Federal Register, Volume 77 Issue 116 (Friday, June 15, 2012)[Federal Register Volume 77, Number 116 (Friday, June 15, 2012)]
[Proposed Rules]
[Pages 35892-35897]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14654]
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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: Proposed rules.
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SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC)
is proposing regulations that would 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 (Proposal).
DATES: Comments must be received on or before August 14, 2012.
ADDRESSES: You may submit comments, identified by RIN 3038-AD66 and
``Dual and Multiple Associations of Persons Associated with Swap
Dealers, Major Swap Participants and other Commission Registrants,'' by
any of the following methods:
Agency Web Site, via its Comments Online process: http://comments.cftc.gov. Follow the instructions on the Web site for
submitting comments.
Mail: Send to David A. Stawick, Secretary, Commodity
Futures Trading Commission, 1155 21st Street NW., Washington, DC 20581.
Hand delivery/Courier: Same as Mail above.
Federal eRulemaking Portal: http://www.regulations.gov/search/index.jsp. Follow the instructions for submitting comments.
Please submit your comments using only one method. All comments
must be submitted in English, or if not, accompanied by an English
translation. Comments will be posted as received to www.cftc.gov and
the information you submit will be publicly available. If, however, you
submit information that ordinarily is exempt from disclosure under the
Freedom of Information Act, you may submit a petition for confidential
treatment of the exempt information according to the procedures set
forth in Commission Regulation 145.9.\1\ The Commission reserves the
right, but shall have no obligation, to review, pre-screen, filter,
redact, refuse or remove any or all of your submission from
www.cftc.gov that it may deem to be inappropriate for publication, such
as obscene language. All submissions that have been redacted or removed
that contain comments on the merits of the rulemaking will be retained
in the public comment file and will be considered as required under the
Administrative Procedure Act \2\ and other applicable laws, and may be
accessible under the Freedom of Information Act.
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\1\ Commission regulations referred to herein are found at 17
CFR Ch. 1 (2011). They are accessible on the Commission's Web site,
http://www.cftc.gov.
\2\ 5 U.S.C. 500 et seq.
FOR FURTHER INFORMATION CONTACT: Israel J. Goodman, Attorney-Advisor,
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: [email protected]
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SUPPLEMENTARY INFORMATION:
[[Page 35893]]
I. Introduction
A. Background
On July 21, 2010, President Obama signed the Dodd-Frank Act.\3\
Section 731 of the Dodd-Frank Act amended the Commodity Exchange Act
(CEA) \4\ 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.\5\
To effectuate the Congressional directive that an SD or MSP apply for
registration in such form and manner as prescribed by the
Commission,\6\ on November 23, 2010, the Commission proposed
regulations to establish a registration process for SDs and MSPs
(Proposed Registration Regulations),\7\ and on January 19, 2012, the
Commission adopted regulations that establish a registration process
for SDs and MSPs (Final Registration Regulations).\8\
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\3\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the
Dodd-Frank Act also may be accessed on the Commission's Web site,
http://www.cftc.gov.
\4\ 7 U.S.C. 1 et seq.
\5\ CEA Sections 4s(a).
\6\ CEA Section 4s(b).
\7\ 75 FR 71379.
\8\ 77 FR 2613. Additionally, 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).
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However, Section 731 did not direct the Commission to adopt
regulations that provide for the registration of APs of SDs and
MSPs.\9\ Thus, unlike APs of other Commission registrants, who are
generally required to register with the Commission,\10\ APs of SDs and
MSPs are not required to register as such.\11\ Although APs of SDs and
MSPs are not subject to registration with the Commission, an SD or MSP
is prohibited from permitting any person associated with it to effect
or be involved in effecting swaps on its behalf if such person is
subject to a statutory disqualification.\12\
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\9\ See 77 FR at 2613 (noting that CEA Section 4s does not
direct the Commission to adopt regulations that provide for the
registration of APs of SDs or MSPs).
\10\ See, e.g., CEA Section 4k and Commission Regulation
3.12(a).
\11\ 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 77 FR 2614-15, whereby
the Commission adopted in new Regulation 1.3(aa)(6) 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:
(i) The solicitation or acceptance of swaps (other than in a
clerical or ministerial capacity); or
(ii) The supervision of any person or persons so engaged.
\12\ See CEA Section 4s(b)(6) and Regulation 23.22(b).
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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
currently found 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 [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.'' \13\ 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.'' \14\ The
Proposal addresses this issue.
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\13\ Comment letter from the National Futures Association at
page 10 (Jan. 24, 2011).
\14\ 77 FR at 2616.
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B. Regulation 3.12(f)
Regulation 3.12 concerns the registration of those persons who must
register as an AP of a Commission registrant. 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.'' 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.''
Regulation 3.12(f)(1)(i) permits dual and multiple associations of
a person registered as an AP.\15\ Regulation 3.12(f)(1)(iii) provides
that each sponsor 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. 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.\16\ The provision was intended to address concerns that
permitting dual and multiple associations would lead to 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.\17\
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\15\ Section 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, as
discussed below.
\16\ 57 FR 23136 (June 2, 1992) (the 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).
The Commission subsequently 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.
\17\ 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'').
In connection with the 1992 Amendments, the Commission also
amended Regulation 3.12(f) to require that the new sponsor file with
the NFA a Form 3-R signed by the AP's existing sponsor and that
included, among other things, an acknowledgement by each sponsor
that, in addition to each sponsor's responsibility to supervise the
AP, each sponsor was jointly and severally responsible for the
conduct of the AP with respect to customers common to it and any
other sponsor. 57 FR at 23146. By signing the Form 3-R, each sponsor
would make clear that it was aware of the new association and that
it was jointly and severally responsible for the AP's conduct. Id.
at 23141. As further discussed in Part II.B of this Federal Register
release, the Commission subsequently amended Regulation 3.12(f) to
eliminate the requirement for each sponsor to sign a Form 3-R and to
specifically acknowledge joint and several responsibility therein.
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[[Page 35894]]
However, and, as explained above, the Dodd-Frank Act does not
direct the Commission to provide for--and, thus, the Commission has not
adopted regulations requiring--the registration of APs of SDs and MSPs.
As a result, the provisions of current Regulation 3.12(f)(1), which
apply to a sponsoring registrant with respect to its APs who are
required to register as such, do not apply to SDs and MSPs and their
APs.
II. The Proposed Regulations
A. Proposed Regulations 3.12(f)(5) and 23.22(c)
The Proposal would provide for dual and multiple associations of
persons associated with SDs, MSPs and other Commission registrants
(i.e., FCMs, retail foreign exchange dealers (RFEDs), IBs, CTAs, CPOs,
and LTMs). Specifically, proposed Regulation 3.12(f)(5)(i)(A) would
apply 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; proposed Regulation 3.12(f)(5)(i)(B) would
apply 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 proposed Regulation 23.22(c) would apply
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.\18\ The Proposal
would 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. These proposed regulations are based on the form
and text of current Regulation 3.12(f)(1).\19\
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\18\ 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 current Regulation
3.12(f) do not, by their terms, apply to SDs and MSPs with respect
to their APs (who are not subject to a registration requirement).
\19\ Thus, for example, proposed Regulation 3.12(f)(5)(i)(B)
provides that where an AP of an SD or MSP seeks to register an as 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,
proposed 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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B. Request for Comments
The Commission requests comments on all aspects of the Proposal. In
particular, the Commission is requesting comment on whether it should
adopt a provision (in both Regulation 3.12(f)(5) and 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). These provisions would serve the purpose of putting any
other SD, MSP or other registrant associated with the AP on notice that
it is (or will become) subject to the supervisory and joint and several
responsibility requirements of Regulation 3.12(f) that would be
applicable to it as a result of the regulations proposed herein. Under
current Regulation 3.12(f)(1), which does not address dual and multiple
associations with SDs and MSPs, 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.
Thus, the current regulations provide a mechanism through which
sponsors are put on notice that their registered APs will subject them
to additional supervisory and joint and several responsibility
requirements under Regulation 3.12(f).\20\ 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. Therefore, NFA would not
otherwise be aware of a particular person's current or planned
association with an SD or MSP and would not be in a position to notify
other SDs, MSPs or existing sponsors. To the extent commenters believe
it is necessary to adopt regulations aimed at providing such notice,
the Commission also is seeking comment specifically on how to do so.
One potential mechanism would be to require any SD, MSP or other
Commission registrant seeking to associate with an AP who is also
associated with another SD or MSP to notify the other SD or MSP that
the AP is or intends to become associated with the SD, MSP or other
Commission registrant.
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\20\ See 67 FR 38869 (June 6, 2002). The Commission adopted
Regulation 3.12(f)(1)(ii) in 2002, in connection with other
amendments to Regulation 3.12 to accommodate NFA's implementation of
an online registration system. Prior to that time, a potential
sponsor of an already registered AP was required to file a Form 3-R
that included a certification signed by it and any existing sponsor
acknowledging their supervisory obligations and their joint and
several responsibility with respect to the AP's activities. In
eliminating these requirements, the Commission explained that
continuing to require a signature from each sponsor would result in
unnecessary costs and delays under the new electronic filing system,
and that the acknowledgment was not needed because Commission
regulations make clear that each sponsor is required to supervise
the AP and is jointly and severally responsible for his or her
conduct. Instead, as adopted, Regulation 3.12(f)(1)(ii) requires NFA
to notify existing sponsors of the AP of the application. Id. at
38870-71.
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III. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) \21\ requires Federal
agencies, in promulgating regulations, to consider the impact of those
regulations on small entities. The Commission has previously
established certain definitions of ``small entities'' to be used by the
Commission in evaluating the impact of its rules on small entities in
accordance with the RFA.\22\ The Commission previously has determined
that FCMs, registered CPOs,\23\ 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.\24\ 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.\25\ 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.\26\ The Commission notes that the
Proposal would only impact,
[[Page 35895]]
potentially, registered CTAs and registered IBs,\27\ and the number of
such impacted entities, if any, should likely be very small.\28\
Accordingly, the Chairman, on behalf of the Commission, hereby
certifies pursuant to 5 U.S.C. 605(b) that the Proposal will not have a
significant economic impact on a substantial number of small entities.
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\21\ 5 U.S.C. 601 et seq.
\22\ 47 FR 18618 (Apr. 30, 1982).
\23\ To the extent the Proposal (specifically, proposed
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.
\24\ 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).
\25\ See 77 FR at 2620 (adopting the Final Registration
Regulations).
\26\ See 47 FR at 18619 (discussing CTAs); 48 FR 35248, 35276-77
(Aug. 3, 1983) (discussing IBs).
\27\ 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.
\28\ 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 February 7, 2011, less than three
percent of all registered APs (or less than 1500 APs) were
associated on a dual or multiple basis with Commission registrants.
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B. Paperwork Reduction Act
The Paperwork Reduction Act (PRA) \29\ 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 Proposal would 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. The Proposal contains no provision that would
impose a ``burden'' or ``collection of information'' as those terms are
defined in the PRA.\30\
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\29\ 44 U.S.C. 3501 et seq.
\30\ See 44 U.S.C. 3502(2) and (3).
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C. Cost-Benefit Considerations
In response to the Proposed Registration Regulations, a commenter
requested that the Commission address ``situations in which an
individual conducts swaps-related activity on behalf of more than one
Swap Entity [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.'' The
Proposal addresses that issue, and in the following paragraphs, the
Commission is considering the costs and benefits of the proposal in
accordance with CEA section 15(a).\31\
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\31\ 7 U.S.C. 19(a).
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As described in the text above, the Commission is proposing 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 existing Regulation 3.12(f).
As noted above, existing regulations addressing dual and multiple
associations of APs do not address 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 Proposal include
the same benefits noted by the Commission when it adopted the
supervisory and joint and several responsibility provisions under
current 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 Proposal 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 Proposal will impose any significant, new cost
on SDs or MSPs but, as discussed below, the Commission seeks comment on
the same, including the potential insurance and litigation costs
associated with joint and several responsibility for APs of SDs and
MSPs with dual and multiple associations.
Consideration of Costs and Benefits Relative to the Alternative of Not
Taking Any Action
Under current Commission regulations, SDs and MSPs are not subject
to the joint supervisory and responsibility requirements applicable to
other Commission registrants with respect to the activities of their
APs who have dual or multiple associations.\32\ This current situation
provides a reference point from which to compare the costs and benefits
of the proposed regulations to the alternative of not taking any
action--that is, where SDs and MSPs, though required to register, would
not be subject to the supervisory or joint and several responsibility
provisions under (proposed) Regulation 3.12(f) or Regulation 23.22(c),
as applicable, for the activities of their APs that are also APs of
other SDs, MSPs, or other Commission registrants.\33\ Under such a
scenario, the costs to the public of inaction would, in qualitative
terms, be that: (1) APs of SDs and MSPs that have dual or multiple
associations would not be subject to the same regulatory regime as APs
of other Commission registrants that have dual or multiple
associations; and (2) SDs and MSPs (or other Commission registrants)
employing an AP with dual or multiple associations would not 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). In contrast, the amendment to
Regulation 3.12(f) and the adoption of Regulation 23.22(c) would yield
a substantial if unquantifiable benefit to the public relative to
inaction by preventing 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 the
common customers of the SDs, MSPs and other Commission registrants.
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\32\ As noted above, these requirements, which are set forth in
existing Regulation 3.12(f)(1)(iii), apply to the activities of such
APs with respect to the common customers of the APs' employing
registrants.
\33\ Similarly, and as noted above, these proposed requirements
would apply to the activities of such APs with respect to the common
customers of the APs' employing SDs, MSPs and/or other Commission
registrants.
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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 Proposal 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 registrants. More
specifically, the Proposal will prevent SDs, MSPs and other Commission
registrants from disclaiming responsibility for the activities of their
[[Page 35896]]
APs who have dual and multiple associations.
(2) The efficiency, competitiveness, and financial integrity of the
futures markets.
The Commission does not expect the Proposal 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 Proposal to have an impact on
the market's price discovery functions.
(4) Sound risk management practices.
The Commission does not expect the Proposal 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 Proposal. The Commission specifically requests comment
on its cost and benefit considerations of the Proposal, as discussed
above.
The Commission requests comment on all aspects of its proposed
consideration of costs and benefits, including identification and
assessment of any costs and benefits not discussed above, such as costs
associated with determining if a potential AP is already associated
with another SD, MSP or other Commission registrant. In addition, the
Commission requests that commenters provide data and any other
information or statistics that the commenters relied on to reach any
conclusions on the Commission's proposed considerations of costs and
benefits.
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 proposes to amend
Chapter I of Title 17 of the Code of Federal Regulations as follows:
PART 3--REGISTRATION
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).
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)
of this part.
(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 requirements set forth in Sec. 3.60(b)(2)(i)(A)
and (B) of this part.
(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
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).
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.
[[Page 35897]]
Issued in Washington, DC, on June 11, 2012, by the Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. 2012-14654 Filed 6-14-12; 8:45 am]
BILLING CODE 6351-01-P
Last Updated: June 15, 2012