2013-07755

Federal Register, Volume 78 Issue 67 (Monday, April 8, 2013)[Federal Register Volume 78, Number 67 (Monday, April 8, 2013)]

[Rules and Regulations]

[Pages 20788-20792]

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

[FR Doc No: 2013-07755]

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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: Final rules.

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SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC)

is adopting regulations to 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.

DATES: Effective June 7, 2013.

FOR FURTHER INFORMATION CONTACT: Israel J. Goodman, Special Counsel, 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]

or [email protected]

SUPPLEMENTARY INFORMATION:

I. Introduction

A. Background

On July 21, 2010, President Obama signed the Dodd-Frank Act.\1\

Section 731 of the Dodd-Frank Act amended the Commodity Exchange Act

(CEA) \2\ 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.\3\

To effectuate the Congressional directive that an SD or MSP apply for

registration in such form and manner as prescribed by the

Commission,\4\ on November 23, 2010, the Commission proposed

regulations to establish a registration process for SDs and MSPs

(Proposed Registration Regulations),\5\ and on January 19, 2012, the

Commission adopted regulations that establish a registration process

for SDs and MSPs (Final Registration Regulations).\6\

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\1\ See Dodd-Frank Wall Street Reform and Consumer Protection

Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010). The text of the

Dodd-Frank Act may be accessed through the Commission's Web site,

http://www.cftc.gov.

\2\ 7 U.S.C. 1 et seq. (2006). The Commission's regulations are

found at 17 CFR Part 1 et seq. (2012). Both the CEA and the

Commission's regulations also may be accessed through the

Commission's Web site.

\3\ CEA Section 4s(a).

\4\ CEA Section 4s(b).

\5\ 75 FR 71379.

\6\ 77 FR 2613. Concurrently, 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).

Subsequently, the Commission issued regulations that further

define the terms ``swap dealer'' and ``major swap participant.'' 77

FR 30596 (May 23, 2012). In this regard, the Commission notes that

pursuant to CEA Section 1a(49)(D), CFTC Regulation 1.3(ggg)(4)

establishes a de minimis exception from the SD definition, thereby

allowing a person who otherwise meets the criteria for being an SD

to engage in a certain amount of swap dealing activity without being

required to register as an SD. If a person exceeds the de minimis

amount of swap dealing at the effective date of the swap definition,

then CFTC Regulation 1.3(ggg)(4)(iii) provides that the person must

register as an SD by no later than two months from the end of the

month in which it exceeded the de minimis threshold, i.e., December

31, 2012. Similarly, the definition of MSP in CFTC Regulation

1.3(hhh)(3) generally requires a person that meets the MSP

definition as a result of its swaps activity in a fiscal quarter to

register as an MSP no later than two months after the end of that

quarter, with the earliest possible date by which the person should

be registered as an MSP being February 28, 2013 (i.e., two months

from the quarter end on December 31, 2012).

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Although APs of other Commission registrants are generally required

to register with the Commission,\7\ APs of SDs and MSPs \8\ are not

required to register as such.\9\ However, an SD or MSP is prohibited

from permitting any

[[Page 20789]]

person associated with it to effect or be involved in effecting swaps

on its behalf if such person is subject to a statutory

disqualification.\10\

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\7\ See, e.g., CEA Section 4k and Commission Regulation 3.12(a).

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.

\8\ 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 Regulation 1.3(aa)(6) for

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 the solicitation or acceptance of swaps (other than in

a clerical or ministerial capacity); or the supervision of any

person or persons so engaged.

\9\ Section 731 did not direct the Commission to adopt

regulations that provide for the registration of APs of SDs and

MSPs, and, thus, the Commission has not done so. See 77 FR at 2613.

\10\ See CEA Section 4s(b)(6) and Regulation 23.22(b).

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B. The Proposed Regulations

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 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 [i.e., an 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.'' \11\ 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.'' \12\

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\11\ Comment letter from the National Futures Association at

page 10 (Jan. 24, 2011).

\12\ 77 FR at 2616.

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Regulation 3.12(f)(1)(i) permits dual and multiple associations of

a person registered as an AP.\13\ Regulation 3.12(f)(1)(iii) provides

that each sponsor \14\ 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.\15\ This joint and several

responsibility provision is intended to prevent 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.\16\ However, because, as noted above, the Commission has not

adopted regulations requiring the registration of APs of SDs and MSPs,

the provisions of Regulation 3.12(f)(1), which apply to a sponsoring

registrant with respect to its APs who are registered or seeking to

register as such, do not apply to SDs and MSPs and their APs.

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\13\ Regulation 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.

\14\ 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.''

\15\ 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. 57 FR 23136

(June 2, 1992) (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).

Subsequently, the Commission 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.

\16\ 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'').

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To address this issue, on June 15, 2012, the Commission proposed

amendments to Regulation 3.12(f) and Regulation 23.22 (Proposal) to

provide that an AP of an SD or MSP may associate with one or more other

SDs, MSPs or other Commission registrants (i.e., FCMs, retail foreign

exchange dealers (RFEDs), IBs, CTAs, CPOs, and LTMs), and that each SD,

MSP or other Commission registrant with whom the AP is associated is

required to supervise the AP and is jointly and severally responsible

for the conduct of the AP with respect to customers common to it and

any other SD, MSP or other Commission registrant with whom the AP is

associated.\17\

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\17\ 77 FR 35892.

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II. Comments on the Proposal

In the Proposal, the Commission requested comment on all aspects of

the Proposal and, in particular, on whether it should adopt a provision

(in both new Regulation 3.12(f)(5) and new 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).\18\

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\18\ Under Regulation 3.12(f)(1), 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. This notification puts sponsors on notice that

their registered APs will subject them to additional supervisory and

joint and several responsibility requirements under Regulation

3.12(f). 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.

More recently (and subsequent to the Proposal), NFA amended NFA

Bylaw 301 to add a new paragraph 301(l) (Eligibility to Conduct

Swaps Activities), which requires NFA Member FCMs, IBs, CPOs and

CTAs and their APs that engage in swaps activity that is subject to

Commission jurisdiction to be approved by NFA as a ``swaps firm'' or

``swaps associated person,'' as applicable. The amendments also

provide that in order to obtain NFA approval as a swaps firm, at

least one of the firm's principals must be registered as an AP and

approved as a swaps associated person. The amendments are intended

to enable NFA to identify entities and individuals that are engaging

in swaps activities. However, these requirements do not apply to

SDs, MSPs or their APs, nor do they apply with respect to APs of an

FCM that is also registered as an SD if the APs do not engage in

swaps activity on behalf of the firm in its capacity as an FCM. See

NFA Notice to Members I-12-24 (Oct. 3, 2012).

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The Commission received one comment letter on the Proposal. The

letter supported the Proposal, stating that:

[The] proposal will help to ensure that SDs, MSPs and other

Commission registrants do not avoid supervision of and

responsibility for the activities of their APs with such dual or

multiple associations; increase transparency of lines of

responsibility and promote accountability thereon; improve internal

consistency with the other Commission regulations pertaining to such

dual or multiple associations; and improve protection for both

market participants and the public by obligating each SD, MSP or

other Commission registrant to supervise its APs who have such dual

or multiple associations.\19\

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\19\ Comment letter from Chris Barnard at page 1 (July 24,

2012).

The comment letter also supported the adoption of a regulation 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. After further considering this issue, the Commission

has determined not to adopt such a regulation. The Commission believes

[[Page 20790]]

that each SD, MSP and other Commission registrant is best positioned to

determine the policies and procedures it will need to implement in

order to determine whether any of its APs are associated with another

SD or MSP.

III. The Final Regulations

A. Regulations 3.12(f)(5) and 23.22(c)

In light of the foregoing, the Commission is adopting as proposed

regulations to provide for dual and multiple associations of persons

associated with SDs, MSPs and other Commission registrants.

Specifically, Regulation 3.12(f)(5)(i)(A) applies 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; Regulation 3.12(f)(5)(i)(B) applies 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

Regulation 23.22(c) applies 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.\20\ The regulations 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. As proposed and as

adopted, the regulations are based on the form and text of current

Regulation 3.12(f)(1).\21\

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\20\ As discussed in the Proposal, 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 Regulation 3.12(f) do not apply to SDs and MSPs with

respect to their APs (who are not subject to a registration

requirement).

\21\ Thus, for example, Regulation 3.12(f)(5)(i)(B) provides

that where an AP of an SD or MSP seeks to register as an 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,

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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IV. Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) \22\ requires federal

agencies, in promulgating regulations, to consider whether those

regulations will have a significant economic impact on a substantial

number of small entities and, if so, to provide a regulatory

flexibility analysis respecting the impact. A regulatory flexibility

analysis or certification typically is required for ``any rule for

which the agency publishes a general notice of proposed rulemaking

pursuant to'' the notice-and-comment provisions of the Administrative

Procedure Act, 5 U.S.C. 553(b).\23\ As discussed in the Proposal, the

Commission has previously established certain definitions of ``small

entities'' to be used by the Commission in evaluating the impact of its

regulations on small entities in accordance with the RFA.\24\ The

Commission previously has determined that FCMs, registered CPOs,\25\

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.\26\

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.\27\ 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.\28\ The

Commission notes that the regulations being published by this Federal

Register release will only impact, potentially, registered CTAs and

registered IBs,\29\ and the number of such impacted entities, if any,

should likely be very small.\30\

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\22\ 5 U.S.C. 601 et seq.

\23\ 5 U.S.C. 601(2), 603, 604 and 605.

\24\ 47 FR 18618 (Apr. 30, 1982).

\25\ To the extent the regulations being published by this

Federal Register release (specifically, new 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.

\26\ 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).

\27\ See 77 FR 2613, 2620 (Jan. 19, 2012) (adopting the Final

Registration Regulations).

\28\ See 47 FR at 18619 (discussing CTAs); 48 FR 35248, 35276-77

(Aug. 3, 1983) (discussing IBs).

\29\ 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.

\30\ 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 October 19, 2012, less than three

percent of all registered APs (or approximately 1500 APs) were

associated on a dual or multiple basis with Commission registrants.

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The Commission did not receive any comments regarding its RFA

analysis in the Proposal. Accordingly, pursuant to 5 U.S.C. 605(b), the

Chairman, on behalf of the Commission, certifies that the regulations

being published today by this Federal Register release will not have a

significant economic impact on a substantial number of small entities.

B. Paperwork Reduction Act

The Paperwork Reduction Act (PRA) \31\ 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 regulations being published by this Federal Register

release 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. As

discussed in the Proposal, the regulations contain no provision that

would impose a ``burden'' or ``collection of information'' as those

terms are defined in the PRA.\32\

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\31\ 44 U.S.C. 3501 et seq.

\32\ 77 FR 35892, 35895 (June 15, 2012).

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The Commission did not receive any comments regarding its PRA

analysis in the Proposal. Accordingly, for purposes of the PRA, the

Chairman, on behalf of the Commission, certifies that the regulations

being published today by this Federal Register release will not impose

any new reporting or recordkeeping requirements.

C. Cost-Benefit Considerations

Section 15(a) of the CEA \33\ requires the Commission to consider

the costs and benefits of its actions before promulgating a regulation

under the CEA or issuing certain orders. Section 15(a) further

specifies that the costs and benefits shall be evaluated in light of

five broad areas of market and public concern: (1) Protection of market

[[Page 20791]]

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. The Commission considers the costs and benefits

resulting from its discretionary determinations with respect to the

section 15(a) factors.

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\33\ 7 U.S.C. 19(a).

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As discussed above, the Commission is adopting regulations 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 Regulation 3.12(f). As noted above,

prior to the adoption of these regulations, no regulations addressed

dual and multiple associations of 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 regulations being adopted by the

Commission include the same benefits noted by the Commission when it

first adopted the supervisory and joint and several responsibility

provisions under 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 regulations being

published by this Federal Register release 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 regulations being adopted will impose any

significant, new cost on SDs or MSPs.

By this rulemaking, APs of SDs and MSPs that have dual or multiple

associations will be subject to the same regulatory regime as APs of

other Commission registrants that have dual or multiple associations,

and SDs and MSPs (or other Commission registrants) employing an AP with

dual or multiple associations will 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). These amendments will yield a substantial if unquantifiable

benefit to the public because they will prevent 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 their common customers.

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 regulations it is

adopting by this Federal Register release 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 registrant. More specifically, the

regulations will prevent SDs, MSPs and other Commission registrants

from disclaiming responsibility for the activities of their APs who

have dual and multiple associations.

(2) The Efficiency, Competitiveness, and Financial Integrity of the

Futures Markets

The Commission does not expect the regulations 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 regulations to have an impact on

the market's price discovery functions.

(4) Sound Risk Management Practices.

The Commission does not expect the regulations 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 regulations.

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 hereby amends

Chapter I of Title 17 of the Code of Federal Regulations as follows:

PART 3--REGISTRATION

0

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).

0

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).

(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

[[Page 20792]]

requirements set forth in Sec. 3.60(b)(2)(i)(A) and (B).

(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

0

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).

0

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.

Issued in Washington, DC, on March 29, 2013, by the Commission.

Christopher J. Kirkpatrick,

Deputy Secretary of the Commission.

[FR Doc. 2013-07755 Filed 4-5-13; 8:45 am]

BILLING CODE 6351-01-P

Last Updated: April 8, 2013