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No. 32-99 July 30, 1999 |
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On July 28, 1999, Commissioner Thomas Erickson was the keynote luncheon speaker at the FIA's Law & Compliance Section monthly meeting.
On July 23, 1999, the Commission held a
closed meeting to discuss surveillance matters.
On July 29, 1999, the Commission held
a closed meeting to discuss enforcement matters.
On July 30, 1999, the Commission will
hold a closed meeting to discuss surveillance matters.
Release:
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July 23, 1999
Commodity Futures Trading Commission Issues Advisories and
Delegation Order Regarding the Filing and Maintenance of Exchange
Disciplinary or Access Denial Action Notices
Washington, D.C. - The Commodity Futures Trading
Commission (Commission) today issued two Advisories regarding exchange
disciplinary information, and a Notice and Order delegating to the
National Futures Association (NFA) certain responsibilities under
Commission Regulation 9.11 related to the receipt and maintenance of this
information. The advisories reflect the Commission's continued
commitment to minimize regulatory reporting burdens and to recognize
advances in electronic media technology. The Regulation 9.11 Advisory and
Notice and Order eliminate a duplicative reporting obligation while
providing exchanges with a simple, electronic method of reporting.
The Regulation 9.11 Advisory will permit exchanges to forego the
requirement that notices of disciplinary or access denial actions be
provided to the Commission. Instead, exchanges may file these notices
directly with the NFA, either electronically or in writing. All
information from Regulation 9.11 notices will be stored in the Background
Affiliation Status Information center (BASIC), the NFA's database of
disciplinary histories.
The Commission is also publishing a Regulation 3.31 Advisory. It is
intended to eliminate a potential duplicative regulatory reporting
obligation by exempting registrants, and applicants for registrant
status, from the requirement to file a Form 3-R with the Commission, if
the information to be reported on Form 3-R is solely the result of an
exchange disciplinary or access denial action. That filing will be
unnecessary since the NFA processes registration information and already
will be in receipt of such information as a result of exchanges filing
notices of disciplinary or access denial actions directly with the
NFA.
The Commission's two Advisories and Notice and Order will become
effective shortly, upon written notification by the NFA to the Commission
that the NFA is prepared to assume the responsibilities contained in the
Notice and Order. The Advisories and the Notice and Order will be
published in the Federal Register. Copies of the publications
may be obtained by contacting the Commission's Office of the
Secretariat, Three Lafayette Centre, 1155 21st Street, N.W.,
Washington, D.C. 20581, (202) 418-5100, or by accessing the
Commission's website,
http://www.cftc.gov.
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July 23, 1999
Statement of I. Michael Greenberger, Director, Division of Trading and Markets
Washington, D.C. -- The process for the Division of
Trading and Markets to review the applications by foreign exchanges for
placement of screen based terminals in the U.S. will be as follows:
Because of their special circumstances, the following four exchanges
will be reviewed and finalized for possible no-action letters by the
Division as soon as possible but no later than within the next 21 days,
barring unforeseen circumstances and assuming cooperation of the
exchange:
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Thereafter, applications will be processed on a first in, first out
basis to the extent practicable.
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July 27, 1999
CFTC NOTIFIES THE COMMODITY EXCHANGE, INC. DIVISION OF THE NEW
YORK MERCANTILE EXCHANGE OF THE RESULTS OF A RULE ENFORCEMENT
REVIEW
The Commodity Futures Trading Commission (Commission) has notified the
Commodity Exchange, Inc. Division (COMEX) of the New York Mercantile
Exchange of the results of a limited-scope rule enforcement review
completed by the Commission's Division of Trading and Markets
(T&M). The purpose of the review was to evaluate COMEX's trade
practice surveillance and disciplinary programs, and certain aspects of
its audit trail. The target period for the review was July 1, 1997 to
June 30, 1998.
T&M found that COMEX generally maintains adequate trade practice
surveillance and disciplinary programs. T&M also found that COMEX
generally maintains an adequate program for conducting order ticket and
trading card recordkeeping reviews.
COMEX's trade practice investigations are thorough, well-documented,
and generally completed in a timely manner. In addition, COMEX members
generally demonstrate a high level of compliance with respect to order
ticket content requirements. T&M found, however, that although
members generally demonstrate a high level of compliance with a number of
trading card recordkeeping standards, compliance needs to improve
regarding several important requirements.
Accordingly, T&M recommended that COMEX increase its required
trading card compliance level similar to that in place for its order
ticket compliance, and issue a notice to members reminding them of their
trading card responsibilities. In addition, although T&M found
evidence that trading cards are routinely reviewed during trade practice
investigations, several investigation files did not include work papers
documenting the review. Therefore, T&M recommended that COMEX ensure
that these workpapers are included in investigation files.
In regard to COMEX's disciplinary program, disciplinary matters are
promptly referred to a disciplinary committee and findings appear to be
supported by the evidence. During the target period, fines totaling
$115,000 and membership suspensions totaling 370 days were imposed.
However, T&M also found that restitution was not ordered in cases
where customer harm was determined. T&M therefore recommended that
COMEX order restitution in all settlements and disciplinary decisions
where the amount of customer harm can be determined.
COMEX will have 60 days to respond to these and other recommendations
set forth in the report. Copies of the report are available from the
Commission's Office of Public Affairs, Three Lafayette Centre, 1155
21st Street, N.W., Washington, D.C. 20581, (202) 418-5080, or
by accessing the Commission's website at www.cftc.gov.
No Opinions Updates were issued during this period.
On July 22, 1999, the Commission approved the Chicago
Mercantile Exchange's application to trade the Three-Month Eurodollar
FRA futures contract and options on that futures contract (99-205).
On July 22, 1999, the Commission approved the
appointment of David Merrill as Acting General Counsel effective August
1, 1999.
On July 23, 1999, the Commission approved for
publication in theFederal Register a notice seeking comment on
proposed amendments to the Commission's Part 4 Rules regarding
performance data and disclosure for commodity trading advisors.
The Commodity Futures Trading Commission added three systems of records
to be maintained under the Privacy Act: Freedom of Information Act
requests, Privacy Act requests, and requests for Confidential Treatment.
The new systems of records will be effective August 29,
1999, unless the Commission receives comments which would result
in a contrary determination. Vol. 64, No. 138, 07/20/99, p. 38893.
The Commodity Futures Trading Commission advised registrants and
applicants for registrant status that they are relieved of filing a Form
3-R, as required under Commission regulation 3.31, if the information to
be reported is solely the result of an exchange disciplinary or access
denial action. Effective Date: July 23,
1999. Vol. 64, No. 141, 07/23/99, p. 39912.
The Commission delegated to the National Futures Association the duty to
receive and to process exchange disciplinary and access denial action
information, in accordance with procedures established by the Commission.
Effective Date: July 23, 1999.
Vol. 64, No. 141, 07/23/99, p. 39913.
The Commodity Futures Trading Commission issued guidance concerning
alternative methods of compliance with the requirements of Commission
regulation 9.11(a) concerning the disclosure of information to the
Commission by exchanges regarding disciplinary action and access denial
actions. Exchanges may now electronically transmit the required notice to
the National Futures Association through NFA's Background Affiliation
Status Information center (BASIC) system. Effective
Date: July 23, 1999. Vol. 64, No. 141,
07/23/99, pp. 39915-39916.
NOTE:
All Comment Letters must be received by the Commission no later than the closing date specified in the applicable Federal Register release. Any requests for an extension of the comment period must be made in writing - - before the expiration of the comment period - - to the Commission's Office of the Secretariat.
Comment period concerning the Commodity Futures Trading Commission's
proposal to approve automatically certain exchange rule amendments upon
adoption and to require their subsequent submission to the Commission in
a single summary filing, rather than individually as currently mandated
ends, August 16, 1999.
Comment period concerning the three systems added to the Commodity
Futures Trading Commission's systems of records to be maintained
under the Privacy Act ends, August 19, 1999.
In the Matter of Alfred R. Piasio and Donald W. Wilson.
Filed July 21, 1999. The Commission issued its complaint against Piasio
and Wilson on June 24, 1997. The complaint charged respondent Wilson with
offering to enter, entering, or confirming wash sales in violation of the
CEAct and charged respondent Piasio with offering to enter into wash
sales in violation with the CEAct. Respondents filed timely answers and
denied any wrongdoing. After a careful review of the record, it was
determined that the transactions were bona fide sales, not wash sales.
Accordingly, the complaint against respondents Alfred R. Piasio and
Donald W. Wilson was dismissed. Administrative Law Judge, George H.
Painter. CFTC Docket No. 97-9.
Dennis L. Wood v. LFG, L.L.C. Filed July 21, 1999.
After a careful review of the parties' submissions, it was concluded
that complainant had failed to establish any violations causing damages.
Accordingly, this matter was dismissed. Philip V. McGuire, Judgment
Officer. CFTC Docket No. 99-R68.
Robert S. Foo, Trustee for the Robert S. Foo Family Trust v.
Alaron Trading Corporation and Alan Captain. Filed July 22,
1999. The complainant in this action contended that the respondent had
misrepresented how successful the trading would be and had disregarded
complainant's trading guidelines. After a careful review of the
record, it was determined that the misrepresentation claim was without
merit and respondent effectively rebutted allegations of fraud.
Accordingly, the complaint was dismissed. Joel R. Maillie, Judgment
Officer. CFTC Docket No. 99-R006.
Donald Eugene Baker v. Gary Louis Yarusso. Filed July
23, 1999. Donald Baker alleged that Gary Yarusso defrauded him during the
solicitation and trading of his options account with American Futures
Group, and sought to recover $24,634.39 in out-of-pocket losses. Yarusso
denied any violations. After a careful review of the record, it was
concluded that Gary Yarusso had violated the CEAct and that the
violations caused $24,634.39 in damages. Accordingly, Gary Yarusso was
ordered to pay Donald Baker reparations of $24,634.39, plus interest at
4.966% compounded annually from September 19, 1996, to the date of
payment, plus $125 in costs for the filing fee. Philip V. McGuire,
Judgment Officer. CFTC Docket No. 98-R160.
Stephen Briggs v. New York Mercantile Exchange. Filed
July 21, 1999. Stephen Briggs sought reconsideration of the
Commission's order dismissing his unperfected appeal from a final
decision of the New York Mercantile Exchange. For good cause shown, that
order was vacated and Brigg's appeal was reinstated. CFTC Docket No.
98-E-2.
99-26; No-Action; July 7, 1999; The Division of Trading
and Markets issued a no-action position to a registered CTA to permit it
to treat a commodity pool with assets of less than $5,000,000 as an
eligible customer for purposes of bunched orders placed, executed, and
allocated pursuant to Rule 1.35(a-1)(5). The no-action position was
issued based upon representations that: 1) the CTA will employ an
electronic block order allocation system, which uses an average price
methodology, for the allocation of orders executed pursuant to Rule
1.35(a-1)(5) and allocated on a post-execution basis; 2) the CPO of the
commodity pool also acts as the CPO of a pool which meets the assets
requirement and satisfies the definition of a QEP in Rule 4.7; and 3)
participants in the pool are current and former employees of the CTA or
its affiliates or immediate family members of employees of the CTA. [Rule
1.35(a-1)(5) -- Orders Eligible for Post-Execution Allocation.]
(T&M).
99-27; No-Action; Exemption; July 14, 1999; The
Division permitted a CPO to claim relief under Rule 4.7 with respect to a
commodity pool that had both QEP and non-QEP participants based upon,
among others, representation that: 1) 93% of the capital of the
participants in the Partnership was attributable to QEPs; and 2) the
non-QEPs would not participate in investments by the Partnership in
commodity interests, would not share in any profits and losses from the
Partnership's commodity interest trading and would not have any
Partnership assets allocable to them subject to claim by the
Partnership's FCM. While not having non-QEP assets subject to claim
by the FCM might implicate Rule 1.56, based upon such factors as the
purpose of that rule, the nature of the arrangement and the
capitalization of the parties to the arrangement, the Division took a
"no-action" position under Rule. 1.56 with respect to the FCM.
[Rule 4.7 (Exemption) and Rule 1.56 (No-Action)] (T&M).
99-28; No-Action; July 9, 1999; The Division of Trading
and Markets (Division) declined to grant an FCM's no-action request
regarding introducing broker (IB) registration requirements as applied to
grain elevators with which the FCM wished to enter into a fee-splitting
arrangement. Specifically, the FCM wanted to split the flat fee paid by a
customer of the FCM's agricultural marketing service with the grain
elevator that originally referred the customer to the FCM's service.
The agricultural marketing service helped agricultural producers develop
individualized marketing plans for those agricultural products that could
be hedged using exchange-traded futures and options contracts. The
Division noted that given positions set forth in previous no-action and
interpretative letters, the grain elevators, in referring customers to
the FCM for compensation, would be engaged in behavior that constituted
indirect solicitation of customer orders and required them to register as
IBs, even though the users of the market services were under no
obligation to open a trading account with the FCM or use futures or
options in marketing their agricultural products. [Section 4d of the Act]
(T&M).