Commodity Exchange Act: Deficiencies, inaccuracies, and changes resulting from exchange disciplinary and access denial actions; reporting requirements,

[Federal Register: July 23, 1999 (Volume 64, Number 141)]

[Rules and Regulations]

[Page 39912-39913]

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

[DOCID:fr23jy99-2]

COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 3

Compliance With Commission Regulation 3.31 Requirements for Reporting Deficiencies, Inaccuracies, and Changes Resulting From Exchange Disciplinary and Access Denial Actions

AGENCY: Commodity Futures Trading Commission.

ACTION: Advisory.

SUMMARY: The Commodity Futures Trading Commission (``Commission'') advises registrants and applicants for registrant status that they are relieved of filing a Form 3-R, as required under Commission regulation 3.31, if the information to be reported is solely the result of an exchange disciplinary or access denial action. The Commission has recently delegated to the National Futures Association (``NFA'') the duty to receive and to process exchange disciplinary and access denial action information filedby the exchanges in accordance with Commission Regulation 9.11. Thus, the NFA will possess the foregoing information that registrants and applicants for registrant status would otherwise be required to include in a Form 3-R.

EFFECTIVE DATE: July 23, 1999.

FOR FURTHER INFORMATION CONTACT: Rachel F. Berdansky, Special Counsel, or Joshua R. Marlow, Attorney-Advisor, Division of Trading and Markets, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581. Telephone: (202) 418-5490.

SUPPLEMENTARY INFORMATION:

1. Introduction

   The Commission has published elsewhere today in the Federal Register an Advisory and a Notice and Order relating to the filing, processing, and maintenance of exchange disciplinary or access denial actions required under Regulation 9.11 (``Regulation 9.11 notices'').\1\ The Advisory, among other things, permits exchanges to file either electronic or written Regulation 9.11 notices with the NFA rather than filing these notices with the Commission. The Notice and Order accompanying the Advisory delegates to the NFA the duty to receive and to process disciplinary and access denial action information filedby exchanges pursuant to Regulation 9.11(a). As part of this delegation, the NFA will serve as the official custodian of records for exchange disciplinary and access denial actions.

   \1\ Regulation 9.11(a) requires that whenever an exchange decision pursuant to which a disciplinary or access denial action is to be imposed has become final, the exchange must provide written notice of such action to the person against whom the action was taken and the Commission within 30 days thereafter.

   Information contained in exchange Regulation 9.11 notices must be reported by registrants--and applicants awaiting registration--on Form 3-R, pursuant to Regulation 3.31. Regulation 3.31(a) requires an applicant or registrant as a futures commission merchant, commodity trading advisor, commodity pool operator, introducing broker, or leverage transaction merchant to correct promptly any deficiency or inaccuracy in Form 7-R or Schedule D to Form 7-R which has rendered the information contained therein non-current or inaccurate. These corrections must be made on Form 3-R. Section (b) imposes a similar requirement on an applicant or registrant as a floor broker, floor trader, associated person, any person qualifying for temporary no- action under Part 1.66 of the Commission's regulations,\2\ and each principal of a futures commission merchant, commodity trading advisor, commodity pool operator, introducing broker, or leverage transaction merchant. These individuals must use Form 3-R to make changes to Form 8-R.

   \2\ Regulation 1.66 grants no-action relief to those floor traders granted trading privileges on a contract market on or before April 26, 1993 from the then-new registration requirements for floor traders under Regulation 3.11.

   As the official custodian of records for exchange Regulation 9.11 filings, the NFA will now have disciplinary information currently required to be reported in a Form 3-R prior to an individual or entity subject to an exchange disciplinary or access denial action actually filing the form. Therefore, to avoid duplicative regulatory reporting, the Commission hereby advises all individuals and entities subject to Regulation 3.31 that they are relieved from Regulation 3.31 reporting obligations resulting from an exchange disciplinary or access denial action and reported by an exchange pursuant to a Regulation 9.11 notice.

2. Compliance With Regulation 3.31

   The NFA has apprised the Commission that exchange Regulation 9.11 notices will be regularly reviewed by the NFA's registration processing group staff.\3\ This is the same staff

   [[Page 39913]]

   currently responsible for receiving and processing Form 3-Rs filed pursuant to Regulation 3.31. Exchange disciplinary information reported in Regulation 9.11 filings will be posted on the NFA's Background Affiliation Status Information Center (``BASIC'') database.\4\ On a daily basis, the NFA will print copies of all entries made in BASIC. These copies will be forwarded to the registration processing group and treated as substitutes for Form 3-Rs. The registration processing group will then update the necessary registration records and the paper copy will be placed in the registrant's or potential registrant's file.

   \3\ Pursuant to Section 8a(10) of the Commodity Exchange Act, the NFA has been delegated numerous registration functions by the Commission. Part 3 of Commission Regulations, 17 C.F.R. Sec. 3 (1998), is dedicated to registration. Most registration functions were delegated to the NFA in 1983. 49 FR 35158 (August 3, 1983) (``NFA's registration rules . . . apply to all persons required to be registered under the Act (and not otherwise exempt by Commission rule or order) . . . [A]ll documents referred to in [Part 3] regulations will be filedwith, submitted to or given by NFA at its Chicago office instead of the Commission.'') Subsequent orders have added to, or clarified, this delegation. See 48 FR 51809 (November 14, 1983); 48 FR 8226 (March 5, 1984); 49 FR 39593 (October 9, 1984), amended by 49 FR 45418 (November 16, 1984); 50 FR 34885 (August 28, 1985); 51 FR 25929 (July 17, 1986); 51 FR 34490 (September 29, 1986); 54 FR 19594 (May 8, 1989); 54 FR 41133 (October 5, 1989); 58 FR 19657 (April 15, 1993); 59 FR 38957 (August 1, 1994); 62 FR 36050 (July 3, 1997); 63 FR 18821 (April 16, 1998); and 63 FR 63913 (November 17, 1998). An earlier Notice and Order delegated to the NFA limited registration functions with respect to introducing brokers and their associated persons. See 49 FR 15940 (April 13, 1983).

   \4\ A description of BASIC and how exchange disciplinary data is posted on the system can be found in the Advisory and Notice and Order published elsewhere today in the Federal Register.

3. Conclusion

   The information contained in a Form 3-R filedas a result of an exchange disciplinary or access denial action is identical to that included in an exchange Regulation 9.11 filing. Pursuant to the Commission's delegation to the NFA to receive and to process exchange Regulation 9.11 notices and to maintain a database of the information contained therein, the NFA will have timely access to exchange Regulation 9.11 notices. Therefore, the Commission, in order to avoid duplicative regulatory reporting, is permitting any individual or entity otherwise required under Regulation 3.31(a) or (b) to file a Form 3-R as a result of an exchange disciplinary or access denial action to forego this reporting obligation. The Commission emphasizes that this relief applies only with respect to exchange disciplinary or access denial actions. All other reporting obligations under Regulation 3.31 remain unchanged.

   Issued in Washington, D.C. on July 19, 1999 by the Commission. Jean A. Webb, Secretary of the Commission.

   [FR Doc. 99-18805Filed7-22-99; 8:45 am]

   BILLING CODE 6351-01-M