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e9-3551

  • FR Doc E9-3551[Federal Register: February 20, 2009 (Volume 74, Number 33)]

    [Proposed Rules]

    [Page 7838-7843]

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

    [DOCID:fr20fe09-34]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Parts 1, 30, and 140

    RIN 3038-AC72

    Acknowledgment Letters for Customer Funds and Secured Amount

    Funds

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Notice of proposed rulemaking.

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

    ``CFTC'') is proposing to amend its regulations regarding the required

    content of the acknowledgment letter that a registrant must obtain from

    any depository holding its segregated customer funds or funds of

    foreign futures or foreign options customers, and certain technical

    changes.

    DATES: Submit comments on or before March 23, 2009.

    ADDRESSES: You may submit comments, identified by RIN number, by any of

    the following methods:

    Federal eRulemaking Portal: http://www.regulations.gov.

    Follow the instructions for submitting comments.

    Agency Web Site: http://www.cftc.gov. Follow the

    instructions for submitting comments on the Web site.

    E-mail: secretary@cftc.gov. Include the RIN number in the

    subject line of the message.

    Fax: 202-418-5521.

    Mail: David A. Stawick, Secretary of the Commission,

    Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st

    Street, NW., Washington, DC 20581.

    Hand Delivery/Courier: Same as mail above.

    FOR FURTHER INFORMATION CONTACT: Eileen A. Donovan, Special Counsel,

    202-418-5096, edonovan@cftc.gov; Division of Clearing and Intermediary

    Oversight, Commodity Futures Trading Commission, Three Lafayette

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

    SUPPLEMENTARY INFORMATION:

    I. Background

    Regulation 1.20 (17 CFR 1.20) requires futures commission merchants

    (FCMs) that accept customer funds and derivatives clearing

    organizations (DCOs) that accept customer funds from FCMs to segregate

    and separately account for those funds.\1\ Currently, Regulation 1.20

    requires such FCMs and DCOs to obtain from the bank, trust company, FCM

    or DCO holding customer funds in the capacity of a depository (each, a

    ``Depository'') a written acknowledgment that the Depository was

    informed that the customer funds deposited therein are those of

    commodity or option customers and are being held in accordance with the

    provisions of the Commodity Exchange Act (Act) \2\ and CFTC

    [[Page 7839]]

    regulations.\3\ Regulation 1.26 (17 CFR 1.26), which requires FCMs and

    DCOs to segregate and separately account for instruments purchased with

    customer funds, repeats the requirement to obtain an acknowledgment

    letter. FCMs also must obtain a similar written acknowledgment from

    Depositories holding ``secured amount'' funds \4\ required under

    Regulation 30.7 (17 CFR 30.7), which governs the treatment of money,

    securities, and property held for or on behalf of the FCM's foreign

    futures and foreign options customers.

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    \1\ See 17 CFR 1.3(gg) (defining the term ``customer funds'').

    \2\ 7 U.S.C. 1 et seq.

    \3\ 17 CFR Parts 1-199.

    \4\ See 17 CFR 1.3(rr) (defining the term ``foreign futures or

    foreign options secured amount'').

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    The proposed amendments to Regulations 1.20, 1.26, and 30.7 set out

    specific representations that would be required in these acknowledgment

    letters in order to reaffirm and clarify the obligations Depositories

    incur when accepting customer funds or secured amount funds. The

    Commission also is proposing several technical changes to Regulations

    1.20, 1.26, 30.7, and 140.91. The Commission invites public comment on

    all aspects of the proposed regulations.

    II. Discussion of the Proposed Regulations

    A. Regulations 1.20 and 1.26

    The Commission is proposing to add paragraphs (d) and (e) to

    Regulation 1.20 to set out specific representations that Depositories

    would have to include in the acknowledgment letter required by

    paragraphs (a) and (b) of the regulation. Proposed paragraph (d)

    concerns the letter required by paragraph (a), which applies to

    customer funds being held for an FCM by a bank, trust company, DCO or

    another FCM. Proposed paragraph (e) concerns the letter required by

    paragraph (b), which applies to customer funds being held for a DCO by

    a bank or trust company.

    Proposed paragraphs (d)(1)(i) and (e)(1)(i) require the Depository

    to acknowledge that the FCM or DCO, respectively, has established the

    account for the purpose of depositing customer funds. The FCM or DCO

    may have other accounts, in addition to the customer account, with the

    same Depository, and therefore the Depository must recognize that the

    funds being deposited in this particular account belong not to the FCM

    or DCO, but to customers.

    Proposed paragraphs (d)(1)(ii) and (e)(1)(ii) require the

    Depository to acknowledge that the customer funds deposited therein are

    those of commodity or option customers of the FCM, or clearing members

    of the DCO, respectively, and that those funds are to be segregated in

    accordance with the provisions of the Act and Part 1 of the CFTC

    regulations. These provisions would reaffirm the Depository's

    obligation to segregate customer funds from any other funds that the

    Depository may hold on behalf of the FCM or DCO.

    Proposed paragraphs (d)(1)(iii) and (e)(1)(iii) require the

    Depository to acknowledge that the customer funds shall not be subject

    to any right of offset, or lien, for or on account of any indebtedness,

    obligations or liabilities owed by the FCM or DCO, respectively. The

    FCM or DCO may hold other non-customer funds with the Depository that

    do not carry such restrictions.

    Proposed paragraphs (d)(1)(iv) and (e)(1)(iv) require the

    Depository to acknowledge that it must treat the customer funds in

    accordance with the Act and CFTC regulations. These provisions restate

    requirements currently included in paragraphs (a) and (b),

    respectively.

    Proposed paragraphs (d)(1)(v) and (e)(1)(v) require the Depository

    to acknowledge that it must immediately release the customer funds upon

    proper notice and instruction from the FCM or DCO, respectively, or

    from the Commission. The Commission is not proposing specific standards

    for what constitutes ``proper notice.'' This is because reasonable

    actions could vary, depending on the situation. For example, in certain

    circumstances, it may not be possible to expeditiously provide written

    notice, and a telephone call would be sufficient and even preferable.

    The Commission recognizes that the release of funds may be delayed by

    practical considerations--for example, electronic transfers may not be

    possible if the Fedwire is unavailable. But the Depository must make

    every effort to execute the transfer as soon as possible. The transfer

    of customer funds from a segregated account cannot be delayed due to

    concerns about the financial status of the FCM or DCO that deposited

    the funds.

    Proposed paragraphs (d)(1)(vi) and (e)(1)(vi) require the

    Depository to acknowledge that the FCM or DCO has informed the

    Depository that the FCM or DCO will provide the Commission with a copy

    of the written acknowledgment.

    Proposed paragraphs (d)(2) and (e)(2) require the written

    acknowledgment to include the account number for each account covered

    by the acknowledgment. If multiple accounts are covered by a single

    written acknowledgment, the account numbers may be listed on an

    attachment to the written acknowledgment.

    Proposed paragraphs (d)(3) and (e)(3) require that a copy of the

    written acknowledgment be filed with the regional office of the

    Commission with jurisdiction over the state in which the FCM's or DCO's

    principal place of business is located.

    The proposed changes to Regulation 1.26 would affirm that the

    written acknowledgment required for instruments in which customer funds

    are invested is identical to the written acknowledgment required under

    Regulation 1.20 and therefore must meet the requirements set out in

    Regulation 1.20.

    B. Regulation 30.7

    The Commission is proposing to amend Regulation 30.7 to set out

    specific representations that Depositories holding secured amount funds

    would have to include in the acknowledgment letter required by the

    regulation.\5\

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    \5\ The Commission has issued an interpretative statement with

    respect to the secured amount requirement set forth in Regulation

    30.7. See 17 CFR Part 30, App. B.

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    Proposed paragraph (c)(2)(i)(A) requires the Depository to affirm

    that it meets the requirement set out in Regulation 30.7(c)(1).

    Regulation 30.7(c)(1) lists the types of depositories that may accept

    secured amount funds.

    Proposed paragraph (c)(2)(i)(B) requires the Depository to

    acknowledge that the FCM has established the account for the purpose of

    depositing money, securities, or property for or on behalf of customers

    that include, but are not limited to, foreign futures and foreign

    options customers. The FCM may have other accounts, in addition to the

    secured amount account, with the same Depository, and therefore the

    Depository must recognize that the funds being deposited in this

    particular account are obligated not to the FCM but to the FCM's

    foreign futures and foreign options customers.

    Proposed paragraph (c)(2)(i)(C) requires the Depository to

    acknowledge that the money, securities, or property deposited therein

    are held on behalf of foreign futures and foreign options customers of

    the FCM and may not be commingled with the FCM's own funds or any other

    funds that the Depository may hold, in accordance with the provisions

    of the Act and Part 30 of the CFTC regulations. This provision would

    reaffirm the Depository's obligation to keep the money, securities, or

    property held for the FCM's foreign futures and options customers

    separate from any

    [[Page 7840]]

    other funds that the Depository may hold on behalf of the FCM,

    including those customer funds required to be separately accounted for

    and segregated under Section 4d of the Act.\6\

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    \6\ See 17 CFR 30.7(d).

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    Proposed paragraph (c)(2)(i)(D) requires the Depository to

    acknowledge that the money, securities, or property shall not be

    subject to any right of offset, or lien, for or on account of any

    indebtedness, obligations or liabilities owed by the FCM. The FCM may

    hold other funds with the Depository that do not carry such

    restrictions.

    Proposed paragraph (c)(2)(i)(E) requires the Depository to

    acknowledge that it must treat the money, securities, or property in

    accordance with the provisions of the Act and CFTC regulations. Under

    this provision, the Depository must recognize not only the prohibition

    against commingling referenced in proposed paragraph (c)(2)(ii), but

    all of its legal obligations as a holder of customer money, securities,

    or property.

    Proposed paragraph (c)(2)(i)(F) requires the Depository to

    acknowledge that it must release immediately, subject to requirements

    of applicable foreign law,\7\ the money, securities, or property upon

    proper notice and instruction from the FCM or the Commission. The

    Commission is not proposing specific standards for what constitutes

    ``proper notice.'' This is because reasonable actions could vary,

    depending on the situation. For example, in certain circumstances, it

    may not be possible to expeditiously provide written notice, and a

    telephone call would be sufficient and even preferable. The Commission

    recognizes that the release of money, securities, or property may be

    delayed by practical considerations--for example, electronic transfers

    may not be possible if the Fedwire is unavailable. But the Depository

    must make every effort to execute the transfer as soon as possible. The

    transfer cannot be delayed due to concerns about the financial status

    of the FCM that deposited the money, securities, or property.

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    \7\ The Commission notes that under the laws of some foreign

    countries, immediate release of customer funds may not always be

    possible. Regulation 30.6(a) (17 CFR 30.6(a)) requires FCMs to

    furnish customers with a separate written disclosure statement

    containing the language set forth in Regulation 1.55(b) (17 CFR

    1.55(b)). Regulation 1.55(b)(7) states in relevant part:

    No domestic organization regulates the activities of a foreign

    exchange * * * and no domestic regulator has the power to compel

    enforcement of the rules of the foreign exchange or the laws of the

    foreign country. Moreover, such laws or regulations will vary

    depending on the foreign country in which the transaction occurs. *

    * * [F]unds received from customers to margin foreign futures

    transactions may not be provided the same protections as funds

    received to margin futures transactions on domestic exchanges.

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    Proposed paragraph (c)(2)(i)(G) requires the Depository to

    acknowledge that the FCM has informed the Depository that the FCM will

    provide the Commission with a copy of the written acknowledgment.

    Proposed paragraph (c)(2)(ii) requires the written acknowledgment

    to include the account number for each account covered by the

    acknowledgment. If multiple accounts are covered by a single written

    acknowledgment, the account numbers may be listed on an attachment to

    the written acknowledgment.

    Proposed paragraph (c)(2)(iii) requires the FCM to file a copy of

    the written acknowledgment with the regional office of the Commission

    with jurisdiction over the state in which the FCM's principal place of

    business is located.

    C. Technical Amendments

    Regulation 1.20(a) imposes upon ``[e]ach registrant'' the

    requirement to obtain and retain a written acknowledgment when customer

    funds are deposited with ``any bank, trust company, clearing

    organization, or another futures commission merchant.'' Regulation

    1.20(a) applies to FCMs, as distinguished from Regulation 1.20(b),

    which applies to DCOs. Therefore, the Commission proposes to substitute

    the term ``futures commission merchant'' for the term ``registrant'' to

    more accurately reflect the intent and meaning of Regulation 1.20(a).

    In connection with this, the Commission further proposes to insert the

    word ``other'' before the term ``futures commission merchant'' that

    appears subsequently in the same sentence, to distinguish between the

    FCM holding the funds of its own customers and an FCM holding customer

    funds of another FCM.

    Regulations 1.20, 1.26, and 30.7 currently require that

    acknowledgment letters be retained for the period specified in

    Regulation 1.31, which applies to all recordkeeping required by the Act

    and CFTC regulations. Regulation 1.31 requires records to be kept for

    five years and to be readily accessible for the first two years of that

    five-year period. The proposed revisions would make clear that an

    acknowledgment letter is to be kept readily accessible for as long as

    the account remains open and that the retention requirements that would

    otherwise apply under Regulation 1.31 would only take effect once the

    account has been closed. For example, if the account remains open for

    ten years, the letter must be kept readily accessible for twelve years

    (the ten years during which the account is open plus the two years

    required by Regulation 1.31) and then for an additional three years,

    also as required by Regulation 1.31.

    Regulations 1.20 and 1.26 use the term ``clearing organization'' to

    describe an entity that performs clearing functions. The Act, as

    amended by the Commodity Futures Modernization Act of 2000,\8\ now

    provides that a clearing organization for a contract market must

    register as a ``derivatives clearing organization.'' \9\ To be

    consistent with the Act and other CFTC regulations, the Commission

    proposes to replace the term ``clearing organization,'' wherever it

    appears in Regulations 1.20 and 1.26, with the term ``derivatives

    clearing organization.''

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    \8\ Appendix E of Public Law 106-554, 114 Stat. 2763 (2000).

    \9\ See Section 5b of the Act, 7 U.S.C. 7a-1. See also Section

    1a(9) of the Act, 7 U.S.C. 1a(9) (defining the term ``derivatives

    clearing organization'').

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    Finally, the Commission also is proposing technical amendments to

    Regulation 140.91 to explicitly delegate to the Director of the

    Division of Clearing and Intermediary Oversight the authority to

    perform certain functions that are reserved to the Commission under the

    proposed changes to Regulations 1.20 and 30.7. Thus, for example, the

    Director of the Division of Clearing and Intermediary Oversight would

    have delegated authority to instruct the Depository to release customer

    funds or secured amount funds.

    D. Proposed Effective Date

    FCMs and DCOs will need to obtain new acknowledgment letters that

    comply with the proposed regulations before the final regulations take

    effect. The Commission recognizes the need for time to obtain the

    letters; therefore, the proposed effective date of the amendments to

    Regulations 1.20, 1.26, and 30.7 is 180 days from the date of

    publication of the final regulations in the Federal Register.

    III. Related Matters

    A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') \10\ requires Federal

    agencies, in promulgating regulations, to consider the impact of those

    regulations on small businesses. The amendments adopted herein will

    affect FCMs and DCOs. The Commission has previously established certain

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

    [[Page 7841]]

    evaluating the impact of its regulations on small entities in

    accordance with the RFA.\11\ The Commission has previously determined

    that FCMs \12\ and DCOs \13\ are not small entities for the purpose of

    the RFA. Accordingly, pursuant to 5 U.S.C. 605(b), the Acting Chairman,

    on behalf of the Commission, certifies that the proposed regulations

    will not have a significant economic impact on a substantial number of

    small entities.

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    \10\ 5 U.S.C. 601 et seq.

    \11\ 47 FR 18618 (Apr. 30, 1982).

    \12\ Id. at 18619.

    \13\ 66 FR 45604, 45609 (Aug. 29, 2001).

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    B. Paperwork Reduction Act

    The Paperwork Reduction Act (``PRA'') \14\ imposes certain

    requirements on Federal agencies in connection with their conducting or

    sponsoring any collection of information as defined by the PRA. The

    regulations to be amended under this proposal are part of an approved

    collection of information (OMB Control No. 3038-0024). The proposed

    amendments would not result in any material modification to this

    approved collection. Accordingly, for purposes of the PRA, the

    Commission certifies that these proposed amendments, if promulgated in

    final form, would not impose any new reporting or recordkeeping

    requirements.

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    \14\ 44 U.S.C. 3501 et seq.

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    C. Cost-Benefit Analysis

    Section 15(a) of the Act requires that the Commission, before

    promulgating a regulation under the Act or issuing an order, consider

    the costs and benefits of its action. By its terms, Section 15(a) does

    not require the Commission to quantify the costs and benefits of a new

    regulation or 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.

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

    evaluated in light of the following considerations: (1) Protection of

    market 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. Accordingly, the Commission could, in its discretion,

    give greater weight to any one of the five considerations and could, in

    its discretion, determine that, notwithstanding its costs, a particular

    regulation 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 has evaluated the costs and benefits of the proposed

    regulations in light of the specific considerations identified in

    Section 15(a) of the Act, as follows:

    1. Protection of market participants and the public. The proposed

    regulations would benefit FCMs and DCOs, as well as customers of the

    futures and options markets, by reaffirming the legal obligation of

    Depositories holding customer funds or secured amount funds to treat

    those funds in accordance with the requirements of the Act and CFTC

    regulations.

    2. Efficiency and competition. The proposed regulations are not

    expected to have an effect on efficiency or competition.

    3. Financial integrity of futures markets and price discovery. The

    proposed regulations would enhance and strengthen the protection of

    customer funds and secured amount funds, thus contributing to the

    financial integrity of the futures and options markets as a whole.

    This, in turn, would further support the price discovery and risk

    transfer functions of such markets.

    4. Sound risk management practices. The proposed regulations would

    reinforce the sound risk management practices already required of FCMs

    and DCOs holding customer funds or secured amount funds.

    5. Other public considerations. Requiring specific representations

    in a Depository's written acknowledgment would reduce the likelihood

    that the Depository would misinterpret its obligations in connection

    with the safekeeping and administration of customer funds and secured

    amount funds.

    Accordingly, after considering the five factors enumerated in the

    Act, the Commission has determined to propose the regulations set forth

    below.

    List of Subjects

    17 CFR Parts 1 and 30

    Commodity futures, Consumer protection.

    17 CFR Part 140

    Authority delegations (Government agencies), Conflict of interests,

    Organization and functions (Government agencies).

    For the reasons stated in the preamble, the Commission proposes to

    amend 17 CFR parts 1, 30, and 140 as follows:

    PART 1--GENERAL REGULATIONS

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

    Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 6h,

    6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c, 13a,

    13a-1, 16, 16a, 19, 21, 23, and 24, as amended by the Commodity

    Futures Modernization Act of 2000, Appendix E of Pub. L. 106-554,

    114 Stat. 2763 (2000).

    2. Revise Sec. 1.20 to read as follows:

    Sec. 1.20 Customer funds to be segregated and separately accounted

    for.

    (a) All customer funds shall be separately accounted for and

    segregated as belonging to commodity or option customers. Such customer

    funds when deposited with any bank, trust company, derivatives clearing

    organization or another futures commission merchant shall be deposited

    under an account name which clearly identifies them as such and shows

    that they are segregated as required by the Act and this part. Each

    futures commission merchant shall obtain and maintain readily

    accessible in its files, for as long as the account remains open, and

    thereafter for the period provided in Sec. 1.31, a written

    acknowledgment from such bank, trust company, derivatives clearing

    organization, or other futures commission merchant, in accordance with

    the requirements of paragraph (d) of this section: Provided, however,

    that an acknowledgment need not be obtained from a derivatives clearing

    organization that has adopted and submitted to the Commission rules

    that provide for the segregation as customer funds, in accordance with

    all relevant provisions of the Act and the rules and orders promulgated

    thereunder, of all funds held on behalf of customers. Under no

    circumstances shall any portion of customer funds be obligated to a

    derivatives clearing organization, any member of a contract market, a

    futures commission merchant, or any depository except to purchase,

    margin, guarantee, secure, transfer, adjust or settle trades, contracts

    or commodity option transactions of commodity or option customers. No

    person, including any derivatives clearing organization or any

    depository, that has received customer funds for deposit in a

    segregated account, as provided in this section, may hold, dispose of,

    or use any such funds as belonging to any person other than the option

    or commodity customers of the futures commission merchant which

    deposited such funds.

    (b) All customer funds received by a derivatives clearing

    organization from a member of the derivatives clearing

    [[Page 7842]]

    organization to purchase, margin, guarantee, secure or settle the

    trades, contracts or commodity options of the clearing member's

    commodity or option customers and all money accruing to such commodity

    or option customers as the result of trades, contracts or commodity

    options so carried shall be separately accounted for and segregated as

    belonging to such commodity or option customers, and a derivatives

    clearing organization shall not hold, use or dispose of such customer

    funds except as belonging to such commodity or option customers. Such

    customer funds when deposited in a bank or trust company shall be

    deposited under an account name which clearly shows that they are the

    customer funds of the commodity or option customers of clearing

    members, segregated as required by the Act and these regulations. The

    derivatives clearing organization shall obtain and maintain readily

    accessible in its files, for as long as the account remains open, and

    thereafter for the period provided in Sec. 1.31, a written

    acknowledgment from such bank or trust company, in accordance with the

    requirements of paragraph (e) of this section.

    (c) Each futures commission merchant shall treat and deal with the

    customer funds of a commodity customer or of an option customer as

    belonging to such commodity or option customer. All customer funds

    shall be separately accounted for, and shall not be commingled with the

    money, securities or property of a futures commission merchant or of

    any other person, or be used to secure or guarantee the trades,

    contracts or commodity options, or to secure or extend the credit, of

    any person other than the one for whom the same are held: Provided,

    however, That customer funds treated as belonging to the commodity or

    option customers of a futures commission merchant may for convenience

    be commingled and deposited in the same account or accounts with any

    bank or trust company, with another person registered as a futures

    commission merchant, or with a derivatives clearing organization, and

    that such share thereof as in the normal course of business is

    necessary to purchase, margin, guarantee, secure, transfer, adjust, or

    settle the trades, contracts or commodity options of such commodity or

    option customers or resulting market positions, with the derivatives

    clearing organization or with any other person registered as a futures

    commission merchant, may be withdrawn and applied to such purposes,

    including the payment of premiums to option grantors, commissions,

    brokerage, interest, taxes, storage and other fees and charges,

    lawfully accruing in connection with such trades, contracts or

    commodity options: Provided, further, That customer funds may be

    invested in instruments described in Sec. 1.25.

    (d)(1) The written acknowledgment made by a bank, trust company,

    derivatives clearing organization or other futures commission merchant,

    as required under paragraph (a) of this section, shall include the

    following representations:

    (i) That the futures commission merchant has established the

    account for the purpose of depositing customer funds;

    (ii) That the customer funds deposited therein are those of

    commodity or option customers of the futures commission merchant and

    shall be segregated from the futures commission merchant's own funds in

    accordance with the provisions of the Act and this part;

    (iii) That the customer funds shall not be subject to any right of

    offset, or lien, for or on account of any indebtedness, obligations or

    liabilities owed by the futures commission merchant;

    (iv) That the customer funds shall be treated in accordance with

    the provisions of the Act and Commission regulations;

    (v) That the customer funds shall be released immediately upon

    proper notice and instruction from the futures commission merchant or

    the Commission; and

    (vi) That the futures commission merchant has informed the bank,

    trust company, derivatives clearing organization, or other futures

    commission merchant that the futures commission merchant will provide

    the Commission with a copy of the written acknowledgment.

    (2) The written acknowledgment shall include the account number for

    each account covered by the acknowledgment.

    (3) The futures commission merchant shall file a copy of the

    written acknowledgment with the regional office of the Commission with

    jurisdiction over the state in which the futures commission merchant's

    principal place of business is located.

    (e)(1) The written acknowledgment made by a bank or trust company,

    as required under paragraph (b) of this section, shall include the

    following representations:

    (i) That the derivatives clearing organization has established the

    account for the purpose of depositing customer funds;

    (ii) That the customer funds deposited therein are those of

    commodity or option customers of clearing members and shall be

    segregated from the derivatives clearing organization's own funds in

    accordance with the provisions of the Act and this part;

    (iii) That the customer funds shall not be subject to any right of

    offset, or lien, for or on account of any indebtedness, obligations or

    liabilities owed by the derivatives clearing organization;

    (iv) That the customer funds shall be treated in accordance with

    the provisions of the Act and Commission regulations;

    (v) That the customer funds shall be released immediately upon

    proper notice and instruction from the derivatives clearing

    organization or the Commission; and

    (vi) That the derivatives clearing organization has informed the

    bank or trust company that it will provide the Commission with a copy

    of the written acknowledgment.

    (2) The written acknowledgment shall include the account number for

    each account covered by the acknowledgment.

    (3) The derivatives clearing organization shall file a copy of the

    written acknowledgment with the regional office of the Commission with

    jurisdiction over the state in which the derivatives clearing

    organization's principal place of business is located.

    3. Revise Sec. 1.26 to read as follows:

    Sec. 1.26 Deposit of instruments purchased with customer funds.

    (a) Each futures commission merchant who invests customer funds in

    instruments described in Sec. 1.25 shall separately account for such

    instruments and segregate such instruments as belonging to such

    commodity or option customers. Such instruments, when deposited with a

    bank, trust company, derivatives clearing organization or another

    futures commission merchant, shall be deposited under an account name

    which clearly shows that they belong to commodity or option customers

    and are segregated as required by the Act and this part. Each futures

    commission merchant upon opening such an account shall obtain and

    maintain readily accessible in its files, for as long as the account

    remains open, and thereafter for the period provided in Sec. 1.31, a

    written acknowledgment from such bank, trust company, derivatives

    clearing organization or other futures commission merchant, in

    accordance with the requirements of paragraph (d) of Sec. 1.20:

    Provided, however, that an acknowledgment need not be obtained

    [[Page 7843]]

    from a derivatives clearing organization that has adopted and submitted

    to the Commission rules that provide for the segregation as customer

    funds, in accordance with all relevant provisions of the Act and the

    rules and orders promulgated thereunder, of all funds held on behalf of

    customers and all instruments purchased with customer funds. Such bank,

    trust company, derivatives clearing organization or other futures

    commission merchant shall allow inspection of such instruments at any

    reasonable time by representatives of the Commission.

    (b) Each derivatives clearing organization which invests money

    belonging or accruing to commodity or option customers of its clearing

    members in instruments described in Sec. 1.25 shall separately account

    for such instruments and segregate such instruments as belonging to

    such commodity or option customers. Such instruments, when deposited

    with a bank or trust company, shall be deposited under an account name

    which will clearly show that they belong to commodity or option

    customers and are segregated as required by the Act and this part. Each

    derivatives clearing organization upon opening such an account shall

    obtain and maintain readily accessible in its files, for as long as the

    account remains open, and thereafter for the period provided in Sec.

    1.31, a written acknowledgment from such bank or trust company, in

    accordance with the requirements of paragraph (e) of Sec. 1.20. Such

    bank or trust company shall allow inspection of such instruments at any

    reasonable time by representatives of the Commission.

    PART 30--FOREIGN FUTURES AND OPTIONS TRANSACTIONS

    4. The authority citation for part 30 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 6, 6c, and 12a, unless otherwise

    noted.

    5. Revise paragraph (c)(2) of Sec. 30.7 to read as follows:

    Sec. 30.7 Treatment of foreign futures or foreign options secured

    amount.

    * * * * *

    (c) * * *

    (2)(i) Each futures commission merchant must obtain and maintain

    readily accessible in its files, for as long as the account remains

    open, and thereafter for the period provided in Sec. 1.31, a written

    acknowledgment from such depository that shall include the following

    representations:

    (A) That the depository meets the requirement set out in Sec.

    30.7(c)(1);

    (B) That the futures commission merchant has established the

    account for the purpose of depositing money, securities, or property

    for or on behalf of customers that include, but are not limited to,

    foreign futures and foreign options customers;

    (C) That the money, securities, or property deposited therein are

    held for or on behalf of customers that include, but are not limited

    to, foreign futures and foreign options customers of the futures

    commission merchant and may not be commingled with the futures

    commission merchant's own funds or any other funds that the depository

    may hold, in accordance with the provisions of the Act and this part;

    (D) That the money, securities, or property shall not be subject to

    any right of offset, or lien, for or on account of any indebtedness,

    obligations or liabilities owed by the futures commission merchant;

    (E) That the money, securities, or property shall be treated in

    accordance with the provisions of the Act and Commission regulations;

    (F) That the money, securities, or property shall be released

    immediately, subject to requirements of applicable foreign law, upon

    proper notice and instruction from the futures commission merchant or

    the Commission; and

    (G) That the futures commission merchant has informed the

    depository that the futures commission merchant will provide the

    Commission with a copy of the written acknowledgment.

    (ii) The written acknowledgment shall include the account number

    for each account covered by the acknowledgment.

    (iii) The futures commission merchant shall file a copy of the

    written acknowledgment with the regional office of the Commission with

    jurisdiction over the state in which the futures commission merchant's

    principal place of business is located.

    * * * * *

    PART 140--ORGANIZATION, FUNCTIONS, AND PROCEDURES OF THE COMMISSION

    6. The authority citation for part 140 continues to read as

    follows:

    Authority: 7 U.S.C. 2 and 12a.

    7. In Sec. 140.91, redesignate paragraph (a)(8) as paragraph

    (a)(10) and paragraph (a)(7) as paragraph (a)(8); and add new

    paragraphs (a)(7) and (a)(9) to read as follows:

    Sec. 140.91 Delegation of authority to the Director of the Division

    of Clearing and Intermediary Oversight.

    (a) * * *

    (7) All functions reserved to the Commission in Sec. 1.20 of this

    chapter.

    * * * * *

    (9) All functions reserved to the Commission in Sec. 30.7 of this

    chapter.

    * * * * *

    Issued in Washington, DC, on February 13, 2009 by the

    Commission.

    David A. Stawick,

    Secretary of the Commission.

    [FR Doc. E9-3551 Filed 2-19-09; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: February 20, 2009



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