[Federal Register: December 30, 2009 (Volume 74, Number 249)]
[Rules and Regulations]
[Page 69004-69009]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30de09-2]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 1
RIN 3038-AB87
Electronic Filing of Financial Reports and Notices
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rules.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is amending certain of its regulations in connection with
electronic filing of financial reports and related notices. The
amendments broaden the language in the Commission's regulations
applicable to electronic filings of financial reports to clarify that,
to the extent a futures commission merchant (``FCM'') submits a Form 1-
FR to the Commission electronically, it may do so using any user
authentication procedures established or approved by the Commission.
The amendments also permit registrants to electronically submit filings
in addition to financial reports, including an election to use a non-
calendar fiscal year, requests for extensions of time to file
uncertified financial reports and ``early warning'' notices required
under Commission regulations. In connection with the filing of
financial reports, the amendments specify, consistent with other
requirements and existing practice, that a statement of income and loss
is included as a required part of the non-certified 1-FR filings for
FCMs and introducing brokers (``IBs''). The amendments also require
more immediate, but less prescriptive, documentation regarding a firm's
capital condition when a firm falls below its required minimum adjusted
net capital. Finally, the final regulations include several other minor
amendments to correct certain outdated references and to make other
clarifications to existing regulations.
DATES: Effective Date: January 4, 2010.
FOR FURTHER INFORMATION CONTACT: Thelma Diaz, Associate Director,
Division of Clearing and Intermediary Oversight, 1155 21st Street, NW.,
Washington, DC 20581. Telephone number: 202-418-5137; facsimile number:
202-418-5547; and electronic mail: <A HREF="mailto:[email protected]">[email protected]</A>, or Lawrence T.
Eckert, Special Counsel, Division of Clearing and Intermediary
Oversight, 140 Broadway, New York, New York 10005. Telephone number
(646) 746-9704; and electronic mail: <A HREF="mailto:[email protected]">[email protected]</A>.
SUPPLEMENTARY INFORMATION:
I. Background
On October 13, 2009, the Commission published for comment in the
Federal Register proposed amendments to Regulations 1.10 and 1.12 (the
``Proposals'').\1\ Commission Regulation 1.10 sets forth the financial
reporting requirements for FCMs and IBs \2\ and Regulation 1.12
requires FCMs, IBs and applicants for registration thereof to provide
notice of a variety of predefined events as or before they occur.\3\
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\1\ 74 FR 52434 (Oct 13, 2009). The Commission's regulations
cited in this rulemaking may be found at 17 CFR Ch. 1 (2009).
\2\ For simplicity, references in this Federal Register release
to IBs in connection with financial reporting and notice
requirements are intended to refer to IBs that are not operating
pursuant to a guarantee agreement.
\3\ For example, Regulation 1.12(a) requires immediate
telephonic notice, to be confirmed in writing by facsimile, when a
registrant's (or applicant's) adjusted net capital falls below that
required by Regulation 1.17. Other provisions of Regulation 1.12
require notification to the Commission for certain ``early warning''
events. Regulation 1.12(b), for example, requires notification by a
registrant or applicant if such entity's adjusted net capital drops
below a specified threshold.
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The Proposals consisted of several amendments regarding electronic
filing of financial reports and notices by FCMs and IBs as well as
amendments to certain other financial reporting requirements.
Specifically, the Commission proposed amendments to: (1) Broaden
language in the Commission's regulations concerning authentication
procedures applicable to electronic filing of financial reports in
order to enable internet-based filing of such reports in anticipation
of expected changes to ``WinJammer<SUP>TM</SUP>,'' an application used
by FCMs that file their non-certified financial reports electronically
with the Commission; (2) expand the types of filings that FCMs and IBs
may submit electronically to include required ``early warning'' notices
and certain other notices and filings under Regulations 1.10 and 1.12;
(3) provide for less prescriptive, but more immediate, documentation to
be filed regarding a firm's undercapitalized condition; (4) expressly
include an income statement in the required periodic unaudited
financial reports of FCMs and IBs; and (5) make several other minor
amendments to correct certain outdated references and to make other
clarifications to existing regulations.
The 30-day public comment period on the Proposals expired on
November 12, 2009. The Commission received one written comment on the
Proposals, submitted by the National Futures Association (``NFA''). NFA
noted its agreement and support of the Commission's Proposals and
commended the Commission for its review of its electronic filing
requirements and proposal of changes to reflect technological advances
and current practices. As discussed below, NFA also encouraged the
Commission to consider certain additional amendments to further expand
the use of electronic filing in certain circumstances. NFA did not
suggest delaying the implementation of the Proposals while these
additional suggestions made by NFA are under consideration by the
Commission. The Commission further notes that certain provisions
included in the additional amendments offered by NFA for consideration
may require publication in the Federal Register for prior notice and
comment before they may be adopted. For the reasons set forth below,
the Commission has therefore determined to adopt the amendments as
proposed.
II. Rule Amendments
A. Electronic Filing Issues
1. Amendments to Regulation 1.10
Commission Regulation 1.10(c) generally sets forth the provisions
governing where and how financial reports required to be filed by FCMs
and IBs under Regulation 1.10 must be filed. Regulation 1.10(c)(1)
indicates with whom reports should be filed and Regulation 1.10(c)(2)
addresses the method for submitting such reports. Electronic submission
of certified financial reports currently is addressed separately in
Regulation 1.10(b)(2)(iii).
[[Page 69005]]
This section provides that FCMs must file certified financial reports
in paper form and IBs must file such reports electronically in
accordance with electronic filing procedures established by NFA.
For clarification and ease of reading, the Commission is moving
Regulation 1.10(b)(2)(iii) into a new subparagraph of Regulation
1.10(c)(2). Regulation 1.10(c)(2) is being amended as discussed below
and divided into 2 new subparagraphs: New subparagraph (c)(2)(i)
addresses electronic filing by FCMs with the Commission and new
subparagraph (c)(2)(ii) addresses electronic filings with NFA by IBs
and by applicants for registration as IBs and FCMs.
Regulation 1.10(c)(2) currently provides that non-certified
financial reports may be submitted to the Commission ``in electronic
form using a Commission assigned Personal Identification Number, and
otherwise in accordance with instructions issued by the Commission * *
*.'' The adopted amendments to Regulation 1.10(c)(2) broaden the
language in the regulation relating to user authentication by no longer
limiting user authentication to the use of a personal identification
number (``PIN''). As described in the proposing release, the use of
such a PIN is no longer consistent with the internet-based enhancements
under development for Winjammer. The revisions to Regulation 1.10(c)(2)
also permit any filing or other notice submitted under the regulation
to be transmitted electronically, rather than limiting such submission
to financial reports as under the current regulation. Such other
notices would include, for example, an election to use a fiscal year
other than a calendar year under Regulation 1.10(e) and a request for
an extension of time to file uncertified financial reports under
Regulation 1.10(f). Regulation 1.10(d)(4)(iii), which deals with
electronic filing of Form 1-FR, is being amended by deleting references
to the use of a PIN.
As amended, Regulation 1.10(c)(2)(i) provides that all filings or
other notices or applications prepared by a futures commission merchant
``[except with respect to the filing of certified financial reports
which must be filed in paper form], and pursuant to [Regulation 1.10]
may be submitted to the Commission in electronic form using a form of
user authentication assigned in accordance with procedures established
by or approved by the Commission, and otherwise in accordance with
instruction issued by or approved by the Commission, if the futures
commission merchant or a designated self-regulatory organization has
provided the Commission with the means necessary to read and to process
the information contained in such report.''
Amended Regulation 1.10(c)(2)(ii) provides that ``[except with
respect to the filing of certified FOCUS reports by a registered broker
or dealer with the SEC], all filings or other notices or applications
prepared by an introducing broker or applicant for registration as an
introducing broker or futures commission merchant * * * must be filed
electronically in accordance with electronic filing procedures
established by the National Futures Association * * *.''
In its comment letter, NFA indicated that it would support the
Commission further broadening the permitted use of electronic filing to
include FCM certified financial statements. The current requirement in
Regulation 1.10 for FCM certified financial statements to be filed in
paper form is due in part to the fact that such statements are not
prepared in a standard format that lends itself easily to electronic
input. NFA suggested that notwithstanding this lack of standardization,
the Commission could consider permitting the submission of such
statements in portable document format (``pdf''). The Commission notes,
however, that this suggestion requires further review because the pdf
format is not conducive to the application of automated review of the
data by the Commission. Further review would also be beneficial in
light of continuing developments in technology that may at a later date
result in increased benefits of electronic filing of certified
financial statements for the filers, the Commission and the DSRO
recipients. The adoption of the amendments as proposed will not impede
such further review, and will make available to these same parties
other recognized enhancements to the current requirements for
electronic filing.
2. Amendments to Regulation 1.12
Commission Regulation 1.12 requires FCMs, IBs and applicants for
registration thereof to provide notice of a variety of predefined
events as or before they occur.\4\ The Commission proposed to amend
Regulation 1.12(i), which sets forth the procedures for filing notices
under Regulation 1.12, to allow FCMs and IBs to submit electronically
filings otherwise required to be submitted in writing via facsimile.\5\
In its comment letter, NFA supported this change, but suggested that
the Commission consider requiring, rather than simply permitting,
registrants to electronically file such notices. Although the
Commission strongly encourages, and believes that most registrants will
choose to utilize, electronic filing as a more efficient and
expeditious means to file notices, the Commission nonetheless
appreciates that there may be times when a registrant would prefer, or
is otherwise unable, to file electronically. For example, a registrant
may have a regulatory deadline under the Commission's regulations but
be unable to satisfy such deadline through electronic means due to
temporary technological issues with WinJammer\TM\, NFA's EasyFile
system or the registrants' own systems. Moreover, moving from a
permissive to mandatory filing requirement may require publication in
the Federal Register in order to obtain public comment on such a
proposal. In light of these concerns, the Commission has determined to
adopt the amendment as proposed.
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\4\ See footnote 3, above.
\5\ IBs file notices under Regulation 1.12 with NFA pursuant to
NFA rules. NFA has indicated that it intends to make changes to the
EasyFile system and/or NFA rules, as may be necessary to facilitate
the electronic filing by IBs of notices or other information
permitted to be submitted electronically by the Proposal but
currently filed with NFA in paper form.
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The amendment adopted adds a new subparagraph 1.12(i)(3) to the
Commission's regulations which provides that ``[e]very notice or report
required to be provided in writing under [Regulation 1.12] may, in lieu
of facsimile, be filed via electronic transmission using a form of user
authentication assigned in accordance with procedures established by or
approved by the Commission, and otherwise in accordance with
instructions issued by or approved by the Commission.'' An electronic
submission is required to clearly indicate the registrant or applicant
on whose behalf such filing is made and the use of such user
authentication in submitting such filing would constitute and become a
substitute for the manual signature of the authorized signer.
B. Income Statement Filing Requirement
Commission Regulation 1.10(d) sets forth the content requirements
for financial reports filed with the Commission: The Commission
proposed to amend Regulation 1.10(d)(1) to require ``statements of
income (loss)'' to be included as part of FCM and IB non-certified
financial report filings. The Commission noted that this amendment is
consistent with Regulation 1.10(d)(2)(ii), which requires FCMs and
[[Page 69006]]
IBs to include an income statement as part of their certified financial
reports, and is a practice currently followed by most registrants. NFA
voiced its support of this amendment in its comment letter noting its
agreement that the income statement provides the Commission with
important information for monitoring the financial condition of firms.
The Commission is adopting the amendment as proposed.
As noted in the Proposals, this amendment does not affect the
ability of a broker-dealer to file with the Commission in accordance
with Regulation 1.10(h) the FOCUS report under the Securities and
Exchange Act of 1934, including the income statement currently provided
in that report.\6\
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\6\ Under SEC Regulation 17a-5 and rules of applicable self-
regulatory organizations, certain securities brokers or dealers may
include as part of their quarterly FOCUS report filings a
consolidated Statement of Income (Loss) for the relevant quarter
rather than a Statement of Income (Loss) for the month for which the
report is being filed (i.e., March, June, September or December).
Such broker-dealers that also are registered as FCMs would file
these same reports with the Commission. The Commission wishes to
make clear that an otherwise complete FOCUS report filing made with
the Commission that includes such a consolidated Statement of Income
(Loss) will be deemed an acceptable filing in accordance with
Commission Regulation 1.10(h).
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C. Net Capital Undercapitalization Documentation
Regulation 1.12(a) requires a registrant or applicant for
registration as an FCM or IB that knows or should have known that its
adjusted net capital is less than the minimum required by the
Commission or by its designated self-regulatory organization (``DSRO'')
to provide notice of such event immediately by telephone and confirm
such telephonic notice in writing by facsimile. Regulations 1.12(a)(2)
(applicable to FCMs) and 1.12(a)(3) (applicable to IBs) further require
that, within 24 hours thereafter, the registrant (or applicant) must
file certain specific financial records with the Commission.\7\
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\7\ Specifically, Regulation 1.12(a)(2) requires an FCM (or
applicant) to file with the Commission: (1) A statement of financial
condition; (2) a statement of the computation of its minimum capital
requirements; (3) the statements of segregation requirements and
funds in segregation for customers trading on U.S. commodity
exchanges and for customers' dealer options accounts; and (4) the
statement of secured amounts and funds held in separate accounts for
foreign futures and foreign options customers. Regulation 1.12(a)(3)
requires an IB (or applicant) to file a statement of financial
condition and a statement of the computation of its minimum capital
requirements.
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The Commission also is amending Regulations 1.12(a)(2) and (a)(3)
to require more immediate, but less prescriptive, reporting to the
Commission when a registrant or applicant falls below its minimum net
capital requirement. NFA supported this amendment, stating its
agreement with the Commission that it is more beneficial for the
Commission to receive prompt information concerning a firm's capital
condition than to receive such information in a specific prescribed
format. Under the amended regulation, a firm must continue to provide
immediate telephonic notice, confirmed in writing, in the event that
its adjusted net capital falls below its required minimum. Amended
Regulation 1.12(a)(2) requires that together with such initial
telephonic notice and written confirmation, a firm must provide
``documentation in such form as necessary to adequately reflect the
firm's capital condition as of any date such person's adjusted net
capital is less than the minimum required.'' \8\ The Commission
envisions that such adequate documentation would at a minimum specify
the firm's adjusted net capital requirement and actual adjusted net
capital for any date during which the firm fell below its regulatory
requirement. The amended regulation also requires a firm to provide
similar documentation to that initially provided for any other days the
Commission may request.\9\ By requiring documentation as of ``any''
date that adjusted net capital is less than the required minimum, the
amended regulation makes clear that where a firm is undercapitalized on
more than one day, documentation related to all such time must be
provided.
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\8\ This amendment is consistent with SEC Regulation 17a-11
which requires a broker or dealer whose net capital falls below its
required minimum to give notice of the deficiency that same day,
specifying the broker or dealer's net capital requirement and its
current amount of net capital.
\9\ Regulation 1.10(b)(4) already provides that representatives
of the Commission may upon written notice require Form 1-FR or other
financial information at such times as specified by the
representative.
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Regulation 1.12(a)(3), which provides documentation requirements
for IBs that provide the Commission with notice of their
undercapitalized condition, has been deleted because Regulation
1.12(a)(2) as amended applies to IBs as well as to FCMs. Regulation
1.12(i)(1) also is being amended by deleting certain language related
to the method of filing documentation that is no longer required to be
submitted to the Commission in light of the amendments to Regulation
1.12(a)(2) discussed above.
D. Miscellaneous Amendments to Regulations
The Commission proposed a number of minor amendments to Regulations
1.10 and 1.12 to correct certain outdated references and to otherwise
clarify existing regulations. NFA noted their support of certain of
these amendments that eliminated requirements that provided for
duplicative filing with NFA and the Commission (enumerated as items (1)
and (2), below). The Commission received no comments on the other
amendments. The Commission is, therefore, adopting each of the
amendments as proposed and, as outlined below:
(1) Regulation 1.10(c)(1) is amended to clarify that FCM and IB
applicants for registration need file financial reports required as
part of the application process only with NFA and not also with a
regional office of the Commission;
(2) Regulation 1.12(i)(1) is amended to clarify that an applicant
for registration as an FCM need file any notices required under
Regulation 1.12 only with NFA and not also with the Commission. The
amended regulation makes clear that any notice or report filed with NFA
will be deemed to be filed with, and to be the official record of, the
Commission;
(3) The following minor wording amendments are being made to
Regulation 1.10(c)(1) for the purposes of consistency with other
provisions of the regulations and/or general clarification:
(A) The reference to ``[a] report filed by an [IB] pursuant to
paragraph (b)(2)(i) or (b)(2)(ii)'' is amended to clarify that ``a
report'' in this context is meant to refer to Form 1-FR;
(B) The reference to subparagraphs (b)(2)(i) and (b)(2)(ii) is
being amended for simplicity to refer only to paragraph (b)(2) in
general; and
(C) The language of paragraph 1.10(c)(1) is being amended to
clarify that it is intended to cover not only ``reports'' but all
reports and other ``information;''
(4) Regulations 1.10(b)(2)(i) and 1.10(b)(2)(ii) are being amended
to delete language referring to an option to file financial statements
on a calendar-year basis which is no longer contained in the
Commission's regulations;
(5) Regulation 1.10(b)(3), which permits an FCM or IB to satisfy
the Commission's Form 1-FR filing requirements if it satisfies certain
financial reporting standards and reporting requirements of its DSRO,
is being amended to delete outdated language referring to DSRO
regulations applicable ``after the effective date of these regulations
by the Commission''; and
(6) Language within regulation 1.10(h) that references ``NFA'' is
amended for consistency purposes by spelling out ``National Futures
Association.''
[[Page 69007]]
III. Related Matters
A. Administrative Procedure Act
The Administrative Procedure Act (``APA'') provides that the
required publication of a substantive rule shall be made not less than
30 days before its effective date, unless the agency is permitted to
implement an earlier effective date under one of the exceptions
recognized by the APA.\10\ The exceptions set forth in the APA are as
follows: (1) A substantive rule which grants or recognizes an exemption
or relieves a restriction; (2) interpretative rules and statements of
policy; or (3) as otherwise provided by the agency for good cause found
and published with the rule.\11\
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\10\ 5 U.S.C. 553(b) and (d).
\11\ 5 U.S.C. 553-(d).
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The amendments being made to Rules 1.10 and 1.12 will ``grant or
recognize an exemption or relieve a restriction'' in that they
generally serve to permit and enable registrants to file notices and
reports electronically that previously were required to be filed in
paper form. In addition, the amendments include a number of non-
substantive amendments to correct certain outdated references and to
otherwise clarify existing regulations.
With regard to the amendments relating to the timing of
documentation required by firms that become undercapitalized, the
Commission has a clear interest in receiving such information
immediately and believes, therefore, that there is ``good cause'' to
make such requirement effective in fewer than 30 days. With respect to
the amendments requiring an income statement, the Commission believes
that there is also ``good cause'' to make this provision effective on
January 4, 2010, consistent with the other rule amendments. It would
not be logical for the income statement requirement to be implemented
at a time later than the effective date of the remaining rules, as the
information in the income statement is an integral part of a
registrant's financial statements. Further, as the SEC and several
self-regulatory organizations already require dual registrants and
other FCMs to include the income statement in their financial
statements, the income statement is already formatted as part of the
Form 1-FR reports that registrants currently file with the Commission,
and the data required to complete it is generally already available
from other parts of the form. In fact, substantially all FCMs and IBs
already complete the income statement as part of their required
periodic non-certified financial report filings.
Accordingly, the Commission has determined to make these amendments
effective on January 4, 2010, consistent with the anticipated
availability of the updated WinJammer<SUP>TM</SUP> system.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq.,
requires that agencies, in rulemaking, consider the impact of those
regulations on small businesses. This rulemaking would affect FCMs and
IBs. The Commission has previously determined that, based upon the
fiduciary nature of FCM/customer relationships, as well as the
requirement that FCMs meet minimum financial requirements, FCMs should
be excluded from the definition of small entity.
With respect to IBs, the Commission stated that it is appropriate
to evaluate within the context of a particular rule proposal whether
some or all IBs should be considered to be small entities and, if so,
to analyze the economic impact on such entities at that time.\12\ These
amendments will not place any additional burdens on IBs that are small
businesses because all such parties, if any, already are subject to the
financial reporting and notice requirements under Regulations 1.10 and
1.12 and already file financial reports through NFA's electronic filing
system. Additionally, although the Commission is amending its
regulations to add a requirement to include statements of income and
loss as part of non-certified financial report filings, substantially
all IBs already are filing this data in practice and, in any event,
must compute the relevant income and loss data (although not currently
required to be provided in a separate income statement) in order to
complete Commission Form 1-FR or the SEC FOCUS report, as applicable,
under the Commission's regulations.\13\ The Commission's Proposals
solicited public comment on this analysis.\14\ No comments were
received. Accordingly, pursuant to Section 3(a) of the RFA, 5 U.S.C.
605(b), the Chairman, on behalf of the Commission, certifies that the
action taken herein will not have a significant economic impact on a
substantial number of small entities.
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\12\ See 48 FR 35248, 35275-78 (Aug. 3, 1983).
\13\ See Commission Regulations 1.10(b)(2) and 1.10(h)
(requiring IBs to file with the Commission Form 1-FR-FCM or, as an
alternative in the case of a registered broker or dealer with the
SEC, the FOCUS report).
\14\ 74 FR at 52438.
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C. Paperwork Reduction Act
This rulemaking provides an alternative method of collection for a
required collection of information under Part 1 of the Commission's
rules, but is not anticipated to change the burden under such
collection as the actual financial reporting requirements have not
changed significantly. As required by the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)), the Commission submitted a copy of this
section to the Office of Management and Budget (``OMB'') for its
review. No comments were received in response to the Commission's
invitation in its notice of proposed rulemaking to comment on any
change in the potential paperwork burden associated with these rule
amendments.\15\
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\15\ Id.
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D. Cost-Benefit Analysis
Section 15(a) of the Act, as amended by Section 119 of the
Commodity Futures Modernization Act, 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) as amended does
not require the Commission to quantify the costs and benefits of a new
regulation or to determine whether the benefits of the proposed
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 five broad areas of market and public concern:
Protection of market participants and the public; efficiency,
competitiveness, and financial integrity of futures markets; price
discovery; sound risk management practices; and other public interest
considerations. The Commission, in its discretion, can choose to give
greater weight to any one of the five enumerated areas and determine
that, notwithstanding its costs, a particular regulation is 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's proposal contained an analysis of its
consideration of these costs and benefits and solicited public comment
thereon.\16\ No comments were received with respect to this analysis.
Therefore, pursuant to such consideration, the Commission has decided
to adopt these amendments as discussed above.
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\16\ 74 FR at 52439.
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[[Page 69008]]
List of Subjects in 17 CFR Part 1
Brokers, Commodity futures, Reporting and recordkeeping
requirements.
0
In consideration of the foregoing and pursuant to the authority
contained in the Commodity Exchange Act and, in particular, Sections
4f, 4g and 8a(5) thereof, 7 U.S.C. 6f, 6g and 12a(5), the Commission
hereby amends 17 CFR part 1 as follows:
PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT
0
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).
0
2. Section 1.10 is amended by removing paragraph (b)(2)(iii) and
revising paragraphs (b)(2)(i), (b)(2)(ii)(A), (b)(3), (c)(1) and
(c)(2), (d)(1)(ii), (d)(4)(iii), and (h) as follows:
Sec. 1.10 Minimum financial requirements for futures commission
merchants and introducing brokers.
* * * * *
(b) * * *
(2)(i) Except as provided in paragraphs (b)(3) and (h) of this
section, and except for an introducing broker operating pursuant to a
guarantee agreement which is not also a securities broker or dealer,
each person registered as an introducing broker must file a Form 1-FR-
IB semiannually as of the middle and the close of each fiscal year.
Each Form 1-FR-IB must be filed no later than 17 business days after
the date for which the report is made.
(ii)(A) In addition to the financial reports required by paragraph
(b)(2)(i) of this section, each person registered as an introducing
broker must file a Form 1-FR-IB as of the close of its fiscal year
which must be certified by an independent public accountant in
accordance with Sec. 1.16 no later than 90 days after the close of
each introducing broker's fiscal year: Provided, however, that a
registrant which is registered with the Securities and Exchange
Commission as a securities broker or dealer must file this report not
later than the time permitted for filing an annual audit report under
Sec. 240.17a-5(d)(5) of this title.
* * * * *
(3) The provisions of paragraphs (b)(1) and (b)(2) of this section
may be met by any person registered as a futures commission merchant or
as an introducing broker who is a member of a designated self-
regulatory organization and conforms to minimum financial standards and
related reporting requirements set by such designated self-regulatory
organization in its bylaws, rules, regulations, or resolutions and
approved by the Commission pursuant to Section 4f(b) of the Act and
Sec. 1.52: Provided, however, That each such registrant shall promptly
file with the Commission a true and exact copy of each financial report
which it files with such designated self-regulatory organization.
* * * * *
(c) Where to file reports. (1) Form 1-FR filed by an introducing
broker pursuant to paragraph (b)(2) of this section need be filed only
with, and will be considered filed when received by, the National
Futures Association. Other reports or information provided for in this
section will be considered filed when received by the regional office
of the Commission with jurisdiction over the state in which the
registrant's principal place of business is located and by the
designated self-regulatory organization, if any; and reports or other
information required to be filed by this section by an applicant for
registration will be considered filed when received by the National
Futures Association. Any report or information filed with the National
Futures Association pursuant to this paragraph shall be deemed for all
purposes to be filed with, and to be the official record of, the
Commission.
(2)(i) Except as provided in the last sentence of this
subparagraph, all filings or other notices prepared by a futures
commission merchant pursuant to this section may be submitted to the
Commission in electronic form using a form of user authentication
assigned in accordance with procedures established by or approved by
the Commission, and otherwise in accordance with instructions issued by
or approved by the Commission, if the futures commission merchant or a
designated self-regulatory organization has provided the Commission
with the means necessary to read and to process the information
contained in such report. A Form 1-FR required to be certified by an
independent public accountant in accordance with Sec. 1.16 which is
filed by a futures commission merchant must be filed in paper form and
may not be filed electronically.
(ii) Except as provided in paragraph (h) of this section, all
filings or other notices or applications prepared by an introducing
broker or applicant for registration as an introducing broker or
futures commission merchant pursuant to this section must be filed
electronically in accordance with electronic filing procedures
established by the National Futures Association. In the case of a Form
1-FR-IB that is required to be certified by an independent public
accountant in accordance with Sec. 1.16, a paper copy of any such
filing with the original manually signed certification must be
maintained by the introducing broker or applicant for registration as
an introducing broker in accordance with Sec. 1.31.
* * * * *
(d)(1) * * *
(ii) Statements of income (loss) and a statement of changes in
ownership equity for the period between the date of the most recent
statement of financial condition filed with the Commission and the date
for which the report is made;
* * * * *
(4) * * *
(iii) In the case of a Form 1-FR filed via electronic transmission
in accordance with procedures established by or approved by the
Commission, such transmission must be accompanied by the user
authentication assigned to the authorized signer under such procedures,
and the use of such user authentication will constitute and become a
substitute for the manual signature of the authorized signer for the
purpose of making the oath or affirmation referred to in this
paragraph.
* * * * *
(h) Filing option available to a futures commission merchant or an
introducing broker that is also a securities broker or dealer. Any
applicant or registrant which is registered with the Securities and
Exchange Commission as a securities broker or dealer may comply with
the requirements of this section by filing (in accordance with
paragraphs (a), (b), (c), and (j) of this section) a copy of its
Financial and Operational Combined Uniform Single Report under the
Securities Exchange Act of 1934, Part II, Part IIA, or Part II CSE
(FOCUS Report), in lieu of Form 1-FR; Provided, however, That all
information which is required to be furnished on and submitted with
Form 1-FR is provided with such FOCUS Report; and Provided, further,
That a certified FOCUS Report filed by an introducing broker or
applicant for registration as an introducing broker in lieu of a
certified Form 1-FR-IB must be filed according to National Futures
Association rules, either in paper form or electronically, in
accordance with procedures established
[[Page 69009]]
by the National Futures Association, and if filed electronically, a
paper copy of such filing with the original manually signed
certification must be maintained by such introducing broker or
applicant in accordance with Sec. 1.31.
* * * * *
0
3. Section 1.12 is amended by:
0
a. Revising paragraphs (a)(2) and (i)(1);
0
b. Removing paragraph (a)(3); and
0
c. Adding paragraph (i)(3) as follows:
Sec. 1.12 Maintenance of minimum financial requirements by futures
commission merchants and introducing brokers.
(a) * * *
(2) Provide together with such notice documentation in such form as
necessary to adequately reflect the applicant's or registrant's capital
condition as of any date such person's adjusted net capital is less
than the minimum required. The applicant or registrant must provide
similar documentation for other days as the Commission may request.
* * * * *
(i)(1) Every notice and written report required to be given or
filed by this section (except for notices required by paragraph (f) of
this section) by a futures commission merchant or a self-regulatory
organization must be filed with the regional office of the Commission
with jurisdiction over the state in which the registrant's principal
place of business is located, with the principal office of the
Commission in Washington, DC, with the designated self-regulatory
organization, if any; and with the Securities and Exchange Commission,
if such registrant is a securities broker or dealer. Every notice and
written report required to be given or filed by this section by an
applicant for registration as a futures commission merchant must be
filed with the National Futures Association (on behalf of the
Commission), with the designated self-regulatory organization, if any,
and with the Securities and Exchange Commission, if such applicant is a
securities broker or dealer. Any notice or report filed with the
National Futures Association pursuant to this paragraph shall be deemed
for all purposes to be filed with, and to be the official record of,
the Commission.
* * * * *
(3) Every notice or report required to be provided in writing to
the Commission under this section may, in lieu of facsimile, be filed
via electronic transmission using a form of user authentication
assigned in accordance with procedures established by or approved by
the Commission, and otherwise in accordance with instructions issued by
or approved by the Commission. Any such electronic submission must
clearly indicate the registrant or applicant on whose behalf such
filing is made and the use of such user authentication in submitting
such filing will constitute and become a substitute for the manual
signature of the authorized signer.
Issued in Washington, DC, on December 24, 2009, by the
Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. E9-31032 Filed 12-29-09; 8:45 am]
Last Updated: December 30, 2009