[Federal Register: July 3, 1997 (Volume 62, Number 128)]
[Notices]
[Page 36050-36051]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03jy97-46]
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COMMODITY FUTURES TRADING COMMISSION
Registration Actions by National Futures Association With Respect
to Floor Brokers, Floor Traders and Applicants for Registration in
Either Category
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice and order.
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SUMMARY: The Commodity Futures Trading Commission (Commission) is
authorizing National Futures Association (NFA) to grant the
registration of any applicant for registration as a floor broker (FB)
or floor trader (FT) or to maintain the registration of any registered
FB or FT who may be subject to statutory disqualification from
registration without forwarding such cases to the Commission for
review. The Commission previously had directed NFA to stay the granting
of registration and provide the Commission with the opportunity to
object to such granting of registration where an applicant for FB or FT
registration has a disciplinary history including a potential statutory
disqualification from registration, but NFA determined that
registration should be granted, either with or without conditions. The
Commission also had directed NFA to provide the Commission with the
opportunity to object to maintaining the registration of a registered
FB or FT with certain new disciplinary history. This Order conforms
NFA's authority regarding the FB and FT registration categories to the
authority delegated by the Commission to NFA concerning the other
categories of registration under the Commodity Exchange Act
(Act).<SUP>1</SUP>
\1\ 7 U.S.C. 1 et seq. (1994).
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EFFECTIVE DATE: July 3, 1997.
FOR FURTHER INFORMATION CONTACT: Lawrence B. Patent, Associate Chief
Counsel; Robert P. Shiner, Assistant Director; or Natalie A. Markman,
Attorney-Advisor, Division of Trading and Markets, Commodity Futures
Trading Commission, Three Lafayette Centre, 1155 21st Street, N.W.,
Washington, D.C. 20581. Telephone: (202) 418-5450.
SUPPLEMENTARY INFORMATION:
Introduction
The Commission previously has issued Orders authorizing NFA to
perform registration processing functions with respect to FBs and FTs,
including: (1) Processing and, where appropriate, granting applications
for registration under the Act; (2) issuing and terminating, where
appropriate, temporary licenses; (3) processing the triennial review of
registration information, periodic updates, terminations of trading
privileges and requests for withdrawal from registration; (4)
establishing and maintaining systems of records regarding FBs and FTs
and serving as the official custodian of those Commission records; and
(5) denying, conditioning, suspending, modifying, restricting or
revoking the registration of any FB, FT or applicant for registration
in either category.<SUP>2</SUP> However, the Commission has not
previously authorized NFA to take action without Commission review that
would either: (1) Grant registration, with or without conditions, with
respect to an application for registration as an FB or an FT where the
applicant's disciplinary history includes a potential statutory
disqualification <SUP>3</SUP> from registration <SUP>4</SUP> or (2)
maintain registration, either with or without restrictions, with
respect to a registered FB or FT with new disciplinary
history.<SUP>5</SUP> The Commission noted in its Order published on
August 1, 1994 that the referral of these registration matters by NFA
to the Commission was only a ``temporary requirement.'' <SUP>6</SUP> By
the Order below issued on this date, the Commission is conforming NFA's
authority concerning the FB and FT registration categories to the
authority delegated by the Commission to NFA concerning the other
categories of registration under the Act.<SUP>7</SUP> However, the
Commission will continue to handle any matter that already has been
referred to it by NFA. The Commission also will continue to accept or
act upon requests for exemption and render ``no-action'' opinions with
respect to applicable registration requirements.
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\2\ 51 FR 25929 (July 7, 1986); 51 FR 34490 (September 29,
1986); 58 FR 19657 (April 15, 1993); 59 FR 38957 (August 1, 1994).
\3\ The grounds for statutory disqualification are set forth in
Sections 8a (2), (3) and (4) of the Act.
\4\ When the Commission issued its most recent delegation Order,
it noted that:
[U]nless the Commission orders otherwise * * * if NFA determines
that registration should be granted in such a case, either with or
without conditions, NFA shall transmit the file to the Commission
and stay the granting of registration until the Commission has had
an opportunity to object to such granting of registration. 59 FR
38957, 38958 (footnote omitted).
See also id. at 38959 n.11.
\5\ The Commission noted that:
NFA need not * * * forward to the Commission any matter related
to an FB, FT or applicant for registration in either category where
the only ``yes'' answer to a disciplinary history question relates
to a single arrest where there was no subsequent conviction, guilty
plea or plea of nolo contendere, or a single misdemeanor conviction
based on conduct unrelated to financial market activity that
predates the application for registration by at least five years,
provided such matter is disclosed on the registration application or
any update thereto. If a person willfully makes any materially false
or misleading statement or omits to state any material fact in his
registration application or any update thereto, that is a separate
ground for statutory disqualification from registration. 7 U.S.C.
12a(2)(G) and 12a(3)(G) (1994).
\6\ 59 FR 38957, 38958 (footnote omitted).
\7\ The Commission previously has authorized NFA to perform
registration processing functions, and to take adverse registration
actions, with respect to futures commission merchants, introducing
brokers, commodity pool operators, commodity trading advisors,
leverage transactions merchants and associated persons of such
entities, as well as applicants for registration in any of the
aforementioned categories. See 48 FR 15940 (April 13, 1983); 48 FR
35158 (August 3, 1983); 48 FR 51809 (November 14, 1983); 49 FR 8226
(March 5, 1984); 49 FR 39593 (October 9, 1984); 50 FR 34885 (August
28, 1985); 54 FR 19594 (May 8, 1989); and 54 FR 41133 (October 5,
1989).
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As recommended by the Commission in its February 1996 review of
NFA's registration fitness program, NFA will provide the Commission
with quarterly schedules of all applicants cleared for registration and
all registrants whose
[[Page 36051]]
registration is maintained without adverse action by NFA's
Registration, Compliance, Legal Committee despite potential statutory
disqualifications. In order to ensure appropriate oversight, the
Commission will review the schedules to determine whether it should
provide further guidance to NFA on particular issues regarding
registration in any of the Commission's registration categories. In
addition, the Commission will continue to monitor NFA activities
through periodic rule enforcement reviews.
United States of America
Before the Commodity Futures Trading Commission, Order Authorizing the
Performance of Registration Processing Functions
I. Authority and Background
Section 8a(10) of the Act <SUP>8</SUP> provides that the Commission
may authorize any person to perform any portion of the registration
functions under the Act, notwithstanding any other provision of law, in
accordance with rules adopted by such person and submitted to the
Commission for approval or, if applicable, for review pursuant to
Section 17(j) of the Act <SUP>9</SUP> and subject to the provisions of
the Act applicable to registrations granted by the Commission. Section
17(o)(1) of the Act <SUP>10</SUP> provides that the Commission may
require NFA to perform Commission registration functions, in accordance
with the Act and NFA rules.
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\8\ 7 U.S.C. 12a(10) (1994).
\9\ 7 U.S.C. 21(j) (1994).
\10\ 7 U.S.C. 21(o)(1) (1994).
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Upon consideration, the Commission has determined to authorize NFA,
effective July 3, 1997, to grant or maintain, either with or without
conditions or restrictions, FB or FT registration where NFA previously
would have forwarded such a case to the Commission for review of
disciplinary history in order to provide the Commission with an
opportunity to object to such granting or maintenance of registration.
However, the Commission will continue to handle any matter that already
has been referred to it by NFA. The Commission also will continue to
accept or act upon requests for exemption and render ``no-action''
opinions with respect to applicable registration requirements.
NFA remains subject to the present requirement that it monitor
compliance with the conditions and restrictions imposed on conditioned
and restricted registrants.<SUP>11</SUP> Such conditions and
restrictions are designed to ensure compliance with the Act and
Commission regulations and typically include sponsorship and/or an
automatic suspension clause, as well as a dual trading prohibition in
certain cases involving FBs. Such conditions or restrictions generally
are imposed for two years.
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\11\ See 59 FR 38957, 38958 n.6.
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In granting and maintaining registration pursuant to this Order,
NFA shall be subject to all other requirements and obligations imposed
upon it by the Commission in existing or future Orders or regulations.
In this regard, NFA also shall implement such additional procedures (or
modify existing procedures) as are necessary and acceptable to the
Commission to ensure the security and integrity of the FB, FT or
applicant records in NFA's custody; to facilitate prompt access to
those records by the Commission and its staff, particularly as
described in other Commission Orders or rules; to facilitate disclosure
of public or nonpublic information in those records when permitted by
Commission Orders or rules and to keep logs as required by the
Commission concerning disclosure of nonpublic information; and
otherwise to safeguard the confidentiality of the records.
II. Conclusion and Order
The Commission has determined, in accordance with the pro-visions
of Section 8a(10) of the Act, to authorize NFA, effective July 3, 1997,
to perform the following registration functions:
(1) Grant, either with or without conditions, FB or FT
registration where NFA previously would have forwarded such a case
to the Commission for review of disciplinary history in order to
provide the Commission with an opportunity to object to such
granting of registration; and
(2) Maintain, either with or without restrictions, FB or FT
registration where NFA previously would have forwarded such a case
to the Commission for review of new disciplinary history in order to
provide the Commission with an opportunity to object to such
maintenance of registration.
NFA shall perform these functions in accordance with the standards
established by the Act and the regulations promulgated thereunder.
These determinations are based upon the Congressional intent
expressed in Sections 8a(10) and 17(o) of the Act that the Commission
be allowed to authorize NFA to perform any portion of the Commission's
registration responsibilities under the Act for purposes of carrying
out these responsibilities in the most efficient and cost-effective
manner, and NFA's representations concerning standards and procedures
to be followed in administering these functions.
This Order does not, however, authorize NFA to accept or act upon
requests for exemption from registration or to render ``no-action''
opinions or interpretations with respect to applicable registration
requirements.
Nothing in this Order or in Sections 8a(10) or 17 of the Act shall
affect the Commission's authority to review the granting of a
registration application by NFA in the performance of Commission
registration functions, or to review the maintenance of registration by
NFA.<SUP>12</SUP>
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\12\ See also 7 U.S.C. 21(o) (3) and (4) (1994) and 17 CFR Part
171 (1996).
Issued in Washington, D.C. on June 26, 1997 by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 97-17473 Filed 7-2-97; 8:45 am]
BILLING CODE 6351-01-P
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