COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 30
Performance of Certain Functions by National Futures Association With Respect to Those Domestic and Foreign Firms Acting in the Capacity of a Commodity Pool Operator or a Commodity Trading Advisor
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice and Order.
SUMMARY: The Commodity Futures Trading Commission ("Commission") is authorizing the National Futures Association ("NFA") to conduct reviews of disclosure documents required to be filed with the Commission pursuant to Rule 30.6(b)(2) by firms acting in the capacity of commodity pool operators ("CPOs") and commodity trading advisors ("CTAs").(1) Further, the Commission is authorizing NFA to maintain and serve as the official custodian of certain Commission records.
EFFECTIVE DATE: [Insert date 30 days from publication in the Federal Register.]
FOR FURTHER INFORMATION CONTACT: Laurie Plessala Duperier, Special Counsel, or Andrew Chapin, Staff Attorney, Division of Trading and Markets, Commodity Futures Trading Commission, 1155 21st Street, N.W., Washington, D.C. 20581. Telephone: (202) 418-5430.
United States of America
Before the Commodity Futures Trading Commission
Order Authorizing the Performance of Certain Functions With Respect to U.S. and Non-U.S. Firms
I. Authority and Background
Section 8a(10) of the Commodity Exchange Act(2) ("Act") provides that the Commission may authorize any person to perform any portion of the registration functions under the Act, notwithstanding any other provision of law, in accordance with rules adopted by such person and submitted to the Commission for approval or, if applicable, for review pursuant to Section 17(j) of the Act(3) and subject to the provisions of the Act applicable to registrations granted by the Commission. Section 17(o)(1) of the Act(4) provides that the Commission may require NFA to perform Commission registration functions in accordance with the Act and NFA rules. NFA has confirmed its willingness to perform certain functions now performed by the Commission and has provided the Commission with a detailed proposal setting forth standards and procedures to be followed and reports to be generated in administering the functions discussed below.(5)
Upon consideration, the Commission has determined to authorize NFA, effective [EFFECTIVE DATE], to conduct reviews of disclosure documents required to be filed pursuant to Rule 30.6(b)(2) by firms registered or required to be registered as CPOs or CTAs under Part 30, or exempt from registration pursuant to Rule 30.5, and to maintain and serve as the official custodian of records for these disclosure documents.
Compliance with Rule 30.6(b)(2)
Rule 30.6(b)(2)(6) requires CPOs and CTAs registered or required to be registered under Part 30, or exempt from registration pursuant to Rule 30.5, to provide a disclosure document.(7) to prospective U.S. foreign futures and foreign options customers(8) that do not meet the definition of qualified eligible participants and qualified eligible clients, respectively.(9) Rule 30.6(b)(2) also requires CPOs and CTAs to file the disclosure documents with the Commission in accordance with Rule 4.26(d) and 4.36(d), respectively.(10)
Pursuant to an October 6, 1997 delegation order, the Commission authorized NFA to review disclosure documents required to be filed with the Commission by CPOs and CTA pursuant to Rules 4.26(d) and 4.36(d), respectively.(11) In light of NFA's experience in receiving and reviewing disclosure documents filed in accordance with Rules 4.26(d) and 4.36(d), the Commission believes that it is appropriate for NFA to undertake the performance of this function as it relates to Rule 30.6(b)(2). Accordingly, by this Order, NFA is authorized to review all disclosure documents filed pursuant to Rule 30.6(b)(2) by firms registered or required to be registered as CPOs or CTAs under Part 30, or exempt from registration pursuant to Rule 30.5.
II. Conclusion and Order
The Commission has determined, in accordance with Sections 8a(10) and 17(o)(1) of the Act, subject to any restriction by a given jurisdiction that information must pass directly between regulatory authorities, to authorize NFA to perform the following functions:
(1) To conduct reviews of disclosure documents required to be filed with the Commission pursuant to Rule 30.6(b)(2) by firms registered or required to be registered as CPOs or CTAs under Part 30, or exempt from registration pursuant to Rule 30.5; and
(2) To maintain and to serve as the official custodian of records for the disclosure documents required by Rule 30.6(b)(2).
NFA shall perform these functions in accordance with the standards established by the Act and the regulations and Commission orders issued thereunder and shall provide the Commission with such summaries and periodic reports as the Commission may determine are necessary for the effective oversight of this program.
These determinations are based on the Congressional intent expressed in Sections 8a(10) and 17(o) of the Act that the Commission shall have the authority to delegate to NFA any portion of the Commission's registration responsibilities under the Act for purposes of carrying out these responsibilities in the most efficient and cost-effective manner and upon NFA's representations concerning the standards and procedures to be followed and the reports to be generated in administering these functions.
This Order does not, however, authorize NFA to render "no-action" positions, exemptions or interpretations with respect to applicable disclosure, reporting, recordkeeping and registration requirements.
Nothing in this Order or in Sections 8a(10) or 17(o) of the Act shall affect the Commission's authority to review NFA's performance of the Commission functions listed above.
NFA is authorized to perform all functions specified herein until such time as the Commission orders otherwise. Nothing in this Order shall prevent the Commission from exercising the authority delegated herein. NFA may submit to the Commission for decision any specific matters that have been delegated to it, and Commission staff will be available to discuss with NFA staff issues relating to the implementation of this Order. Nothing in this Order affects the applicability of previous orders issued by the Commission under Parts 4 and 30.
Issued in Washington, D.C., on [EFFECTIVE DATE] by the Commission.
Jean A. Webb,
Secretary of the Commission
1 Commission rules referred to herein are found at 17 C.F.R. Ch. I (1998).
2 7 U.S.C. §12a(10) (1998).
3 7 U.S.C. §21(j) (1998).
4 7 U.S.C. §21(o)(1) (1998).
5 Letter from Robert K. Wilmouth, President of NFA, to Brooksley Born, Chairperson of the Commission, dated June 20, 1997.
6 On January 11, 1999, the Commission proposed to amend Rules 30.5 and 30.6. 64 F.R. 1566 (January 11, 1999). The Commission adopted amended rules on [EFFECTIVE DATE].
7 The information contained in the disclosure document must comply with Rule 4.21 for CPOs and Rule 4.31 for CTAs.
8 Pursuant to Rule 30.1(c), "foreign futures or foreign options customer" means "any person located in the United States, its territories or possessions who trades in foreign futures or foreign options, Provided, That an owner or holder of a proprietary account defined in paragraph (y) or §1.3 of this Chapter shall not be deemed to be a foreign futures or foreign options customer within §§30.6 and 30.7 of this part."
9 Qualified eligible participants and qualified eligible clients are defined in Rules 4.7(a)(1)(ii) and 4.7(b)(1)(ii), respectively.
10 Rule 4.26(d)(1) requires that a CPO file a disclosure document with the Commission for each pool that it operates or intends to operate not less than 21 calendar days prior to the date the CPO intends to deliver the document to prospective participants in the pool. Similarly, Rule 4.36(d)(1) requires that a CTA file a disclosure document with the Commission for each trading program that it offers or intends to offer not less than 21 calendar days prior to the date the CTA first intends to deliver the document to a prospective client in the trading program. Further, pursuant to Rules 4.26(d) and 4.36(d), CPOs and CTAs, respectively, must file with the Commission all subsequent amendments to their disclosure documents within 21 calendar days of the date upon which the CPO or CTA first knows or has reason to know of the defect requiring amendment. In addition, CPOs and CTAs may not use their disclosure documents for more than nine months from the effective dates of such documents, in accordance with Rules 4.26(a)(2) and 4.36(a)(2), respectively.
11 62 F.R. 52088 (October 6, 1997).