Release: #4346-99
For Release: December 3, 1999

CFTC PROPOSES TO EXEMPT CERTAIN COMMODITY TRADING ADVISORS FROM REGISTRATION

Proposed New Rule Would Eliminate Registration Requirement For Distributors of Commodity Trading Advice Through Periodicals, The Internet, and Similar Media

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that it will issue for public comment a proposed rule that would exempt from mandatory registration under the Commodity Exchange Act (CEA) those persons who engage in the business of distributing commodity interest trading advice through media such as periodicals, books, Internet web sites, electronic mail, telephone voice recordings, facsimile services, and non-customized computer software. Under current law, persons advising others about trading commodity futures and options contracts, ordinarily must register with the Commission as commodity trading advisors (CTAs). Although such CTAs would be relieved of the burdens associated with registration, they would continue to be subject to other provisions of the CEA and Commission rules that apply to CTAs, including prohibitions against fraud and deceptive advertising, prohibition against the handling of clients' funds by a CTA, and prescribed disclosures concerning the limitations of hypothetical or simulated commodity trading.


The proposed exemption is designed to eliminate the legal uncertainty that has arisen from recent federal court decisions involving plaintiffs who published standardized commodity trading advice through impersonal media. In these cases, the plaintiffs claimed that the First Amendment protected their right to publish without registration because they did not possess discretionary control over their clients' commodity trading accounts; they did not provide advice tailored to their clients' particular situations; and they had no personal contact with their clients. The proposed rule, which adds a new subdivision (9) to 17 C.F.R. 4.14(a), reflects these considerations.

To qualify for the registration exemption, the CTA may not engage in any of the following activities: (i) directing client accounts; (ii) providing commodity interest trading advice that is tailored to a particular client's circumstances; or (iii) providing such advice through interactive communications with individual clients, such as face-to-face or telephonic conversations.

The CFTC has invited interested persons to submit comments within 60 days. A copy of the Commission's proposed rule can be obtained by contacting the Commission's Office of Secretariat, Three Lafayette Centre, 1155 21st Street, N.W., Washington, D.C., 20581, (202) 418-5100. The Commission also intends to make the proposed rule available in the near future on its website at www.cftc.gov.