registrants x 2.5

hours per registrant).

3. Information Collection Comments

In the Proposal, the Commission invited the public and other

Federal agencies to comment on any aspect of the information collection

requirements discussed above. The Commission did not receive any such

comments.

C. Cost-Benefit Considerations

Section 15(a) of the Act \26\ requires the Commission to consider

the costs and benefits of its actions before issuing a regulation under

the Act. Section 15(a) further specifies that the costs and benefits

shall be evaluated in light of the following five broad areas of market

and public concern: (i) Protection of market participants and the

public; (ii) efficiency, competitiveness and financial integrity of

futures markets; (iii) price discovery; (iv) sound risk management

practices; and (v) other public interest considerations. The Commission

considers the costs and benefits resulting from its discretionary

determinations with respect to the Section 15(a) considerations.

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\26\ 7 U.S.C. 19(a).

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1. Costs

a. Costs to FCMs, RFEDs, IBs, CPOs, CTAs, SDs, MSPs, LTMs, FBs, FTs,

Associated Persons, and Other Foreign Natural Persons

The Final Rule provides an alternative to complying with the

Fingerprinting Requirement, which alternative no FCM, RFED, IB, CPO,

CTA, SD, MSP, LTM, FB, FT, associated person, or other Foreign Natural

Person is required to elect. As such, the Commission believes that the

Final Rule does not impose any net cost on such persons, because the

Commission presumes that such persons will elect the alternative only

if they assess it to have a lower or equal net cost.

b. Other Costs

Because the Final Rule allows FCMs, RFEDs, IBs, CPOs, CTAs, SDs,

MSPs, LTMs, FBs, and FTs to submit, subject to the terms and conditions

herein, a certification in lieu of a fingerprint card for Foreign

Natural Persons, NFA will need to develop a process to review and

retain such certifications and consider amending its applications and/

or other forms to reflect the availability of this alternative to the

Fingerprinting Requirement. The Commission expects that the costs of

such activities will not be significant, because NFA has been

processing and retaining requests under the DSIO No-Action Letters

since their issuance and the changes to NFA's applications and/or other

forms to take into account the Final Rule would likely be minimal and

could be included in other future unrelated updates.

2. Benefits

The Commission believes that, by establishing an alternative method

for evaluating the fitness of Foreign Natural Persons for whom a

fingerprint card must currently be submitted, the Final Rule helps keep

the United States' commodity interest markets accessible and

competitive with other markets around the world by removing an

impediment to participation in United States' markets by Foreign

Natural Persons while also ensuring the continued protection of market

participants and the public. Further, the Commission believes that, by

providing an alternative for persons outside the United States, the

Final Rule is consistent with the principles of international comity.

3. Commenter's Request

As discussed above, The Working Group requested that the Commission

expand the alternative provided in the Proposal to include all natural

persons that are principals or associated persons of registrants

subject to the Fingerprinting Requirement. The Commission is not making

such an expansion, because, while there are limitations on the

usefulness of fingerprints of foreign nationals, fingerprinting is an

expedient way to investigate whether someone has a criminal record in

the United States.

4. Section 15(a) Factors

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

costs and benefits of its actions before promulgating a regulation

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

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

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

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

financial integrity of futures markets; (iii) price discovery; (iv)

sound risk management practices; and (v) other public interest

considerations.

i. Protection of Market Participants and the Public

The Final Rule continues to protect the public by ensuring that

persons who are currently subject to the Fingerprinting Requirement,

whether or not they reside in the United States, must have their

fitness reviewed through the completion of a background check.

ii. Efficiency, Competitiveness, and Financial Integrity of Markets

The Final Rule may increase the efficiency and competitiveness of

the markets by encouraging more participation in United States markets

by Foreign Natural Persons. The Commission does not believe that the

integrity of financial markets is harmed because the Final Rule

requires that the background check meet the objective standards which

rely on the clearly-stated matters under Sections 8a(2)(D) and

8a(3)(D), (E), and (H) of the CEA.

iii. Price Discovery

The Commission generally believes that providing an alternative

means of ensuring the fitness of a person who resides outside the

United States for purposes of Commission registration, by reducing the

burden that the Fingerprinting Requirement could impose on such

persons, could reduce impediments to transact on a cross-border basis,

increasing participation in commodity interest markets. The Commission

believes that such increased participation and the resulting increased

liquidity may help to facilitate price discovery.

iv. Sound Risk Management Practices

One of the critically important functions of registration is to

allow the Commission to ensure that all futures and swaps industry

professionals who deal with the public meet minimum standards of

fitness and competency.\27\ The fitness investigations that are part of

the registration process permit the Commission and/or its delegatees to

(a) uncover past misconduct that may disqualify an individual or entity

from registration and (b) help determine if such persons have disclosed

all matters required to be disclosed in their applications to become

registered with

[[Page 18747]]

the Commission.\28\ Having futures and swaps market participants that

are not subject to any of the matters that would lead to a

disqualification of registration under Sections 8a(2) or (3) of the CEA

is one way to help ensure that a Commission registrant will not be a

risk to its customers or to the market in general.

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\27\ See, e.g., Commodity Futures Trading Comm'n, Division of

Clearing and Intermediary Oversight, Public Report on the

Registration Program of the National Futures Association, June 2010,

at 1 (citing H.R. REP. NO. 97-565(I), at 48 (1982), reprinted in

1982 U.S.C.C.A.N. 3871, 3897-3899).

\28\ See http://www.nfa.futures.org/NFA-registration/index.HTML

(last visited Feb. 24, 2016), stating that ``[t]he primary purposes

of registration are to screen an applicant's fitness to engage in

business as a futures professional and to identify those individuals

and organizations whose activities are subject to federal

regulation.''

Pursuant to Commission regulation 3.60, the Commission may,

subject to some limitations, deny, grant with conditions, suspend,

revoke, or restrict registration to an applicant if the Commission

alleges and is prepared to prove that the registrant or applicant is

subject to one or more of the statutory disqualifications set forth

in section 8a(2), 8a(3) or 8a(4) of the Act. 17 CFR 3.60. Sections

8a(2) and 8a(3) of the Act contain an extensive list of matters that

provide grounds for refusing or conditioning an applicant's

registration, including, without limitation, felony convictions,

commodities or securities law violations, bars or other adverse

actions taken by financial regulators, and willfully omitting to

state any material fact in an application. See 7 U.S.C. 12a(2) and

(3). See also Interpretative Statement With Respect to Section

8a(2)(C) and (E) and Section 8a(3)(J) and (M) of the Commodity

Exchange Act, appendix A to part 3 of the Commission's regulations.

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v. Other Public Interest Considerations

The Commission believes that, by providing an alternative for

persons outside the United States, the Final Rule is consistent with

the principles of international comity.

List of Subjects in 17 CFR Part 3

Associated persons, Brokers, Commodity futures, Commodity pool

operators, Commodity trading advisors, Customer protection,

Fingerprinting, Foreign exchange, Futures commission merchants,

Introducing brokers, Leverage transaction merchants, Leverage

transactions, Major swap participants, Principals, Registration,

Reporting and recordkeeping requirements, Retail foreign exchange

dealers, Swap dealers, Swaps.

For the reasons set forth in the preamble, the Commodity Futures

Trading Commission amends part 3 as follows:

PART 3--REGISTRATION

0

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

Authority: 5 U.S.C. 552, 552b; 7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1,

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

12a, 13b, 13c, 16a, 18, 19, 21, 23.

0

2. In Sec. 3.21, add paragraph (e) to read as follows:

Sec. 3.21 Exemption from fingerprinting requirement in certain cases.

* * * * *

(e) Foreign natural persons. (1) For purposes of this paragraph

(e):

(i) The term foreign natural person means any natural person who

has not resided in the United States since reaching the age of 18

years.

(ii) The term certifying firm means:

(A) For any natural person that is a principal or associated person

of a futures commission merchant, retail foreign exchange dealer, swap

dealer, major swap participant, introducing broker, commodity pool

operator, commodity trading advisor, leverage transaction merchant,

floor broker, or floor trader, such futures commission merchant, retail

foreign exchange dealer, swap dealer, major swap participant,

introducing broker, commodity pool operator, commodity trading advisor,

leverage transaction merchant, floor broker, or floor trader; and

(B) For any natural person that is responsible for, or directs, the

entry of orders from a floor broker's or floor trader's own account,

such floor broker or floor trader.

(2) Any obligation in this part to provide a fingerprint card for a

foreign natural person shall be deemed satisfied with respect to a

certifying firm if:

(i) Such certifying firm causes a criminal history background check

of such foreign natural person to be performed; and

(ii) The criminal history background check:

(A) Is of a type that would reveal all matters listed under

Sections 8a(2)(D) or 8a(3)(D), (E), or (H) of the Act relating to such

foreign natural person;

(B) Does not reveal any matters that constitute a disqualification

under Sections 8a(2) or 8a(3) of the Act, other than those disclosed to

the National Futures Association; and

(C) Is completed not more than one calendar year prior to the date

that such certifying firm submits the certification described in

paragraph (e)(2)(iii) of this section;

(iii) A person authorized by such certifying firm submits, in

reliance on such criminal history background check, a certification by

such certifying firm to the National Futures Association, that:

(A) States that the conditions of paragraphs (e)(2)(i) and (ii) of

this section have been satisfied; and

(B) Is signed by a person authorized by such certifying firm to

make such certification.

(3) The certifying firm shall maintain, in accordance with Sec.

1.31 of this chapter, records documenting that the criminal history

background check performed pursuant to paragraph (e)(2)(i) of this

section was completed and the results thereof.

Issued in Washington, DC, on March 28, 2016, by the Commission.

Robert N. Sidman,

Deputy Secretary of the Commission.

Note: The following appendices will not appear in the Code of

Federal Regulations.

Appendices to Alternative to Fingerprinting Requirement for Foreign

Natural Persons--Commission Voting Summary and Chairman's Statement

Appendix 1--Commission Voting Summary

On this matter, Chairman Massad and Commissioners Bowen and

Giancarlo voted in the affirmative. No Commissioner voted in the

negative.

Appendix 2--Statement of Chairman Timothy G. Massad

I support the rule being finalized today, which provides foreign

natural persons with an alternative to the fingerprinting

requirement that applies to certain participants in our markets.

This will reduce unnecessary burdens on foreign individuals while

maintaining appropriate standards of fitness and competency. This

final rule also continues the Commission's ongoing efforts to

codify, where appropriate, and through notice-and-comment

rulemaking, no-action relief that previously had been provided by

Commission staff.

[FR Doc. 2016-07304 Filed 3-31-16; 8:45 am]

BILLING CODE 6351-01-P

 

Last Updated: April 1, 2016