Federal Register, Volume 80 Issue 177 (Monday, September 14, 2015)  
[Federal Register Volume 80, Number 177 (Monday, September 14, 2015)]
[Pages 55098-55099]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-23040]



Public Alert--Registration Deficient List

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice; request for comment.


SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or 
``Commission'') is announcing a new program, the Registration Deficient 
List (``RED List''), that will post on the Commission's Web site and 
distribute to the public certain factual information about foreign 
entities that are soliciting or accepting funds from U.S. residents and 
are acting in a manner that requires registration but are not 
appropriately registered with the CFTC.

DATES: Comments must be received on or before October 14, 2015.

ADDRESSES: You may submit comments, identified by ``Registration 
Deficient List,'' by any of the following methods:
     The agency's Web site, at http://comments.cftc.gov. Follow 
the instructions for submitting comments through the Web site.
     Mail: Christopher Kirkpatrick, 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.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    Please submit your comments using only one method.
    All comments must be submitted in English, or if not, accompanied 
by an English translation. Comments will be posted as received to 
www.cftc.gov. You should submit only information that you wish to make 
available publicly. If you wish the Commission to consider information 
that you believe is exempt from disclosure under the Freedom of 
Information Act, a petition for confidential treatment of the exempt 
information may be submitted according to the procedures established in 
Sec.  145.9 of the Commission's regulations.\1\

    \1\ 17 CFR 145.9 (2014).

    The Commission reserves the right, but shall have no obligation, to 
review, pre-screen, filter, redact, refuse or remove any or all of your 
submission from www.cftc.gov that it may deem to be inappropriate for 
publication, such as obscene language. All submissions that have been 
redacted or removed that contain comments on the merits of the 
rulemaking will be retained in the public comment file and will be 
considered as required under the Administrative Procedure Act and other 
applicable laws, and may be accessible under the Freedom of Information 

FOR FURTHER INFORMATION CONTACT: Rick Glaser, Deputy Director, Division 
of Enforcement, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1151 21st Street NW., Washington, DC 20581, phone: (202) 418-
5358, email: [email protected].

SUPPLEMENTARY INFORMATION: The CFTC today is announcing a new program, 
effective immediately, for informing the public about unregistered 
foreign entities engaged in the solicitation or acceptance of funds 
from U.S. residents at a retail level. These entities solicit and/or 
accept funds for investments in, among other things, foreign currency 
(``forex'') and binary options. Through this new program, the 
Registration Deficient List (``RED List''), the Commission will publish 
on its Web site the names of unregistered foreign entities that the 
Commission has reason to believe may be required to register with the 
CFTC but are not, in fact, registered. Publication does not represent 
final Commission disposition or a final Commission order. By making 
this information publicly available, the Commission expects investors 
to make more informed decisions whether to trade with or through such 
an entity. The more U.S. investors trade with and through registered 
entities, the more likely that their funds have a better chance of 
being protected.

I. Background

    The Commission often receives investigative leads relating to 
foreign entities that solicit and/or accept funds from U.S. residents 
at a retail level. For example, the CFTC's Division of Enforcement 
(``Enforcement'') has investigated approximately 60 such cases in the 
past twenty-four months. These cases involve unregistered foreign 
entities that engage in, among other things, forex in a capacity 
similar to Retail Foreign Exchange Dealers, Introducing Brokers, 
Commodity Trading Advisors or Commodity Pool Operators and binary 
options.\2\ Almost all, if not all, of these foreign entities are 
acting in a capacity that requires them to be registered with the 

    \2\ The Commission uses forex and binary options merely as 
illustrative examples. Any entity that meets the criteria set forth 
below is a candidate for inclusion on the RED list.

    In many cases, there are obstacles to bringing an effective 
enforcement action against these types of entities. For example, the 
Commission spends considerable resources investigating these matters. 
Even if Enforcement is able to develop a legal case against one of 
these entities, international service of process is cumbersome, often 
takes a very long time to effectuate and is not always successful. Even 
if service of process is successful, many of these entities are 
judgment proof.
    The Commission believes that a consumer protection approach has a 
better chance of success than continuing to spend resources on 
Enforcement investigations and litigations that have a limited chance 
of success. The proposed RED List would disseminate information about 
certain foreign entities into the marketplace so that U.S. residents 
would be able to make more informed choices about how they trade their 
money. This approach is used by other regulators, including the 
Securities and Exchange Commission.\3\

    \3\ There are approximately 47 countries that issue, or have 
issued, lists, warning letters, or public statements, including 
Belgium, Brazil, British Virgin Islands, Canada (Ontario, British 
Columbia and the Quebec provincial regulators), Croatia, Denmark, 
Hong Kong, Ireland, Malaysia, Panama, Poland, Cyprus, Singapore, 
Spain, Sweden, Switzerland, Thailand, The Netherlands, the United 
Kingdom and the U.S.
    The International Organization of Securities Commissions 
(``IOSCO'') has established an investor Alert Portal on its Web site 
to receive and publish alerts and warnings from its members about 
firms which are not authorized to provide investment services in the 
jurisdiction that issued the alert or warning.


[[Page 55099]]

II. The RED List

    In light of the challenges associated with taking enforcement 
action against such entities, the Commission believes it useful to 
educate and empower prospective investors. The goal of the RED List is 
to provide prospective investors with information regarding 
unregistered soliciting entities before they invest. For a foreign 
entity to be listed on the CFTC's RED List, reasonable grounds must 
exist to believe that the entity meets the following six criteria:
    1. The entity is foreign;
    2. The foreign entity has no or limited presence in the United 
States; \4\

    \4\ Merely registering a Web site with a U.S. based domain name 
registrar does not constitute physical presence.

    3. The foreign entity is soliciting and/or accepting funds from 
U.S. residents;
    4. The foreign entity is offering a product within the Commission's 
jurisdiction (e.g. ``forex'');
    5. The foreign entity is required to be registered; and
    6. The foreign entity is not registered.\5\

    \5\ If the foreign entity offers binary options there is one 
additional criterion: Whether the entity is a foreign board of 
trade. If it is a foreign board of trade, then the entity would not 
be eligible for the RED list.

    If the foreign entity meets these criteria, Enforcement will 
propose that it be included on a publicly disclosed list stating that 
the foreign entity is acting in a capacity that appears to require 
registration but is not registered with the Commission. This list will 
then be publicized by the Commission's Office of Consumer Outreach by a 
variety of different methods and media.
    The RED List process contains three separate levels of review 
before a recommendation is made to the Commission for inclusion on the 
RED List. First the Intake Officer reviews the complaint and makes an 
initial determination of whether a foreign entity should potentially be 
included in the RED List. This initial determination is passed to a 
Triage Officer who will conduct a limited investigation and then make a 
recommendation to an Enforcement Deputy Director. The Deputy Director 
will, based on the information before him/her, make a decision as to 
whether to recommend to the Commission that it include a foreign entity 
on the RED List. These levels of review are to ensure that only those 
foreign entities that should be included on the RED List are included 
on the RED List.
    The CFTC is committed to providing accurate information to 
investors using the RED List. Before listing an entity on the RED List, 
Commission staff will notify the entity by Notice Letter of the 
Commission's intent to list the entity. The entity will have the 
opportunity to respond to the Commission and provide relevant 
documentation. If the foreign entity does not respond to the notice 
letter or provides an unsatisfactory response, Enforcement will 
recommend to the Commission that a foreign entity should be included on 
the RED List.
    To implement the RED List, the Commission will post on its public 
Web sites, http://www.SmartCheck.gov/REDList, the names, and only the 
names, of unregistered soliciting foreign entities that have been 
subject of complaints received by the CFTC. The RED list will contain 
the following information:

RED (Registration Deficient) LIST

List of Foreign Entities That Have Been Identified as Acting in a 
Capacity That Appears To Require Registration but Are Not Appropriately 
Registered With the Commission

    The Commodity Futures Trading Commission (``CFTC'') frequently 
receives investigative leads and questions from the public about 
foreign entities that solicit and/or accept funds from U.S. 
residents at a retail level. For example these leads and questions 
can relate to, among things, foreign entities that engage in foreign 
currency (``Forex'') in a capacity similar to Retail Foreign 
Exchange Dealers (``RFEDs''), Introducing Brokers, Commodity Trading 
Advisors or Commodity Pool Operators http://www.cftc.gov/ConsumerProtection/FraudAwarenessPrevention/ForeignCurrencyTrading/index.htm; and binary options http://www.cftc.gov/PressRoom/PressReleases/fraudadv_binaryoptions. Many of these foreign entities 
are acting in a capacity that requires them to be registered with 
the CFTC.
    If a foreign entity is registered with the CFTC, then it is 
subject to CFTC regulations and oversight that apply to registrants. 
Generally, foreign entities that solicit you to trade are required 
to register with the CFTC. For this reason, it is important for you 
to consider whether the foreign entity that solicits you is, in 
fact, registered with the CFTC.
    In certain cases, a preliminary review by the CFTC reveals that 
foreign entities that solicit and/or accept funds from U.S. 
residents at a retail level have no or limited U.S. presence, and 
act in a capacity that requires registration, but are not in fact 
registered. In an effort to warn the public about these entities, 
the CFTC is publishing the names of those foreign entities.
    The goal of this list is to provide information to U.S. 
consumers about foreign entities that are acting in an unregistered 
capacity and to help them make more informed decisions about whether 
to trade with or through such an entity. The more that U.S. 
consumers trade with and through registered entities, the more 
likely that their funds will have a greater chance of being 
    The named foreign entities currently appear to be acting in a 
capacity that requires registration with the CFTC but are NOT 
registered with the CFTC.
    [Inserted will be a list of all of the foreign entities that 
have met the criteria, as approved by the Commission.]

    The inclusion of an entity's name on the RED list does not mean 
that the CFTC or a Court has concluded that a violation of any 
provision of the Commodity Exchange Act or the Commission's Regulations 
has occurred.

III. Review of RED List

    Twice annually, on or about June 30 and December 31, the Triage 
Officer will review the RED List and, if it appears that a minimum of 
12 months have elapsed during which no complaints have been received 
regarding the a foreign entity and the foreign entity's Web site is 
either inactive or taken down, Enforcement will submit a recommendation 
for Commission consideration to move the foreign entity from the active 
portion of the RED List homepage to the archival portion of such page.

    Issued in Washington, DC, on September 9, 2015, by the 
Robert N. Sidman,
Deputy Secretary of the Commission.
[FR Doc. 2015-23040 Filed 9-11-15; 8:45 am]