e9-4740

FR Doc E9-4740[Federal Register: March 5, 2009 (Volume 74, Number 42)]

[Rules and Regulations]

[Page 9568-9570]

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

[DOCID:fr05mr09-3]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 4

RIN 3038-AC 67

Electronic Filing of Disclosure Documents

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

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

is amending its regulations applicable to the filing of Disclosure

Documents by commodity pool operators (CPOs) and commodity trading

advisors (CTAs) with the National Futures Association (NFA). In

response to a petition from NFA, the CFTC is requiring that CPOs and

CTAs be required to file their Disclosure Documents electronically with

NFA (Amendments).

DATES: Effective Date: April 6, 2009.

FOR FURTHER INFORMATION CONTACT: Barbara S. Gold, Associate Director,

Compliance and Registration Section, Division of Clearing and

Intermediary Oversight, Commodity Futures Trading Commission, Three

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

telephone number: (202) 418-5450; facsimile number: (202) 418-5528; and

electronic mail: [email protected]

SUPPLEMENTARY INFORMATION:

I. Background

A. CPO and CTA Disclosure Documents

Part 4 of the Commission's regulations \1\ governs the operations

and activities of CPOs and CTAs. Regulations 4.21 and 4.31 respectively

require each CPO and CTA registered or required to be registered with

the Commission to deliver a Disclosure Document to prospective pool

participants and clients. Regulations 4.24 and 4.25 specify the

informational content of the CPO Disclosure Document, and Regulations

4.34 and 4.35 specify the informational content for the CTA Disclosure

Document. Regulations 4.26 and 4.36 respectively pertain to the use,

amendment and filing of CPO and CTA Disclosure Documents. Specifically,

under Regulations 4.26(d) and 4.36(d), the CPO or CTA must file one

copy of the Disclosure Document, and any supplements and amendments

thereto, with NFA.\2\

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\1\ 17 CFR Part 4 (2008). The Commission's regulations can be

accessed through the CFTC's Web site, www.cftc.gov.

\2\ NFA is a registered futures association pursuant to Section

17 of the Commodity Exchange Act (Act), 7 U.S.C. 21 (2000). The Act

also may be accessed through the CFTC's Web site.

The Commission previously authorized NFA to conduct reviews of

Disclosure Documents filed by CPOs and CTAs pursuant to Regulations

4.26(d) and 4.36(d). See 62 FR 52088 (Oct. 6, 1997).

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B. The Proposing Release

On November 26, 2008, the Commission proposed to amend Regulations

4.26 and 4.36 in order to require that CPOs and CTAs file Disclosure

Documents electronically through NFA's electronic Disclosure Document

filing system (Proposing Release).\3\ This action was in response to a

petition filed by NFA with the Commission (Petition).\4\

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\3\ 73 FR 71968. The Proposing Release may be accessed through

the CFTC's Web site, at http://www.cftc.gov/stellent/groups/public/

@lrfederalregister/documents/file/e8-28177a.pdf.

\4\ NFA filed the Petition with the Commission on July 21, 2008.

The Commission previously authorized NFA to accept notices of

exemptions or exclusions claimed under Part 4 and required that

these notices be filed electronically. See 62 FR 52088 and 72 FR

1658 (Jan. 16, 2007), respectively.

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In the Petition, under ``Supporting Arguments,'' NFA explained that

although it had developed a new Internet-based Disclosure Document

electronic filing system ``that will be significantly less resource

intensive while also streamlining and enhancing the filing process for

registrants,'' \5\ absent an electronic filing requirement these

proposed benefits would not be realized. In the Proposing Release, the

Commission noted also NFA's representations that the system is designed

to be easy and secure; it can be accessed through any public internet

site; and CPOs and CTAs will access the system ``using the same

designated login and password that they currently use for NFA's Online

Registration System.'' \6\ The Commission further explained that:

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\5\ 73 FR at 71968.

\6\ Id.

NFA's process for the electronic filing of Disclosure Documents

will have two components. One of those components will require CPOs

and CTAs to electronically submit their Disclosure Documents, as

well as any amendments and supplements thereto. The other of these

components will require CPOs and CTAs to enter from their Disclosure

Documents certain key information on their operations and activities

into a standardized form accessed through NFA's Web site.\7\

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\7\ The Commission noted that, among other things, this key

information concerns identification of contact persons,

relationships with futures commission merchants or introducing

brokers, and the past performance history and related data for the

offered pool or trading program. 73 FR at 71969 n. 6.

In light of the foregoing, the Commission proposed to amend

Regulations 4.26(d) and 4.36(d) to require that any documents required

to be filed thereunder be filed electronically with NFA, pursuant to

NFA's electronic filing procedures. The Commission emphasized, however,

that the proposed amendments, if adopted, would not impact the delivery

of Disclosure Documents to prospective pool participants and clients,

which CPOs and CTAs could continue to provide through hardcopy

distribution via postal mail or electronically if the intended

recipient consented thereto.\8\

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\8\ 73 FR at 71969. See Regulations 4.21(b) for CPOs and 4.31(b)

for CTAs.

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II. Final Action

A. Responses to the Comments

The Commission received one comment letter, from a committee of a

bar association whose members consist of attorneys who represent CPOs

and CTAs (Committee). The Committee expressed concern that neither the

Proposing Release nor the Petition contained detail on the information

that would be required to be filed concurrent with the filing of the

Disclosure Document or the uses to which that information would be put.

In response, the Commission notes that the Petition states ``the filing

process includes a series of questions that will assist in identifying

the type of filing as well as provide important background information

to assist NFA staff with the analysis of the document itself''--which,

the Commission believes, will be in furtherance of NFA's compliance and

enforcement programs. Moreover, as the Commission previously stated in

the Proposing Release, CPOs and CTAs will be entering information

directly from their Disclosure Documents.\9\ Further,

[[Page 9569]]

the Commission has been advised that NFA staff spoke with NFA's CPO/CTA

Advisory Committee in advance of the filing of the Petition, and the

Advisory Committee was supportive of the electronic filing system for

CPO and CTA Disclosure Documents.

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\9\ 73 FR 71969.

In anticipation of the Commission's action today, on January 22,

2009, NFA presented a web seminar on the electronic Disclosure

Document filing system--which seminar is now available for ``on

demand'' viewing on NFA's Web site, www.nfa.futures.org. Page 7 on

the ``on demand'' document confirms the Commission's previous

statement with the text that:

Before you start, you should have a copy of the disclosure

document you plan to file available since the system will require

you to enter certain information (e.g., performance data, business

relationships) directly from the document you are filing.

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In light of the foregoing, the Commission has determined to adopt

the amendments to Regulations 4.26(d) and 4.36(d) as proposed.

B. Other Action

Also in response to the Petition, and in the absence of any

comments, the Commission has added the word ``each'' before the words

``trading program'' in paragraph (d)(1) of Regulation 4.36 to make that

paragraph read parallel to the phrase ``each trading program'' in

paragraph (d)(2) of Regulation 4.36.\10\

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\10\ See 73 FR 71968 n. 3.

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III. Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) \11\ requires that agencies,

in proposing rules, consider the impact of those rules on small

businesses. The Commission previously has established certain

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

evaluating the impact of its rules on such entities in accordance with

the RFA.\12\ With respect to CPOs, the Commission previously has

determined that a registered CPO is not a small entity for the purpose

of the RFA.\13\ As for CTAs, the Commission previously has stated that

it would evaluate within the context of a particular rule proposal

whether all or some affected CTAs would be considered to be small

entities and, if so, the economic impact on them of the particular

rule.\14\ The Commission believes that the Amendments will not place

any significant economic burdens, whether new or additional, on CPOs

and CTAs who will be affected by them. This is because while the

Amendments will require these CPOs and CTAs to have access to and a

certain degree of technical knowledge to file Disclosure Documents

electronically and to enter the required information, they will access

the system using the same designated login and password that they

currently use for registration purposes and they will be entering the

information directly from their Disclosure Documents. The Commission

did not receive any comments relative to its analysis of the RFA in the

Proposing Release.

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\11\ 5 U.S.C. 601 et seq.

\12\ See 47 FR 18618 (Apr. 30, 1982).

\13\ Id. at 18619.

\14\ Id. at 18620.

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B. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (PRA) \15\ imposes certain

requirements on federal agencies (including the Commission) in

conducting or sponsoring any collection of information as defined by

the PRA. The Amendments change the manner in which CPOs and CTAs file

Disclosure Documents with NFA; they do not affect the substance or

frequency of those filings. The Amendments do, however, authorize the

separate collection from CPOs and CTAs of certain information from the

Disclosure Documents CPOs and CTAs must now file electronically.

Accordingly, pursuant to the PRA, the Commission submitted a copy of

the PRA section of the Proposing Release to the Office of Management

and Budget (OMB) for its review.\16\

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\15\ 44 U.S.C. 3501 et seq.

\16\ See 73 FR 71969 for the PRA section of the Proposing

Release.

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The Commission received one comment on its analysis of the PRA in

the Proposing Release, from the Committee. For the reasons provided in

the Proposing Release and above in this release, the Commission

continues to believe that the Amendments change the manner, but not the

substance or frequency, of the filing of Disclosure Documents by CPOs

and CTAs.

C. Cost-Benefit Analysis

Section 15(a) of the Act \17\ requires the Commission to consider

the costs and benefits of its action before issuing a new regulation

under the Act. By its terms, Section 15(a) does not require the

Commission to quantify the costs and benefits of a new regulation or to

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.

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\17\ 7 U.S.C. 19(a).

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

evaluated in light of five broad areas of market and public concern,

enumerated below. Accordingly, the Commission could in its discretion

give greater weight to any one of the five enumerated areas and could

in its discretion determine that, notwithstanding its costs, a

particular rule 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 did not receive any comments relative to its cost-

benefit analysis in the Proposing Release.

List of Subjects in 17 CFR Part 4

Advertising, Brokers, Commodity futures, Commodity pool operators,

Commodity trading advisors, Consumer protection, Reporting and

recordkeeping requirements.

0

For the reasons presented above, the Commission hereby amends Chapter I

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

PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS

0

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

Authority: 7 U.S.C. 1a, 2, 4, 6b, 6c, 6l, 6m, 6n, 6o, 12a, and

23.

0

2. Revise paragraphs (d)(1) and (2) of Sec. 4.26 to read as follows:

Sec. 4.26 Use, amendment and filing of Disclosure Document.

* * * * *

(d) * * *

(1) The commodity pool operator must electronically file with the

National Futures Association, pursuant to the electronic filing

procedures of the National Futures Association, the Disclosure Document

and, where used, profile document for each pool that it operates or

that it intends to operate not less than 21 calendar days prior to the

date the pool operator first intends to deliver such Document or

documents to a prospective participant in the pool; and

(2) The commodity pool operator must electronically file with the

National Futures Association, pursuant to the electronic filing

procedures of the National Futures Association, the subsequent

amendments to the Disclosure Document and, where used, profile document

for each pool that it operates or that it intends to operate within 21

calendar days of the date upon which the pool operator first knows or

has reason to know of the defect requiring the amendment.

0

3. Revise paragraph (d) of Sec. 4.36 to read as follows:

Sec. 4.36 Use, amendment and filing of Disclosure Document.

* * * * *

(d)(1) The commodity trading advisor must electronically file with

the National Futures Association, pursuant to the electronic filing

procedures of the

[[Page 9570]]

National Futures Association, the Disclosure Document for each trading

program that it offers or that it intends to offer not less than 21

calendar days prior to the date the trading advisor first intends to

deliver the Document to a prospective client in the trading program;

and

(2) The commodity trading advisor must electronically file with the

National Futures Association, pursuant to the electronic filing

procedures of the National Futures Association, the subsequent

amendments to the Disclosure Document for each trading program that it

offers or that it intends to offer within 21 calendar days of the date

upon which the trading advisor first knows or has reason to know of the

defect requiring the amendment.

Issued in Washington, DC on February 27, 2009 by the Commission.

David A. Stawick,

Secretary of the Commission.

[FR Doc. E9-4740 Filed 3-4-09; 8:45 am]

BILLING CODE 6351-01-P

Last Updated: March 5, 2009