2016-07304
Federal Register, Volume 81 Issue 63 (Friday, April 1, 2016)
[Federal Register Volume 81, Number 63 (Friday, April 1, 2016)]
[Rules and Regulations]
[Pages 18743-18747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-07304]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 3
RIN 3038-AE16
Alternative to Fingerprinting Requirement for Foreign Natural
Persons
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rule.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is amending existing Commission regulations to establish an
alternative to fingerprinting to evaluate the fitness of natural
persons who are required to submit fingerprints under the Commission's
regulations and who have not resided in the United States since
reaching 18 years of age (``Final Rule'').
DATES: The Final Rule is effective on May 2, 2016.
FOR FURTHER INFORMATION CONTACT: Katherine Driscoll, Associate Chief
Counsel, 202-418-5544, [email protected]; Jacob Chachkin, Special
Counsel, 202-418-5496, [email protected]; or Adam Kezsbom, Special
Counsel, 202-418-5372, [email protected], Division of Swap Dealer and
Intermediary Oversight, Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Proposal
On January 12, 2016, the Commission published a Notice of Proposed
Rulemaking (``Proposal'') \1\ to amend the requirement that, pursuant
to the registration process for determining a registrant's fitness in
part 3 of the Commission's regulations, natural persons \2\ that wish
to be principals \3\ or associated persons \4\ of Commission
registrants,\5\ or who are responsible for entry of orders from an FB's
or FT's own account, submit their fingerprints (the ``Fingerprinting
Requirement'').\6\ The Proposal contemplated adding a new paragraph (e)
to the existing list of exemptions from the Fingerprinting Requirement
in Sec. 3.21 \7\ to, among other things, codify and clarify the
alternative to the Fingerprinting Requirement provided by CFTC Staff
Letter No. 12-49 \8\ and CFTC Staff Letter No. 13-29 \9\ (``DSIO No-
Action Letters''). In particular, the Commission proposed
[[Page 18744]]
adding an alternative to the requirement to provide fingerprints when
applying for Commission registration for natural persons who have not
resided in the United States since reaching 18 years of age. The
Proposal allowed any such person's registered firm to complete a
criminal history background check in lieu of submitting fingerprints
for such person.\10\
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\1\ Alternative to Fingerprinting Requirement for Foreign
Natural Persons, 81 FR 1359 (Jan. 12, 2016).
\2\ As used herein, the terms ``natural person'' and
``individual'' have the same meaning.
\3\ See the definition of principal in Commission regulation
3.1(a). 17 CFR 3.1(a).
\4\ An ``associated person'' is any natural person who is
associated in certain capacities with a futures commission merchant
(``FCM''), retail foreign exchange dealer (``RFED''), introducing
broker (``IB''), commodity pool operator (``CPO''), commodity
trading advisor (``CTA''), swap dealer (``SD''), major swap
participant (``MSP''), or leverage transaction merchant (``LTM'').
17 CFR 1.3(aa).
For the definitions of these registration categories (other than
RFED), see Section 1a of the Commodity Exchange Act (``CEA'' or
``Act'') and Commission regulation 1.3. 7 U.S.C. 1a and 17 CFR 1.3.
For the definition of RFED, see Commission regulation 5.1(h). 17 CFR
5.1(h).
\5\ Subject to certain exceptions and exclusions, persons
engaging in specified activities involving commodity interests are
required pursuant to the CEA and/or Commission regulations to
register with the Commission in certain registration categories.
These include registration as an FCM, RFED, IB, CPO, CTA, SD, MSP,
LTM, floor broker (``FB''), and floor trader (``FT''). For the
definitions of FB and FT, see Section 1a of the CEA and Commission
regulation 1.3. 7 U.S.C. 1a and 17 CFR 1.3.
\6\ Currently, the Commission may, directly or indirectly,
require fingerprinting pursuant to Commission regulations
3.10(a)(2); 3.11(a)(1); 3.12(c)(3), d(2), f(3), or (i)(3);
3.40(a)(1), (a)(2), or (b); 3.44(a)(5) or (c); or 3.46(a)(3). 17 CFR
3.10(a)(2); 3.11(a)(1); 3.12(c)(3), d(2), f(3), and (i)(3);
3.40(a)(1), (a)(2), and (b); 3.44(a)(5) and (c); and 3.46(a)(3).
In support of its initial promulgation of the fingerprinting
requirements, the Commission stated that these requirements ``are
necessary to permit improvements in the Commission's background
checking of applicants for registration, to permit positive
identification of certain individuals with common names, to reduce
the number of applications filed by individuals who are unfit for
registration, and to facilitate fitness reviews of registrants on a
spot and periodic basis.'' See Revision of Registration Regulations;
Final Rules; Designation of New Part, 45 FR 80485, 80485 (Dec. 5,
1980).
\7\ Commission regulation 3.21 provides exemptions to the
Fingerprinting Requirement, subject to certain conditions, for
persons whose fingerprints have recently been identified and
processed by the Federal Bureau of Investigation, for persons whose
application for initial registration with the Commission in any
capacity was recently granted, for persons that have a current Form
8-R on file with the Commission or National Futures Association
(``NFA''), and for principals that are outside directors. 17 CFR
3.21.
\8\ CFTC Staff Letter No. 12-49 (Dec. 11, 2012), available at
http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/12-49.pdf.
\9\ CFTC Staff Letter No. 13-29 (Jun. 21, 2013), available at
http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-29.pdf.
\10\ The Commission has delegated to NFA, a registered futures
association under Section 17 of the CEA, the registration functions
set forth in subparts A, B, and C of part 3 of the Commission's
regulations, including the collection and review of a completed Form
8-R and related fingerprint submissions from each natural person
completing a Form 8-R. See 17 CFR 3.2(a).
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The Commission generally requested comments on the Proposal and
also solicited comments on a number of specific matters.\11\ For
example, the Commission solicited comments on potential changes to its
proposed definition of a foreign natural person, on the scope and
effectiveness of the criminal history background check required by the
Proposal and any alternatives thereto, and on the Commission's analysis
of the costs and benefits of the Proposal. The comment period for the
Proposal ended on February 11, 2016.
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\11\ Proposal, 81 FR at 1361.
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II. Summary of Comments
The Commission received two relevant comments in response to the
Proposal--one from Sutherland Asbill & Brennan LLP on behalf of The
Commercial Energy Working Group (``The Working Group'') and one from
Joyce Dillard (``Dillard'').\12\ The Working Group supported the
Proposal as a means of alleviating some of, what The Working Group
described as, ``the undue burdens associated with providing a
fingerprint card pursuant to Part 3 of the Commission's regulations.''
However, The Working Group requested that the Commission expand the
Proposal to all natural persons that are principals or associated
persons of registrants subject to the Fingerprinting Requirement. The
Working Group stated that ``[t]his approach, rooted in fairness, would
provide equal treatment to U.S. residents and non-U.S. residents
alike,'' but provided no further rationale for its approach.
Conversely, Dillard did not support the Proposal, and stated that
fingerprinting should be required without alternative.
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\12\ The Commission also received two comments that were not
relevant to the Proposal. All of the comments are available at
http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1657.
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III. Final Rule
After careful consideration, the Commission is adopting the Final
Rule as proposed. The Commission is not expanding the Final Rule to
cover persons other than Foreign Natural Persons (as defined below) as
requested by The Working Group because, while there are limitations on
the usefulness of fingerprints of foreign nationals, fingerprinting is
an expedient way to investigate whether someone has a criminal record
in the United States. For instance, in the United States, fingerprints
may be checked for possible matches against existing repositories of
fingerprints quickly and efficiently.
As discussed in the Proposal, the Commission believes the Final
Rule, in providing certainty to market participants by way of
Commission regulation, makes the commodity interest markets it oversees
more liquid, competitive, and accessible by enabling Foreign Natural
Persons to demonstrate that they meet the minimum standards for fitness
and competency without undue burden. The alternative to fingerprinting
removes an impediment to participation in United States' markets by
Foreign Natural Persons while also ensuring the continued protection of
market participants and the public. Further, the Commission believes
that, by providing an alternative for Foreign Natural Persons, the
Final Rule is consistent with the principles of international comity.
Section 3.21(e)(2) provides that the obligation to provide a
fingerprint card for a Foreign Natural Person under part 3 of the
Commission's regulations shall be deemed satisfied for a Certifying
Firm (as defined below) if: (a) Such Certifying Firm causes a criminal
history background check of such Foreign Natural Person to be
performed; (b) such criminal history background check does not reveal
any matters that constitute a disqualification under Sections 8a(2) or
8a(3) of the CEA,\13\ other than those disclosed to NFA; and (c) a
person authorized by such Certifying Firm submits, in reliance on such
criminal history background check, a certification by such Certifying
Firm to NFA.
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\13\ 7 U.S.C. 12a(2) and (3).
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The certification must: (i) State that the conditions described
above have been satisfied; and (ii) be signed by a person authorized by
such Certifying Firm to make such certification. In addition, each
criminal history background check must: (a) Be of a type that would
reveal all matters listed under Sections 8a(2)(D) or 8a(3)(D), (E), or
(H) of the CEA \14\ relating to the Foreign Natural Person and (b) be
completed not more than one calendar year prior to the date that such
Certifying Firm submits the certification to NFA described in the Final
Rule.
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\14\ 7 U.S.C. 12a(2)(D) and 12a(3)(D), (E), and (H). These
provisions of Sections 8a(2) and (3) of the CEA generally relate to
criminal convictions.
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In terms of definitions, Sec. 3.21(e)(1)(i) defines Foreign
Natural Person, solely for purposes of paragraph (e), as any natural
person who has not resided in the United States since reaching the age
of 18 years. Also, Sec. 3.21(e)(1)(ii) defines Certifying Firm, also
solely for purposes of paragraph (e), with respect to natural persons
acting in certain specified capacities in relation to the firm.
By way of recordkeeping, Sec. 3.21(e)(3) requires that the
Certifying Firm maintain, in accordance with Commission regulation
1.31, records documenting each criminal history background check and
the results thereof.\15\
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\15\ 17 CFR 1.31.
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As discussed in the Proposal, the Final Rule supersedes the DSIO
No-Action Letters without prejudice to those that were relying on
either of the DSIO No-Action Letters and had satisfied the requirements
thereof prior to January 12, 2016, the date the Proposal was published
in the Federal Register.
V. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') \16\ requires Federal
agencies, in promulgating regulations, to consider whether the rules
they propose will have a significant economic impact on a substantial
number of small entities and, if so, to provide a regulatory
flexibility analysis regarding the economic impact on those entities.
In the Proposal, the Commission certified that the Proposal would not
have a significant economic impact on a substantial number of small
entities. The Commission received no comments with respect to the RFA.
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\16\ 5 U.S.C. 601 et seq.
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As discussed in the Proposal, the Final Rule affects certain FCMs,
RFEDs, IBs, CPOs, CTAs, SDs, MSPs, LTMs, FBs, and FTs that wish to take
advantage of the alternative to fingerprinting to evaluate the fitness
of their Foreign Natural Persons for which fingerprints must be
submitted to NFA.\17\ The Commission has previously
[[Page 18745]]
determined that FCMs, RFEDS, CPOs, SDs, MSPs, and LTMs are not small
entities for purposes of the RFA.\18\ Therefore, the requirements of
the RFA do not apply to those entities. With respect to CTAs, FBs, FTs,
and IBs, the Commission has found it appropriate to consider whether
such registrants should be deemed small entities for purposes of the
RFA on a case-by-case basis, in the context of the particular
Commission regulation at issue.\19\ As certain of these registrants may
be small entities for purposes of the RFA, the Commission considered
whether the Final Rule would have a significant economic impact on such
registrants. As discussed in the Proposal, the Final Rule solely
provides an optional alternative to complying with the Fingerprinting
Requirement, which already applies to such registrants, and will,
therefore, not impose any new regulatory obligations on affected
registrants. The Final Rule is not expected to impose any new burdens
on market participants. Rather, to the extent that the Final Rule
provides an alternative means to comply with the Fingerprinting
Requirement and is elected by a market participant, the Commission
believes it is reasonable to infer that the alternative is less
burdensome to such participant. The Commission does not, therefore,
expect small entities to incur any additional costs as a result of the
Final Rule. Consequently, the Commission finds that no significant
economic impact on small entities will result from the Final Rule.
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\17\ The Final Rule also directly affects certain of such
individuals; however, the Commission has noted that the RFA, by its
terms, does not apply to individuals. See 48 FR 14933, 14954 n.115
(Apr. 6, 1983). Therefore, no analysis on the economic impact of
this rule on individuals is provided.
\18\ See Policy Statement and Establishment of Definitions of
``Small Entities'' for Purposes of the Regulatory Flexibility Act,
47 FR 18618 (Apr. 30, 1982) (FCMs and CPOs); Leverage Transactions,
54 FR 41068 (Oct. 5, 1989) (LTMs); Regulation of Off-Exchange Retail
Foreign Exchange Transactions and Intermediaries, 75 FR 55410, 55416
(Sept. 10, 2010) (RFEDs); and Registration of Swap Dealers and Major
Swap Participants, 77 FR 2613, 2620 (Jan. 19, 2012) (SDs and MSPs).
\19\ See 47 FR at 18620 (CTAs and FBs); Registration of Floor
Traders; Mandatory Ethics Training for Registrants; Suspension of
Registrants Charged With Felonies, 58 FR 19575, 19588 (Apr. 15,
1993) (FTs); and Introducing Brokers and Associated Persons of
Introducing Brokers, Commodity Trading Advisors and Commodity Pool
Operators; Registration and Other Regulatory Requirements, 48 FR
35248, 35276 (Aug. 3, 1983) (IBs).
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Accordingly, for the reasons stated above, the Commission believes
that the Final Rule will not have a significant economic impact on a
substantial number of small entities. Therefore, the Chairman, on
behalf of the Commission, hereby certifies, pursuant to 5 U.S.C.
605(b), that the Final Rule being published today by this Federal
Register release will not have a significant economic impact on a
substantial number of small entities.
B. Paperwork Reduction Act
1. Background
The Paperwork Reduction Act of 1995 (``PRA'') \20\ imposes certain
requirements on Federal agencies (including the Commission) in
connection with conducting or sponsoring any collection of information
as defined by the PRA.
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\20\ 44 U.S.C. 3501 et seq.
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As discussed in the Proposal, the Final Rule contains collections
of information for which the Commission has previously received control
numbers from the Office of Management and Budget (``OMB''). The titles
for these collections of information are ``Registration under the
Commodity Exchange Act, OMB control number 3038-0023'' \21\ and
``Registration of Swap Dealers and Major Swap Participants, OMB control
number 3038-0072.'' \22\
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\21\ See OMB Control No. 3038-0023, http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0023# (last visited
Feb. 24, 2016).
\22\ See OMB Control No. 3038-0072, http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0072# (last visited
Feb. 24, 2016).
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The responses to these collections of information are mandatory. An
agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless it displays a currently
valid control number issued by OMB.
The collection of information in the Final Rule provides an
optional alternative to complying with the Fingerprinting Requirement
(as described above). Eligible persons have the option to elect the
certification process, but no obligation to do so. For this reason,
except to the extent that the Commission has amended the subject OMB
control numbers for PRA purposes to reflect the alternative
certification process, the Final Rule is not expected to impose any new
burdens on market participants. Rather, to the extent that the Final
Rule provides an alternative means to comply with the Fingerprinting
Requirement and is elected by market participants, it is reasonable for
the Commission to infer that the alternative is less burdensome to such
participants.
2. Revisions to Collections 3038-0023 and 3038-0072
Collections 3038-0023 and 3038-0072 are currently in force with
their control numbers having been provided by OMB.
As discussed above, the Final Rule incorporates an alternative to
fingerprinting to evaluate the fitness of certain Foreign Natural
Persons. In order to qualify for this alternative, the Certifying Firm
must take the steps required pursuant to the Final Rule, including
submitting the required certification to NFA and maintaining records of
the criminal history background check and the results thereof.
Requiring such actions requires revisions to collections 3038-0023 and
3038-0072. Accordingly, the Commission submitted a request to amend
each of collections 3038-0023 and 3038-0072 to OMB and invited public
comment on its paperwork burdens in the Proposal. In particular, as
further described in the Proposal, the Commission estimates that
approximately 198 FCMs, RFEDs, IBs, CPOs, CTAs, LTMs, FBs, and FTs and
2 SDs and MSPs will submit the required certification \23\ and,
accordingly, estimates the additional hour burdens below.
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\23\ Proposal, 81 FR at 1362.
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a. Estimated Additional Hour Burden for Collection 3038-0023
Collection 3038-0023 relates to collections of information from
FCMs, RFEDs, IBs, CPOs, CTAs, LTMs, FBs, and FTs. The estimated
additional hour burden for collection 3038-0023 of 495 hours is
calculated as follows:
Number of registrants: 198.
Frequency of collection: As needed.
Estimated annual responses per registrant: 1.
Estimated aggregate number of annual responses: 198.
Estimated annual hour burden per registrant: 2.5.\24\
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\24\ This collection's burdens are restricted to (i) registrants
providing necessary information to commercial service provider(s) to
conduct a criminal history background check for a Foreign Natural
Person; (ii) registrants preparing and submitting the certification
described herein; and (iii) registrants maintaining, in accordance
with Commission regulation 1.31, records documenting that the
criminal history background check was completed and the results
thereof. To the extent that a market participant instead elects to
conduct the background check internally, it is reasonable for the
Commission to infer that doing so is less burdensome to such
participant.
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Estimated aggregate annual hour burden: 495 (198 registrants x 2.5
hours per registrant).
b. Estimated Additional Hour Burden for Collection 3038-0072
Collection 3038-0072 relates to collections of information from SDs
and MSPs. The estimated additional hour
[[Page 18746]]
burden for collection 3038-0072 of 5 hours is calculated as follows:
Number of registrants: 2.
Frequency of collection: As needed.
Estimated annual responses per registrant: 1.
Estimated aggregate number of annual responses: 2.
Estimated annual hour burden per registrant: 2.5.\25\
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\25\ See n. 24, supra.
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Estimated aggregate annual hour burden: 5 (2 registrants x 2.5
hours per registrant).
3. Information Collection Comments
In the Proposal, the Commission invited the public and other
Federal agencies to comment on any aspect of the information collection
requirements discussed above. The Commission did not receive any such
comments.
C. Cost-Benefit Considerations
Section 15(a) of the Act \26\ requires the Commission to consider
the costs and benefits of its actions before issuing a regulation under
the Act. Section 15(a) further specifies that the costs and benefits
shall be evaluated in light of the following five broad areas of market
and public concern: (i) Protection of market participants and the
public; (ii) efficiency, competitiveness and financial integrity of
futures markets; (iii) price discovery; (iv) sound risk management
practices; and (v) other public interest considerations. The Commission
considers the costs and benefits resulting from its discretionary
determinations with respect to the Section 15(a) considerations.
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\26\ 7 U.S.C. 19(a).
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1. Costs
a. Costs to FCMs, RFEDs, IBs, CPOs, CTAs, SDs, MSPs, LTMs, FBs, FTs,
Associated Persons, and Other Foreign Natural Persons
The Final Rule provides an alternative to complying with the
Fingerprinting Requirement, which alternative no FCM, RFED, IB, CPO,
CTA, SD, MSP, LTM, FB, FT, associated person, or other Foreign Natural
Person is required to elect. As such, the Commission believes that the
Final Rule does not impose any net cost on such persons, because the
Commission presumes that such persons will elect the alternative only
if they assess it to have a lower or equal net cost.
b. Other Costs
Because the Final Rule allows FCMs, RFEDs, IBs, CPOs, CTAs, SDs,
MSPs, LTMs, FBs, and FTs to submit, subject to the terms and conditions
herein, a certification in lieu of a fingerprint card for Foreign
Natural Persons, NFA will need to develop a process to review and
retain such certifications and consider amending its applications and/
or other forms to reflect the availability of this alternative to the
Fingerprinting Requirement. The Commission expects that the costs of
such activities will not be significant, because NFA has been
processing and retaining requests under the DSIO No-Action Letters
since their issuance and the changes to NFA's applications and/or other
forms to take into account the Final Rule would likely be minimal and
could be included in other future unrelated updates.
2. Benefits
The Commission believes that, by establishing an alternative method
for evaluating the fitness of Foreign Natural Persons for whom a
fingerprint card must currently be submitted, the Final Rule helps keep
the United States' commodity interest markets accessible and
competitive with other markets around the world by removing an
impediment to participation in United States' markets by Foreign
Natural Persons while also ensuring the continued protection of market
participants and the public. Further, the Commission believes that, by
providing an alternative for persons outside the United States, the
Final Rule is consistent with the principles of international comity.
3. Commenter's Request
As discussed above, The Working Group requested that the Commission
expand the alternative provided in the Proposal to include all natural
persons that are principals or associated persons of registrants
subject to the Fingerprinting Requirement. The Commission is not making
such an expansion, because, while there are limitations on the
usefulness of fingerprints of foreign nationals, fingerprinting is an
expedient way to investigate whether someone has a criminal record in
the United States.
4. Section 15(a) Factors
Section 15(a) of the CEA requires the Commission to consider the
costs and benefits of its actions before promulgating a regulation
under the CEA or issuing certain orders. CEA Section 15(a) further
specifies that the costs and benefits shall be evaluated in light of
five broad areas of market and public concern: (i) Protection of market
participants and the public; (ii) efficiency, competitiveness, and
financial integrity of futures markets; (iii) price discovery; (iv)
sound risk management practices; and (v) other public interest
considerations.
i. Protection of Market Participants and the Public
The Final Rule continues to protect the public by ensuring that
persons who are currently subject to the Fingerprinting Requirement,
whether or not they reside in the United States, must have their
fitness reviewed through the completion of a background check.
ii. Efficiency, Competitiveness, and Financial Integrity of Markets
The Final Rule may increase the efficiency and competitiveness of
the markets by encouraging more participation in United States markets
by Foreign Natural Persons. The Commission does not believe that the
integrity of financial markets is harmed because the Final Rule
requires that the background check meet the objective standards which
rely on the clearly-stated matters under Sections 8a(2)(D) and
8a(3)(D), (E), and (H) of the CEA.
iii. Price Discovery
The Commission generally believes that providing an alternative
means of ensuring the fitness of a person who resides outside the
United States for purposes of Commission registration, by reducing the
burden that the Fingerprinting Requirement could impose on such
persons, could reduce impediments to transact on a cross-border basis,
increasing participation in commodity interest markets. The Commission
believes that such increased participation and the resulting increased
liquidity may help to facilitate price discovery.
iv. Sound Risk Management Practices
One of the critically important functions of registration is to
allow the Commission to ensure that all futures and swaps industry
professionals who deal with the public meet minimum standards of
fitness and competency.\27\ The fitness investigations that are part of
the registration process permit the Commission and/or its delegatees to
(a) uncover past misconduct that may disqualify an individual or entity
from registration and (b) help determine if such persons have disclosed
all matters required to be disclosed in their applications to become
registered with
[[Page 18747]]
the Commission.\28\ Having futures and swaps market participants that
are not subject to any of the matters that would lead to a
disqualification of registration under Sections 8a(2) or (3) of the CEA
is one way to help ensure that a Commission registrant will not be a
risk to its customers or to the market in general.
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\27\ See, e.g., Commodity Futures Trading Comm'n, Division of
Clearing and Intermediary Oversight, Public Report on the
Registration Program of the National Futures Association, June 2010,
at 1 (citing H.R. REP. NO. 97-565(I), at 48 (1982), reprinted in
1982 U.S.C.C.A.N. 3871, 3897-3899).
\28\ See http://www.nfa.futures.org/NFA-registration/index.HTML
(last visited Feb. 24, 2016), stating that ``[t]he primary purposes
of registration are to screen an applicant's fitness to engage in
business as a futures professional and to identify those individuals
and organizations whose activities are subject to federal
regulation.''
Pursuant to Commission regulation 3.60, the Commission may,
subject to some limitations, deny, grant with conditions, suspend,
revoke, or restrict registration to an applicant if the Commission
alleges and is prepared to prove that the registrant or applicant is
subject to one or more of the statutory disqualifications set forth
in section 8a(2), 8a(3) or 8a(4) of the Act. 17 CFR 3.60. Sections
8a(2) and 8a(3) of the Act contain an extensive list of matters that
provide grounds for refusing or conditioning an applicant's
registration, including, without limitation, felony convictions,
commodities or securities law violations, bars or other adverse
actions taken by financial regulators, and willfully omitting to
state any material fact in an application. See 7 U.S.C. 12a(2) and
(3). See also Interpretative Statement With Respect to Section
8a(2)(C) and (E) and Section 8a(3)(J) and (M) of the Commodity
Exchange Act, appendix A to part 3 of the Commission's regulations.
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v. Other Public Interest Considerations
The Commission believes that, by providing an alternative for
persons outside the United States, the Final Rule is consistent with
the principles of international comity.
List of Subjects in 17 CFR Part 3
Associated persons, Brokers, Commodity futures, Commodity pool
operators, Commodity trading advisors, Customer protection,
Fingerprinting, Foreign exchange, Futures commission merchants,
Introducing brokers, Leverage transaction merchants, Leverage
transactions, Major swap participants, Principals, Registration,
Reporting and recordkeeping requirements, Retail foreign exchange
dealers, Swap dealers, Swaps.
For the reasons set forth in the preamble, the Commodity Futures
Trading Commission amends part 3 as follows:
PART 3--REGISTRATION
0
1. The authority citation for part 3 continues to read as follows:
Authority: 5 U.S.C. 552, 552b; 7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1,
6c, 6d, 6e, 6f, 6g, 6h, 6i, 6k, 6m, 6n, 6o, 6p, 6s, 8, 9, 9a, 12,
12a, 13b, 13c, 16a, 18, 19, 21, 23.
0
2. In Sec. 3.21, add paragraph (e) to read as follows:
Sec. 3.21 Exemption from fingerprinting requirement in certain cases.
* * * * *
(e) Foreign natural persons. (1) For purposes of this paragraph
(e):
(i) The term foreign natural person means any natural person who
has not resided in the United States since reaching the age of 18
years.
(ii) The term certifying firm means:
(A) For any natural person that is a principal or associated person
of a futures commission merchant, retail foreign exchange dealer, swap
dealer, major swap participant, introducing broker, commodity pool
operator, commodity trading advisor, leverage transaction merchant,
floor broker, or floor trader, such futures commission merchant, retail
foreign exchange dealer, swap dealer, major swap participant,
introducing broker, commodity pool operator, commodity trading advisor,
leverage transaction merchant, floor broker, or floor trader; and
(B) For any natural person that is responsible for, or directs, the
entry of orders from a floor broker's or floor trader's own account,
such floor broker or floor trader.
(2) Any obligation in this part to provide a fingerprint card for a
foreign natural person shall be deemed satisfied with respect to a
certifying firm if:
(i) Such certifying firm causes a criminal history background check
of such foreign natural person to be performed; and
(ii) The criminal history background check:
(A) Is of a type that would reveal all matters listed under
Sections 8a(2)(D) or 8a(3)(D), (E), or (H) of the Act relating to such
foreign natural person;
(B) Does not reveal any matters that constitute a disqualification
under Sections 8a(2) or 8a(3) of the Act, other than those disclosed to
the National Futures Association; and
(C) Is completed not more than one calendar year prior to the date
that such certifying firm submits the certification described in
paragraph (e)(2)(iii) of this section;
(iii) A person authorized by such certifying firm submits, in
reliance on such criminal history background check, a certification by
such certifying firm to the National Futures Association, that:
(A) States that the conditions of paragraphs (e)(2)(i) and (ii) of
this section have been satisfied; and
(B) Is signed by a person authorized by such certifying firm to
make such certification.
(3) The certifying firm shall maintain, in accordance with Sec.
1.31 of this chapter, records documenting that the criminal history
background check performed pursuant to paragraph (e)(2)(i) of this
section was completed and the results thereof.
Issued in Washington, DC, on March 28, 2016, by the Commission.
Robert N. Sidman,
Deputy Secretary of the Commission.
Note: The following appendices will not appear in the Code of
Federal Regulations.
Appendices to Alternative to Fingerprinting Requirement for Foreign
Natural Persons--Commission Voting Summary and Chairman's Statement
Appendix 1--Commission Voting Summary
On this matter, Chairman Massad and Commissioners Bowen and
Giancarlo voted in the affirmative. No Commissioner voted in the
negative.
Appendix 2--Statement of Chairman Timothy G. Massad
I support the rule being finalized today, which provides foreign
natural persons with an alternative to the fingerprinting
requirement that applies to certain participants in our markets.
This will reduce unnecessary burdens on foreign individuals while
maintaining appropriate standards of fitness and competency. This
final rule also continues the Commission's ongoing efforts to
codify, where appropriate, and through notice-and-comment
rulemaking, no-action relief that previously had been provided by
Commission staff.
[FR Doc. 2016-07304 Filed 3-31-16; 8:45 am]
BILLING CODE 6351-01-P
Last Updated: April 1, 2016