e9-3551

FR Doc E9-3551[Federal Register: February 20, 2009 (Volume 74, Number 33)]

[Proposed Rules]

[Page 7838-7843]

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

[DOCID:fr20fe09-34]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 1, 30, and 140

RIN 3038-AC72

Acknowledgment Letters for Customer Funds and Secured Amount

Funds

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or

``CFTC'') is proposing to amend its regulations regarding the required

content of the acknowledgment letter that a registrant must obtain from

any depository holding its segregated customer funds or funds of

foreign futures or foreign options customers, and certain technical

changes.

DATES: Submit comments on or before March 23, 2009.

ADDRESSES: You may submit comments, identified by RIN number, by any of

the following methods:

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.

Agency Web Site: http://www.cftc.gov. Follow the

instructions for submitting comments on the Web site.

E-mail: [email protected] Include the RIN number in the

subject line of the message.

Fax: 202-418-5521.

Mail: David A. Stawick, Secretary of the Commission,

Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st

Street, NW., Washington, DC 20581.

Hand Delivery/Courier: Same as mail above.

FOR FURTHER INFORMATION CONTACT: Eileen A. Donovan, Special Counsel,

202-418-5096, [email protected]; Division of Clearing and Intermediary

Oversight, Commodity Futures Trading Commission, Three Lafayette

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

SUPPLEMENTARY INFORMATION:

I. Background

Regulation 1.20 (17 CFR 1.20) requires futures commission merchants

(FCMs) that accept customer funds and derivatives clearing

organizations (DCOs) that accept customer funds from FCMs to segregate

and separately account for those funds.\1\ Currently, Regulation 1.20

requires such FCMs and DCOs to obtain from the bank, trust company, FCM

or DCO holding customer funds in the capacity of a depository (each, a

``Depository'') a written acknowledgment that the Depository was

informed that the customer funds deposited therein are those of

commodity or option customers and are being held in accordance with the

provisions of the Commodity Exchange Act (Act) \2\ and CFTC

[[Page 7839]]

regulations.\3\ Regulation 1.26 (17 CFR 1.26), which requires FCMs and

DCOs to segregate and separately account for instruments purchased with

customer funds, repeats the requirement to obtain an acknowledgment

letter. FCMs also must obtain a similar written acknowledgment from

Depositories holding ``secured amount'' funds \4\ required under

Regulation 30.7 (17 CFR 30.7), which governs the treatment of money,

securities, and property held for or on behalf of the FCM's foreign

futures and foreign options customers.

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\1\ See 17 CFR 1.3(gg) (defining the term ``customer funds'').

\2\ 7 U.S.C. 1 et seq.

\3\ 17 CFR Parts 1-199.

\4\ See 17 CFR 1.3(rr) (defining the term ``foreign futures or

foreign options secured amount'').

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The proposed amendments to Regulations 1.20, 1.26, and 30.7 set out

specific representations that would be required in these acknowledgment

letters in order to reaffirm and clarify the obligations Depositories

incur when accepting customer funds or secured amount funds. The

Commission also is proposing several technical changes to Regulations

1.20, 1.26, 30.7, and 140.91. The Commission invites public comment on

all aspects of the proposed regulations.

II. Discussion of the Proposed Regulations

A. Regulations 1.20 and 1.26

The Commission is proposing to add paragraphs (d) and (e) to

Regulation 1.20 to set out specific representations that Depositories

would have to include in the acknowledgment letter required by

paragraphs (a) and (b) of the regulation. Proposed paragraph (d)

concerns the letter required by paragraph (a), which applies to

customer funds being held for an FCM by a bank, trust company, DCO or

another FCM. Proposed paragraph (e) concerns the letter required by

paragraph (b), which applies to customer funds being held for a DCO by

a bank or trust company.

Proposed paragraphs (d)(1)(i) and (e)(1)(i) require the Depository

to acknowledge that the FCM or DCO, respectively, has established the

account for the purpose of depositing customer funds. The FCM or DCO

may have other accounts, in addition to the customer account, with the

same Depository, and therefore the Depository must recognize that the

funds being deposited in this particular account belong not to the FCM

or DCO, but to customers.

Proposed paragraphs (d)(1)(ii) and (e)(1)(ii) require the

Depository to acknowledge that the customer funds deposited therein are

those of commodity or option customers of the FCM, or clearing members

of the DCO, respectively, and that those funds are to be segregated in

accordance with the provisions of the Act and Part 1 of the CFTC

regulations. These provisions would reaffirm the Depository's

obligation to segregate customer funds from any other funds that the

Depository may hold on behalf of the FCM or DCO.

Proposed paragraphs (d)(1)(iii) and (e)(1)(iii) require the

Depository to acknowledge that the customer funds shall not be subject

to any right of offset, or lien, for or on account of any indebtedness,

obligations or liabilities owed by the FCM or DCO, respectively. The

FCM or DCO may hold other non-customer funds with the Depository that

do not carry such restrictions.

Proposed paragraphs (d)(1)(iv) and (e)(1)(iv) require the

Depository to acknowledge that it must treat the customer funds in

accordance with the Act and CFTC regulations. These provisions restate

requirements currently included in paragraphs (a) and (b),

respectively.

Proposed paragraphs (d)(1)(v) and (e)(1)(v) require the Depository

to acknowledge that it must immediately release the customer funds upon

proper notice and instruction from the FCM or DCO, respectively, or

from the Commission. The Commission is not proposing specific standards

for what constitutes ``proper notice.'' This is because reasonable

actions could vary, depending on the situation. For example, in certain

circumstances, it may not be possible to expeditiously provide written

notice, and a telephone call would be sufficient and even preferable.

The Commission recognizes that the release of funds may be delayed by

practical considerations--for example, electronic transfers may not be

possible if the Fedwire is unavailable. But the Depository must make

every effort to execute the transfer as soon as possible. The transfer

of customer funds from a segregated account cannot be delayed due to

concerns about the financial status of the FCM or DCO that deposited

the funds.

Proposed paragraphs (d)(1)(vi) and (e)(1)(vi) require the

Depository to acknowledge that the FCM or DCO has informed the

Depository that the FCM or DCO will provide the Commission with a copy

of the written acknowledgment.

Proposed paragraphs (d)(2) and (e)(2) require the written

acknowledgment to include the account number for each account covered

by the acknowledgment. If multiple accounts are covered by a single

written acknowledgment, the account numbers may be listed on an

attachment to the written acknowledgment.

Proposed paragraphs (d)(3) and (e)(3) require that a copy of the

written acknowledgment be filed with the regional office of the

Commission with jurisdiction over the state in which the FCM's or DCO's

principal place of business is located.

The proposed changes to Regulation 1.26 would affirm that the

written acknowledgment required for instruments in which customer funds

are invested is identical to the written acknowledgment required under

Regulation 1.20 and therefore must meet the requirements set out in

Regulation 1.20.

B. Regulation 30.7

The Commission is proposing to amend Regulation 30.7 to set out

specific representations that Depositories holding secured amount funds

would have to include in the acknowledgment letter required by the

regulation.\5\

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\5\ The Commission has issued an interpretative statement with

respect to the secured amount requirement set forth in Regulation

30.7. See 17 CFR Part 30, App. B.

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Proposed paragraph (c)(2)(i)(A) requires the Depository to affirm

that it meets the requirement set out in Regulation 30.7(c)(1).

Regulation 30.7(c)(1) lists the types of depositories that may accept

secured amount funds.

Proposed paragraph (c)(2)(i)(B) requires the Depository to

acknowledge that the FCM has established the account for the purpose of

depositing money, securities, or property for or on behalf of customers

that include, but are not limited to, foreign futures and foreign

options customers. The FCM may have other accounts, in addition to the

secured amount account, with the same Depository, and therefore the

Depository must recognize that the funds being deposited in this

particular account are obligated not to the FCM but to the FCM's

foreign futures and foreign options customers.

Proposed paragraph (c)(2)(i)(C) requires the Depository to

acknowledge that the money, securities, or property deposited therein

are held on behalf of foreign futures and foreign options customers of

the FCM and may not be commingled with the FCM's own funds or any other

funds that the Depository may hold, in accordance with the provisions

of the Act and Part 30 of the CFTC regulations. This provision would

reaffirm the Depository's obligation to keep the money, securities, or

property held for the FCM's foreign futures and options customers

separate from any

[[Page 7840]]

other funds that the Depository may hold on behalf of the FCM,

including those customer funds required to be separately accounted for

and segregated under Section 4d of the Act.\6\

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\6\ See 17 CFR 30.7(d).

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Proposed paragraph (c)(2)(i)(D) requires the Depository to

acknowledge that the money, securities, or property shall not be

subject to any right of offset, or lien, for or on account of any

indebtedness, obligations or liabilities owed by the FCM. The FCM may

hold other funds with the Depository that do not carry such

restrictions.

Proposed paragraph (c)(2)(i)(E) requires the Depository to

acknowledge that it must treat the money, securities, or property in

accordance with the provisions of the Act and CFTC regulations. Under

this provision, the Depository must recognize not only the prohibition

against commingling referenced in proposed paragraph (c)(2)(ii), but

all of its legal obligations as a holder of customer money, securities,

or property.

Proposed paragraph (c)(2)(i)(F) requires the Depository to

acknowledge that it must release immediately, subject to requirements

of applicable foreign law,\7\ the money, securities, or property upon

proper notice and instruction from the FCM or the Commission. The

Commission is not proposing specific standards for what constitutes

``proper notice.'' This is because reasonable actions could vary,

depending on the situation. For example, in certain circumstances, it

may not be possible to expeditiously provide written notice, and a

telephone call would be sufficient and even preferable. The Commission

recognizes that the release of money, securities, or property may be

delayed by practical considerations--for example, electronic transfers

may not be possible if the Fedwire is unavailable. But the Depository

must make every effort to execute the transfer as soon as possible. The

transfer cannot be delayed due to concerns about the financial status

of the FCM that deposited the money, securities, or property.

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\7\ The Commission notes that under the laws of some foreign

countries, immediate release of customer funds may not always be

possible. Regulation 30.6(a) (17 CFR 30.6(a)) requires FCMs to

furnish customers with a separate written disclosure statement

containing the language set forth in Regulation 1.55(b) (17 CFR

1.55(b)). Regulation 1.55(b)(7) states in relevant part:

No domestic organization regulates the activities of a foreign

exchange * * * and no domestic regulator has the power to compel

enforcement of the rules of the foreign exchange or the laws of the

foreign country. Moreover, such laws or regulations will vary

depending on the foreign country in which the transaction occurs. *

* * [F]unds received from customers to margin foreign futures

transactions may not be provided the same protections as funds

received to margin futures transactions on domestic exchanges.

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Proposed paragraph (c)(2)(i)(G) requires the Depository to

acknowledge that the FCM has informed the Depository that the FCM will

provide the Commission with a copy of the written acknowledgment.

Proposed paragraph (c)(2)(ii) requires the written acknowledgment

to include the account number for each account covered by the

acknowledgment. If multiple accounts are covered by a single written

acknowledgment, the account numbers may be listed on an attachment to

the written acknowledgment.

Proposed paragraph (c)(2)(iii) requires the FCM to file a copy of

the written acknowledgment with the regional office of the Commission

with jurisdiction over the state in which the FCM's principal place of

business is located.

C. Technical Amendments

Regulation 1.20(a) imposes upon ``[e]ach registrant'' the

requirement to obtain and retain a written acknowledgment when customer

funds are deposited with ``any bank, trust company, clearing

organization, or another futures commission merchant.'' Regulation

1.20(a) applies to FCMs, as distinguished from Regulation 1.20(b),

which applies to DCOs. Therefore, the Commission proposes to substitute

the term ``futures commission merchant'' for the term ``registrant'' to

more accurately reflect the intent and meaning of Regulation 1.20(a).

In connection with this, the Commission further proposes to insert the

word ``other'' before the term ``futures commission merchant'' that

appears subsequently in the same sentence, to distinguish between the

FCM holding the funds of its own customers and an FCM holding customer

funds of another FCM.

Regulations 1.20, 1.26, and 30.7 currently require that

acknowledgment letters be retained for the period specified in

Regulation 1.31, which applies to all recordkeeping required by the Act

and CFTC regulations. Regulation 1.31 requires records to be kept for

five years and to be readily accessible for the first two years of that

five-year period. The proposed revisions would make clear that an

acknowledgment letter is to be kept readily accessible for as long as

the account remains open and that the retention requirements that would

otherwise apply under Regulation 1.31 would only take effect once the

account has been closed. For example, if the account remains open for

ten years, the letter must be kept readily accessible for twelve years

(the ten years during which the account is open plus the two years

required by Regulation 1.31) and then for an additional three years,

also as required by Regulation 1.31.

Regulations 1.20 and 1.26 use the term ``clearing organization'' to

describe an entity that performs clearing functions. The Act, as

amended by the Commodity Futures Modernization Act of 2000,\8\ now

provides that a clearing organization for a contract market must

register as a ``derivatives clearing organization.'' \9\ To be

consistent with the Act and other CFTC regulations, the Commission

proposes to replace the term ``clearing organization,'' wherever it

appears in Regulations 1.20 and 1.26, with the term ``derivatives

clearing organization.''

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\8\ Appendix E of Public Law 106-554, 114 Stat. 2763 (2000).

\9\ See Section 5b of the Act, 7 U.S.C. 7a-1. See also Section

1a(9) of the Act, 7 U.S.C. 1a(9) (defining the term ``derivatives

clearing organization'').

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Finally, the Commission also is proposing technical amendments to

Regulation 140.91 to explicitly delegate to the Director of the

Division of Clearing and Intermediary Oversight the authority to

perform certain functions that are reserved to the Commission under the

proposed changes to Regulations 1.20 and 30.7. Thus, for example, the

Director of the Division of Clearing and Intermediary Oversight would

have delegated authority to instruct the Depository to release customer

funds or secured amount funds.

D. Proposed Effective Date

FCMs and DCOs will need to obtain new acknowledgment letters that

comply with the proposed regulations before the final regulations take

effect. The Commission recognizes the need for time to obtain the

letters; therefore, the proposed effective date of the amendments to

Regulations 1.20, 1.26, and 30.7 is 180 days from the date of

publication of the final regulations in the Federal Register.

III. Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (``RFA'') \10\ requires Federal

agencies, in promulgating regulations, to consider the impact of those

regulations on small businesses. The amendments adopted herein will

affect FCMs and DCOs. The Commission has previously established certain

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

[[Page 7841]]

evaluating the impact of its regulations on small entities in

accordance with the RFA.\11\ The Commission has previously determined

that FCMs \12\ and DCOs \13\ are not small entities for the purpose of

the RFA. Accordingly, pursuant to 5 U.S.C. 605(b), the Acting Chairman,

on behalf of the Commission, certifies that the proposed regulations

will not have a significant economic impact on a substantial number of

small entities.

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\10\ 5 U.S.C. 601 et seq.

\11\ 47 FR 18618 (Apr. 30, 1982).

\12\ Id. at 18619.

\13\ 66 FR 45604, 45609 (Aug. 29, 2001).

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B. Paperwork Reduction Act

The Paperwork Reduction Act (``PRA'') \14\ imposes certain

requirements on Federal agencies in connection with their conducting or

sponsoring any collection of information as defined by the PRA. The

regulations to be amended under this proposal are part of an approved

collection of information (OMB Control No. 3038-0024). The proposed

amendments would not result in any material modification to this

approved collection. Accordingly, for purposes of the PRA, the

Commission certifies that these proposed amendments, if promulgated in

final form, would not impose any new reporting or recordkeeping

requirements.

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\14\ 44 U.S.C. 3501 et seq.

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C. Cost-Benefit Analysis

Section 15(a) of the Act requires that the Commission, before

promulgating a regulation under the Act or issuing an order, consider

the costs and benefits of its action. By its terms, Section 15(a) does

not require the Commission to quantify the costs and benefits of a new

regulation or 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.

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

evaluated in light of the following considerations: (1) Protection of

market 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. Accordingly, the Commission could, in its discretion,

give greater weight to any one of the five considerations and could, in

its discretion, determine that, notwithstanding its costs, a particular

regulation 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 has evaluated the costs and benefits of the proposed

regulations in light of the specific considerations identified in

Section 15(a) of the Act, as follows:

1. Protection of market participants and the public. The proposed

regulations would benefit FCMs and DCOs, as well as customers of the

futures and options markets, by reaffirming the legal obligation of

Depositories holding customer funds or secured amount funds to treat

those funds in accordance with the requirements of the Act and CFTC

regulations.

2. Efficiency and competition. The proposed regulations are not

expected to have an effect on efficiency or competition.

3. Financial integrity of futures markets and price discovery. The

proposed regulations would enhance and strengthen the protection of

customer funds and secured amount funds, thus contributing to the

financial integrity of the futures and options markets as a whole.

This, in turn, would further support the price discovery and risk

transfer functions of such markets.

4. Sound risk management practices. The proposed regulations would

reinforce the sound risk management practices already required of FCMs

and DCOs holding customer funds or secured amount funds.

5. Other public considerations. Requiring specific representations

in a Depository's written acknowledgment would reduce the likelihood

that the Depository would misinterpret its obligations in connection

with the safekeeping and administration of customer funds and secured

amount funds.

Accordingly, after considering the five factors enumerated in the

Act, the Commission has determined to propose the regulations set forth

below.

List of Subjects

17 CFR Parts 1 and 30

Commodity futures, Consumer protection.

17 CFR Part 140

Authority delegations (Government agencies), Conflict of interests,

Organization and functions (Government agencies).

For the reasons stated in the preamble, the Commission proposes to

amend 17 CFR parts 1, 30, and 140 as follows:

PART 1--GENERAL REGULATIONS

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

Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 6h,

6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c, 13a,

13a-1, 16, 16a, 19, 21, 23, and 24, as amended by the Commodity

Futures Modernization Act of 2000, Appendix E of Pub. L. 106-554,

114 Stat. 2763 (2000).

2. Revise Sec. 1.20 to read as follows:

Sec. 1.20 Customer funds to be segregated and separately accounted

for.

(a) All customer funds shall be separately accounted for and

segregated as belonging to commodity or option customers. Such customer

funds when deposited with any bank, trust company, derivatives clearing

organization or another futures commission merchant shall be deposited

under an account name which clearly identifies them as such and shows

that they are segregated as required by the Act and this part. Each

futures commission merchant shall obtain and maintain readily

accessible in its files, for as long as the account remains open, and

thereafter for the period provided in Sec. 1.31, a written

acknowledgment from such bank, trust company, derivatives clearing

organization, or other futures commission merchant, in accordance with

the requirements of paragraph (d) of this section: Provided, however,

that an acknowledgment need not be obtained from a derivatives clearing

organization that has adopted and submitted to the Commission rules

that provide for the segregation as customer funds, in accordance with

all relevant provisions of the Act and the rules and orders promulgated

thereunder, of all funds held on behalf of customers. Under no

circumstances shall any portion of customer funds be obligated to a

derivatives clearing organization, any member of a contract market, a

futures commission merchant, or any depository except to purchase,

margin, guarantee, secure, transfer, adjust or settle trades, contracts

or commodity option transactions of commodity or option customers. No

person, including any derivatives clearing organization or any

depository, that has received customer funds for deposit in a

segregated account, as provided in this section, may hold, dispose of,

or use any such funds as belonging to any person other than the option

or commodity customers of the futures commission merchant which

deposited such funds.

(b) All customer funds received by a derivatives clearing

organization from a member of the derivatives clearing

[[Page 7842]]

organization to purchase, margin, guarantee, secure or settle the

trades, contracts or commodity options of the clearing member's

commodity or option customers and all money accruing to such commodity

or option customers as the result of trades, contracts or commodity

options so carried shall be separately accounted for and segregated as

belonging to such commodity or option customers, and a derivatives

clearing organization shall not hold, use or dispose of such customer

funds except as belonging to such commodity or option customers. Such

customer funds when deposited in a bank or trust company shall be

deposited under an account name which clearly shows that they are the

customer funds of the commodity or option customers of clearing

members, segregated as required by the Act and these regulations. The

derivatives clearing organization shall obtain and maintain readily

accessible in its files, for as long as the account remains open, and

thereafter for the period provided in Sec. 1.31, a written

acknowledgment from such bank or trust company, in accordance with the

requirements of paragraph (e) of this section.

(c) Each futures commission merchant shall treat and deal with the

customer funds of a commodity customer or of an option customer as

belonging to such commodity or option customer. All customer funds

shall be separately accounted for, and shall not be commingled with the

money, securities or property of a futures commission merchant or of

any other person, or be used to secure or guarantee the trades,

contracts or commodity options, or to secure or extend the credit, of

any person other than the one for whom the same are held: Provided,

however, That customer funds treated as belonging to the commodity or

option customers of a futures commission merchant may for convenience

be commingled and deposited in the same account or accounts with any

bank or trust company, with another person registered as a futures

commission merchant, or with a derivatives clearing organization, and

that such share thereof as in the normal course of business is

necessary to purchase, margin, guarantee, secure, transfer, adjust, or

settle the trades, contracts or commodity options of such commodity or

option customers or resulting market positions, with the derivatives

clearing organization or with any other person registered as a futures

commission merchant, may be withdrawn and applied to such purposes,

including the payment of premiums to option grantors, commissions,

brokerage, interest, taxes, storage and other fees and charges,

lawfully accruing in connection with such trades, contracts or

commodity options: Provided, further, That customer funds may be

invested in instruments described in Sec. 1.25.

(d)(1) The written acknowledgment made by a bank, trust company,

derivatives clearing organization or other futures commission merchant,

as required under paragraph (a) of this section, shall include the

following representations:

(i) That the futures commission merchant has established the

account for the purpose of depositing customer funds;

(ii) That the customer funds deposited therein are those of

commodity or option customers of the futures commission merchant and

shall be segregated from the futures commission merchant's own funds in

accordance with the provisions of the Act and this part;

(iii) That the customer funds shall not be subject to any right of

offset, or lien, for or on account of any indebtedness, obligations or

liabilities owed by the futures commission merchant;

(iv) That the customer funds shall be treated in accordance with

the provisions of the Act and Commission regulations;

(v) That the customer funds shall be released immediately upon

proper notice and instruction from the futures commission merchant or

the Commission; and

(vi) That the futures commission merchant has informed the bank,

trust company, derivatives clearing organization, or other futures

commission merchant that the futures commission merchant will provide

the Commission with a copy of the written acknowledgment.

(2) The written acknowledgment shall include the account number for

each account covered by the acknowledgment.

(3) The futures commission merchant shall file a copy of the

written acknowledgment with the regional office of the Commission with

jurisdiction over the state in which the futures commission merchant's

principal place of business is located.

(e)(1) The written acknowledgment made by a bank or trust company,

as required under paragraph (b) of this section, shall include the

following representations:

(i) That the derivatives clearing organization has established the

account for the purpose of depositing customer funds;

(ii) That the customer funds deposited therein are those of

commodity or option customers of clearing members and shall be

segregated from the derivatives clearing organization's own funds in

accordance with the provisions of the Act and this part;

(iii) That the customer funds shall not be subject to any right of

offset, or lien, for or on account of any indebtedness, obligations or

liabilities owed by the derivatives clearing organization;

(iv) That the customer funds shall be treated in accordance with

the provisions of the Act and Commission regulations;

(v) That the customer funds shall be released immediately upon

proper notice and instruction from the derivatives clearing

organization or the Commission; and

(vi) That the derivatives clearing organization has informed the

bank or trust company that it will provide the Commission with a copy

of the written acknowledgment.

(2) The written acknowledgment shall include the account number for

each account covered by the acknowledgment.

(3) The derivatives clearing organization shall file a copy of the

written acknowledgment with the regional office of the Commission with

jurisdiction over the state in which the derivatives clearing

organization's principal place of business is located.

3. Revise Sec. 1.26 to read as follows:

Sec. 1.26 Deposit of instruments purchased with customer funds.

(a) Each futures commission merchant who invests customer funds in

instruments described in Sec. 1.25 shall separately account for such

instruments and segregate such instruments as belonging to such

commodity or option customers. Such instruments, when deposited with a

bank, trust company, derivatives clearing organization or another

futures commission merchant, shall be deposited under an account name

which clearly shows that they belong to commodity or option customers

and are segregated as required by the Act and this part. Each futures

commission merchant upon opening such an account shall obtain and

maintain readily accessible in its files, for as long as the account

remains open, and thereafter for the period provided in Sec. 1.31, a

written acknowledgment from such bank, trust company, derivatives

clearing organization or other futures commission merchant, in

accordance with the requirements of paragraph (d) of Sec. 1.20:

Provided, however, that an acknowledgment need not be obtained

[[Page 7843]]

from a derivatives clearing organization that has adopted and submitted

to the Commission rules that provide for the segregation as customer

funds, in accordance with all relevant provisions of the Act and the

rules and orders promulgated thereunder, of all funds held on behalf of

customers and all instruments purchased with customer funds. Such bank,

trust company, derivatives clearing organization or other futures

commission merchant shall allow inspection of such instruments at any

reasonable time by representatives of the Commission.

(b) Each derivatives clearing organization which invests money

belonging or accruing to commodity or option customers of its clearing

members in instruments described in Sec. 1.25 shall separately account

for such instruments and segregate such instruments as belonging to

such commodity or option customers. Such instruments, when deposited

with a bank or trust company, shall be deposited under an account name

which will clearly show that they belong to commodity or option

customers and are segregated as required by the Act and this part. Each

derivatives clearing organization upon opening such an account shall

obtain and maintain readily accessible in its files, for as long as the

account remains open, and thereafter for the period provided in Sec.

1.31, a written acknowledgment from such bank or trust company, in

accordance with the requirements of paragraph (e) of Sec. 1.20. Such

bank or trust company shall allow inspection of such instruments at any

reasonable time by representatives of the Commission.

PART 30--FOREIGN FUTURES AND OPTIONS TRANSACTIONS

4. The authority citation for part 30 continues to read as follows:

Authority: 7 U.S.C. 1a, 2, 6, 6c, and 12a, unless otherwise

noted.

5. Revise paragraph (c)(2) of Sec. 30.7 to read as follows:

Sec. 30.7 Treatment of foreign futures or foreign options secured

amount.

* * * * *

(c) * * *

(2)(i) Each futures commission merchant must obtain and maintain

readily accessible in its files, for as long as the account remains

open, and thereafter for the period provided in Sec. 1.31, a written

acknowledgment from such depository that shall include the following

representations:

(A) That the depository meets the requirement set out in Sec.

30.7(c)(1);

(B) That the futures commission merchant has established the

account for the purpose of depositing money, securities, or property

for or on behalf of customers that include, but are not limited to,

foreign futures and foreign options customers;

(C) That the money, securities, or property deposited therein are

held for or on behalf of customers that include, but are not limited

to, foreign futures and foreign options customers of the futures

commission merchant and may not be commingled with the futures

commission merchant's own funds or any other funds that the depository

may hold, in accordance with the provisions of the Act and this part;

(D) That the money, securities, or property shall not be subject to

any right of offset, or lien, for or on account of any indebtedness,

obligations or liabilities owed by the futures commission merchant;

(E) That the money, securities, or property shall be treated in

accordance with the provisions of the Act and Commission regulations;

(F) That the money, securities, or property shall be released

immediately, subject to requirements of applicable foreign law, upon

proper notice and instruction from the futures commission merchant or

the Commission; and

(G) That the futures commission merchant has informed the

depository that the futures commission merchant will provide the

Commission with a copy of the written acknowledgment.

(ii) The written acknowledgment shall include the account number

for each account covered by the acknowledgment.

(iii) The futures commission merchant shall file a copy of the

written acknowledgment with the regional office of the Commission with

jurisdiction over the state in which the futures commission merchant's

principal place of business is located.

* * * * *

PART 140--ORGANIZATION, FUNCTIONS, AND PROCEDURES OF THE COMMISSION

6. The authority citation for part 140 continues to read as

follows:

Authority: 7 U.S.C. 2 and 12a.

7. In Sec. 140.91, redesignate paragraph (a)(8) as paragraph

(a)(10) and paragraph (a)(7) as paragraph (a)(8); and add new

paragraphs (a)(7) and (a)(9) to read as follows:

Sec. 140.91 Delegation of authority to the Director of the Division

of Clearing and Intermediary Oversight.

(a) * * *

(7) All functions reserved to the Commission in Sec. 1.20 of this

chapter.

* * * * *

(9) All functions reserved to the Commission in Sec. 30.7 of this

chapter.

* * * * *

Issued in Washington, DC, on February 13, 2009 by the

Commission.

David A. Stawick,

Secretary of the Commission.

[FR Doc. E9-3551 Filed 2-19-09; 8:45 am]

BILLING CODE 6351-01-P

Last Updated: February 20, 2009