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e9-4740

  • FR Doc E9-4740[Federal Register: March 5, 2009 (Volume 74, Number 42)]

    [Rules and Regulations]

    [Page 9568-9570]

    From the Federal Register Online via GPO Access [wais.access.gpo.gov]

    [DOCID:fr05mr09-3]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 4

    RIN 3038-AC 67

    Electronic Filing of Disclosure Documents

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Final rule.

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

    is amending its regulations applicable to the filing of Disclosure

    Documents by commodity pool operators (CPOs) and commodity trading

    advisors (CTAs) with the National Futures Association (NFA). In

    response to a petition from NFA, the CFTC is requiring that CPOs and

    CTAs be required to file their Disclosure Documents electronically with

    NFA (Amendments).

    DATES: Effective Date: April 6, 2009.

    FOR FURTHER INFORMATION CONTACT: Barbara S. Gold, Associate Director,

    Compliance and Registration Section, Division of Clearing and

    Intermediary Oversight, Commodity Futures Trading Commission, Three

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

    telephone number: (202) 418-5450; facsimile number: (202) 418-5528; and

    electronic mail: bgold@cftc.gov.

    SUPPLEMENTARY INFORMATION:

    I. Background

    A. CPO and CTA Disclosure Documents

    Part 4 of the Commission's regulations \1\ governs the operations

    and activities of CPOs and CTAs. Regulations 4.21 and 4.31 respectively

    require each CPO and CTA registered or required to be registered with

    the Commission to deliver a Disclosure Document to prospective pool

    participants and clients. Regulations 4.24 and 4.25 specify the

    informational content of the CPO Disclosure Document, and Regulations

    4.34 and 4.35 specify the informational content for the CTA Disclosure

    Document. Regulations 4.26 and 4.36 respectively pertain to the use,

    amendment and filing of CPO and CTA Disclosure Documents. Specifically,

    under Regulations 4.26(d) and 4.36(d), the CPO or CTA must file one

    copy of the Disclosure Document, and any supplements and amendments

    thereto, with NFA.\2\

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    \1\ 17 CFR Part 4 (2008). The Commission's regulations can be

    accessed through the CFTC's Web site, www.cftc.gov.

    \2\ NFA is a registered futures association pursuant to Section

    17 of the Commodity Exchange Act (Act), 7 U.S.C. 21 (2000). The Act

    also may be accessed through the CFTC's Web site.

    The Commission previously authorized NFA to conduct reviews of

    Disclosure Documents filed by CPOs and CTAs pursuant to Regulations

    4.26(d) and 4.36(d). See 62 FR 52088 (Oct. 6, 1997).

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    B. The Proposing Release

    On November 26, 2008, the Commission proposed to amend Regulations

    4.26 and 4.36 in order to require that CPOs and CTAs file Disclosure

    Documents electronically through NFA's electronic Disclosure Document

    filing system (Proposing Release).\3\ This action was in response to a

    petition filed by NFA with the Commission (Petition).\4\

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    \3\ 73 FR 71968. The Proposing Release may be accessed through

    the CFTC's Web site, at http://www.cftc.gov/stellent/groups/public/

    @lrfederalregister/documents/file/e8-28177a.pdf.

    \4\ NFA filed the Petition with the Commission on July 21, 2008.

    The Commission previously authorized NFA to accept notices of

    exemptions or exclusions claimed under Part 4 and required that

    these notices be filed electronically. See 62 FR 52088 and 72 FR

    1658 (Jan. 16, 2007), respectively.

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    In the Petition, under ``Supporting Arguments,'' NFA explained that

    although it had developed a new Internet-based Disclosure Document

    electronic filing system ``that will be significantly less resource

    intensive while also streamlining and enhancing the filing process for

    registrants,'' \5\ absent an electronic filing requirement these

    proposed benefits would not be realized. In the Proposing Release, the

    Commission noted also NFA's representations that the system is designed

    to be easy and secure; it can be accessed through any public internet

    site; and CPOs and CTAs will access the system ``using the same

    designated login and password that they currently use for NFA's Online

    Registration System.'' \6\ The Commission further explained that:

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    \5\ 73 FR at 71968.

    \6\ Id.

    NFA's process for the electronic filing of Disclosure Documents

    will have two components. One of those components will require CPOs

    and CTAs to electronically submit their Disclosure Documents, as

    well as any amendments and supplements thereto. The other of these

    components will require CPOs and CTAs to enter from their Disclosure

    Documents certain key information on their operations and activities

    into a standardized form accessed through NFA's Web site.\7\

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    \7\ The Commission noted that, among other things, this key

    information concerns identification of contact persons,

    relationships with futures commission merchants or introducing

    brokers, and the past performance history and related data for the

    offered pool or trading program. 73 FR at 71969 n. 6.

    In light of the foregoing, the Commission proposed to amend

    Regulations 4.26(d) and 4.36(d) to require that any documents required

    to be filed thereunder be filed electronically with NFA, pursuant to

    NFA's electronic filing procedures. The Commission emphasized, however,

    that the proposed amendments, if adopted, would not impact the delivery

    of Disclosure Documents to prospective pool participants and clients,

    which CPOs and CTAs could continue to provide through hardcopy

    distribution via postal mail or electronically if the intended

    recipient consented thereto.\8\

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    \8\ 73 FR at 71969. See Regulations 4.21(b) for CPOs and 4.31(b)

    for CTAs.

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    II. Final Action

    A. Responses to the Comments

    The Commission received one comment letter, from a committee of a

    bar association whose members consist of attorneys who represent CPOs

    and CTAs (Committee). The Committee expressed concern that neither the

    Proposing Release nor the Petition contained detail on the information

    that would be required to be filed concurrent with the filing of the

    Disclosure Document or the uses to which that information would be put.

    In response, the Commission notes that the Petition states ``the filing

    process includes a series of questions that will assist in identifying

    the type of filing as well as provide important background information

    to assist NFA staff with the analysis of the document itself''--which,

    the Commission believes, will be in furtherance of NFA's compliance and

    enforcement programs. Moreover, as the Commission previously stated in

    the Proposing Release, CPOs and CTAs will be entering information

    directly from their Disclosure Documents.\9\ Further,

    [[Page 9569]]

    the Commission has been advised that NFA staff spoke with NFA's CPO/CTA

    Advisory Committee in advance of the filing of the Petition, and the

    Advisory Committee was supportive of the electronic filing system for

    CPO and CTA Disclosure Documents.

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    \9\ 73 FR 71969.

    In anticipation of the Commission's action today, on January 22,

    2009, NFA presented a web seminar on the electronic Disclosure

    Document filing system--which seminar is now available for ``on

    demand'' viewing on NFA's Web site, www.nfa.futures.org. Page 7 on

    the ``on demand'' document confirms the Commission's previous

    statement with the text that:

    Before you start, you should have a copy of the disclosure

    document you plan to file available since the system will require

    you to enter certain information (e.g., performance data, business

    relationships) directly from the document you are filing.

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    In light of the foregoing, the Commission has determined to adopt

    the amendments to Regulations 4.26(d) and 4.36(d) as proposed.

    B. Other Action

    Also in response to the Petition, and in the absence of any

    comments, the Commission has added the word ``each'' before the words

    ``trading program'' in paragraph (d)(1) of Regulation 4.36 to make that

    paragraph read parallel to the phrase ``each trading program'' in

    paragraph (d)(2) of Regulation 4.36.\10\

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    \10\ See 73 FR 71968 n. 3.

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    III. Related Matters

    A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) \11\ requires that agencies,

    in proposing rules, consider the impact of those rules on small

    businesses. The Commission previously has established certain

    definitions of ``small entities'' to be used by the Commission in

    evaluating the impact of its rules on such entities in accordance with

    the RFA.\12\ With respect to CPOs, the Commission previously has

    determined that a registered CPO is not a small entity for the purpose

    of the RFA.\13\ As for CTAs, the Commission previously has stated that

    it would evaluate within the context of a particular rule proposal

    whether all or some affected CTAs would be considered to be small

    entities and, if so, the economic impact on them of the particular

    rule.\14\ The Commission believes that the Amendments will not place

    any significant economic burdens, whether new or additional, on CPOs

    and CTAs who will be affected by them. This is because while the

    Amendments will require these CPOs and CTAs to have access to and a

    certain degree of technical knowledge to file Disclosure Documents

    electronically and to enter the required information, they will access

    the system using the same designated login and password that they

    currently use for registration purposes and they will be entering the

    information directly from their Disclosure Documents. The Commission

    did not receive any comments relative to its analysis of the RFA in the

    Proposing Release.

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    \11\ 5 U.S.C. 601 et seq.

    \12\ See 47 FR 18618 (Apr. 30, 1982).

    \13\ Id. at 18619.

    \14\ Id. at 18620.

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    B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) \15\ imposes certain

    requirements on federal agencies (including the Commission) in

    conducting or sponsoring any collection of information as defined by

    the PRA. The Amendments change the manner in which CPOs and CTAs file

    Disclosure Documents with NFA; they do not affect the substance or

    frequency of those filings. The Amendments do, however, authorize the

    separate collection from CPOs and CTAs of certain information from the

    Disclosure Documents CPOs and CTAs must now file electronically.

    Accordingly, pursuant to the PRA, the Commission submitted a copy of

    the PRA section of the Proposing Release to the Office of Management

    and Budget (OMB) for its review.\16\

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    \15\ 44 U.S.C. 3501 et seq.

    \16\ See 73 FR 71969 for the PRA section of the Proposing

    Release.

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    The Commission received one comment on its analysis of the PRA in

    the Proposing Release, from the Committee. For the reasons provided in

    the Proposing Release and above in this release, the Commission

    continues to believe that the Amendments change the manner, but not the

    substance or frequency, of the filing of Disclosure Documents by CPOs

    and CTAs.

    C. Cost-Benefit Analysis

    Section 15(a) of the Act \17\ requires the Commission to consider

    the costs and benefits of its action before issuing a new regulation

    under the Act. By its terms, Section 15(a) does not require the

    Commission to quantify the costs and benefits of a new regulation or to

    determine whether the benefits of the regulation outweigh its costs.

    Rather, Section 15(a) simply requires the Commission to ``consider the

    costs and benefits'' of its action.

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    \17\ 7 U.S.C. 19(a).

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

    evaluated in light of five broad areas of market and public concern,

    enumerated below. Accordingly, the Commission could in its discretion

    give greater weight to any one of the five enumerated areas and could

    in its discretion determine that, notwithstanding its costs, a

    particular rule was necessary or appropriate to protect the public

    interest or to effectuate any of the provisions or to accomplish any of

    the purposes of the Act.

    The Commission did not receive any comments relative to its cost-

    benefit analysis in the Proposing Release.

    List of Subjects in 17 CFR Part 4

    Advertising, Brokers, Commodity futures, Commodity pool operators,

    Commodity trading advisors, Consumer protection, Reporting and

    recordkeeping requirements.

    0

    For the reasons presented above, the Commission hereby amends Chapter I

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

    PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS

    0

    1. The authority citation for part 4 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 4, 6b, 6c, 6l, 6m, 6n, 6o, 12a, and

    23.

    0

    2. Revise paragraphs (d)(1) and (2) of Sec. 4.26 to read as follows:

    Sec. 4.26 Use, amendment and filing of Disclosure Document.

    * * * * *

    (d) * * *

    (1) The commodity pool operator must electronically file with the

    National Futures Association, pursuant to the electronic filing

    procedures of the National Futures Association, the Disclosure Document

    and, where used, profile document for each pool that it operates or

    that it intends to operate not less than 21 calendar days prior to the

    date the pool operator first intends to deliver such Document or

    documents to a prospective participant in the pool; and

    (2) The commodity pool operator must electronically file with the

    National Futures Association, pursuant to the electronic filing

    procedures of the National Futures Association, the subsequent

    amendments to the Disclosure Document and, where used, profile document

    for each pool that it operates or that it intends to operate within 21

    calendar days of the date upon which the pool operator first knows or

    has reason to know of the defect requiring the amendment.

    0

    3. Revise paragraph (d) of Sec. 4.36 to read as follows:

    Sec. 4.36 Use, amendment and filing of Disclosure Document.

    * * * * *

    (d)(1) The commodity trading advisor must electronically file with

    the National Futures Association, pursuant to the electronic filing

    procedures of the

    [[Page 9570]]

    National Futures Association, the Disclosure Document for each trading

    program that it offers or that it intends to offer not less than 21

    calendar days prior to the date the trading advisor first intends to

    deliver the Document to a prospective client in the trading program;

    and

    (2) The commodity trading advisor must electronically file with the

    National Futures Association, pursuant to the electronic filing

    procedures of the National Futures Association, the subsequent

    amendments to the Disclosure Document for each trading program that it

    offers or that it intends to offer within 21 calendar days of the date

    upon which the trading advisor first knows or has reason to know of the

    defect requiring the amendment.

    Issued in Washington, DC on February 27, 2009 by the Commission.

    David A. Stawick,

    Secretary of the Commission.

    [FR Doc. E9-4740 Filed 3-4-09; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: March 5, 2009



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