2016-00045
Federal Register, Volume 81 Issue 7 (Tuesday, January 12, 2016)
[Federal Register Volume 81, Number 7 (Tuesday, January 12, 2016)]
[Proposed Rules]
[Pages 1359-1364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-00045]
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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: Notice of proposed rulemaking.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is proposing to amend 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 (``Proposal'').
DATES: Comments must be received on or before February 11, 2016.
ADDRESSES: You may submit comments, identified by RIN 3038-AE16, by any
of the following methods:
Agency Web site: Via its Comments Online process: http://comments.cftc.gov. Follow the instructions on the Web site for
submitting comments.
Mail: Send to Christopher Kirkpatrick, Secretary,
Commodity Futures Trading Commission, 1155 21st Street NW., Washington,
DC 20581.
Hand delivery/Courier: Same as Mail above.
Federal eRulemaking Portal: at http://www.regulations.gov/. Follow the instructions for submitting comments.
All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received to
http://www.cftc.gov. You should submit only information that you wish
to make available publicly. If you wish the Commission to consider
information that is exempt from disclosure under the Freedom of
Information Act,\1\ a petition for confidential treatment of the exempt
information may be submitted according to the procedures set forth in
Sec. 145.9 of the Commission's regulations.\2\
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\1\ 5 U.S.C. 552.
\2\ Commission regulations referred to herein are found at 17
CFR chapter. 1. Commission regulations are accessible on the
Commission's Web site, http://www.cftc.gov.
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The Commission reserves the right, but shall have no obligation, to
review, pre-screen, filter, redact, refuse or remove any or all of your
submission from http://www.cftc.gov that it may deem to be
inappropriate for publication, such as obscene language. All
submissions that have been redacted or removed that contain comments on
the merits of the rulemaking will be retained in the public comment
file and will be considered as required under the Administrative
Procedure Act and other applicable laws, and may be accessible under
the Freedom of Information Act.
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. Background
Subject to certain exceptions and exclusions, persons engaging in
specified activities involving commodity interests \3\ are required
pursuant to the Commodity Exchange Act (``CEA'' or ``Act'') and/or
Commission regulations \4\ to register with the Commission in certain
registration categories. These include registration as 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
[[Page 1360]]
swap participant (``MSP''), leverage transaction merchant (``LTM''),
floor broker (``FB''), and floor trader (``FT'').\5\ 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.\6\ 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 the Commission.\7\
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\3\ A commodity interest is (1) any contract for the purchase or
sale of a commodity for future delivery; (2) any contract, agreement
or transaction subject to a Commission regulation under section 4c
or 19 of the Commodity Exchange Act; (3) any contract, agreement or
transaction subject to Commission jurisdiction under section 2(c)(2)
of such Act; and (4) Any swap as defined in such Act, by the
Commission, or jointly by the Commission and the Securities and
Exchange Commission. 17 CFR 1.3(yy).
\4\ See, e.g., Commission regulation 3.4(a). 17 CFR 3.4(a).
\5\ For the definitions of these registration categories (other
than RFED), see Section 1a of the CEA 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).
\6\ 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).
\7\ See http://www.nfa.futures.org/NFA-registration/index.HTML
(last visited Dec. 22, 2015), 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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Pursuant to the registration process for determining a registrant's
fitness in part 3 of the Commission's regulations, natural persons \8\
that wish to be principals \9\ or associated persons \10\ of Commission
registrants, or who are responsible for entry of orders from an FB's or
FT's own account, are required to submit their fingerprints \11\ (the
``Fingerprinting Requirement'').\12\
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\8\ As used herein, the terms ``natural person'' and
``individual'' have the same meaning.
\9\ See the definition of principal in Commission regulation
3.1(a). 17 CFR 3.1(a).
\10\ An ``associated person'' is any natural person who is
associated in certain capacities with an FCM, RFED, IB, CPO, CTA,
SD, MSP, or LTM. 17 CFR 1.3(aa).
\11\ 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).
\12\ 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).
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The Commission has delegated to National Futures Association
(``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 \13\ and related fingerprint submissions
from each natural person completing a Form 8-R.\14\ NFA, working with
law enforcement agencies, uses these fingerprints to conduct background
checks on these natural persons to assist in determining their fitness.
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\13\ Generally, Form 8-R is the Commission's application for
natural persons that are associated persons or principals of a
registrant.
\14\ See 17 CFR 3.2(a).
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In December 2012, the Commission's Division of Swap Dealer and
Intermediary Oversight (``DSIO''), in response to concerns raised by
industry participants that the Fingerprinting Requirement was unduly
burdensome to foreign natural persons and after considering those
concerns in light of the continued need to evaluate the fitness of
those persons, issued a no-action letter, CFTC Staff Letter No. 12-
49.\15\ CFTC Staff Letter No. 12-49 provides an alternative to
complying with the Fingerprinting Requirement for principals of LTMs,
FCMs, RFEDs, IBs, CPOs, CTAs, SDs, and MSPs that have not resided in
the United States since reaching 18 years of age. Subject to certain
conditions specified in the letter, DSIO staff stated that it would not
recommend that the Commission commence an enforcement action against
any such firm based solely upon that firm's failure to submit with its
registration application a fingerprint card for each such principal.
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\15\ CFTC Staff Letter No. 12-49 (Dec. 11, 2012), available at
http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/12-49.pdf.
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To rely on the relief provided in CFTC Staff Letter No. 12-49, DSIO
staff required that any such firm submit, for each principal, either a
fingerprint card (as required under Commission regulation 3.10(a)(2))
or a certification, signed by a person with authority to bind such
firm, stating that: (1) A reasonable criminal history background check
using a reputable commercial service had been conducted; (2) such
criminal history background check did not reveal any matters that
constitute a disqualification under Sections 8a(2) or 8a(3) of the
CEA,\16\ other than those disclosed; and (3) such firm would maintain,
in accordance with Commission regulation 1.31, records documenting that
such criminal history background check was performed and the results of
such background check.\17\
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\16\ 7 U.S.C. 12a(2) and (3).
\17\ CFTC Staff Letter No. 12-49, at 2.
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After issuing CFTC Staff Letter No. 12-49, DSIO staff issued
similar no-action relief from the Fingerprinting Requirement for
associated persons of FCMs, RFEDs, IBs, CTAs, CPOs, and LTMs that have
not resided in the United States since reaching 18 years of age in CFTC
Staff Letter No. 13-29 \18\ (CFTC Staff Letter No. 13-29, together with
CFTC Staff Letter No. 12-49, are the ``DSIO No-Action Letters'' and the
relief provided by such letters is the ``DSIO No-Action Relief'').
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\18\ CFTC Staff Letter No. 13-29 (Jun. 21, 2013), available at
http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-29.pdf.
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II. Proposal
The Commission is proposing to amend the Fingerprinting Requirement
by adding a new sub-section (e) to the existing list of exemptions from
the Fingerprinting Requirement in Sec. 3.21 \19\ to codify and clarify
the DSIO No-Action Relief.
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\19\ 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 NFA, and for principals that are
outside directors. 17 CFR 3.21.
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This Proposal differs from the DSIO No-Action Relief. First, this
Proposal would extend the relief to certain natural persons connected
to FBs and FTs. Second, the Proposal would include all requirements to
provide a fingerprint card under Part 3 of the Commission's
regulations, whereas the DSIO No-Action Relief is more limited.\20\ As
a result, this Proposal broadens the availability of the alternative to
fingerprinting provided in
[[Page 1361]]
the DSIO No-Action Letters; however, the Commission believes that the
rationale for providing the alternative to fingerprinting described
above is equally applicable to natural persons connected to FBs and FTs
and to all other requirements to provide a fingerprint card under Part
3 of the Commission's regulations, as explained further below.
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\20\ The DSIO No-Action Letters provide an alternative solely to
the requirements of Commission regulations 3.10(a)(2) and
3.12(c)(3). See DSIO No-Action Letters.
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Proposed sub-section (e)(2) of Sec. 3.21 would provide that the
obligation to provide a fingerprint card for a Foreign Natural Person
under part 3 of the Commission's regulations would be deemed satisfied
for a Certifying Firm (each, 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,\21\ 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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\21\ 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 \22\ 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
proposed rule.
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\22\ 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, proposed paragraph 3.21(e)(1)(i) would
define 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, proposed paragraph 3.21(e)(1)(ii)
would define 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, proposed paragraph 3.21(e)(3) would
require that the Certifying Firm maintain, in accordance with
Commission regulation 1.31, records documenting each criminal history
background check and the results thereof.
The Commission believes the proposal, in providing certainly to
market participants by way of Commission regulation, will make 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 proposed will remove an
impediment to participation in United States' markets by persons
located outside of the United States 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, this Proposal is consistent with the
principles of international comity.
As discussed above, in an attempt to provide greater clarity to
market participants, this Proposal is slightly different than the DSIO
No-Action Letters. In particular, where the No-Action Relief required
that ``a reasonable criminal history background check using a reputable
commercial service'' be performed, this Proposal does not include the
terms ``reasonable'' or ``reputable.'' Instead, this Proposal requires
that the background check meet the objective standard described above,
which relies on the clearly-stated matters under Sections 8a(2)(D) and
8a(3)(D), (E), and (H) of the CEA. The Commission believes that using
such an objective standard (one that does not require a market
participant to make a subjective determination of what is
``reasonable'' or ``reputable'' for purposes of the alternative)
furthers its goal of providing certainty to market participants while
allowing the Commission to continue to ensure the fitness of its
registrants.
If adopted, the proposed rule would supersede the DSIO No-Action
Letters without prejudice to those who are relying on either of the
DSIO No-Action Letters and have satisfied the requirements thereof
prior to the date hereof.
III. Request for Comments
The Commission requests comment generally on all aspects of this
Proposal. In particular, the Commission requests comment on the
following:
1. Should the Commission promulgate a final rule in relation to
this Proposal to provide an alternative to the Fingerprinting
Requirement for Foreign Natural Persons?
2. Please describe the burdens that Foreign Natural Persons face in
complying with the Fingerprinting Requirement. How are these burdens
different from those faced by natural persons that are not Foreign
Natural Persons?
3. Is the criminal history background check as set forth in the
Proposal sufficient to reveal the existence of all matters listed under
Sections 8a(2)(D) or 8a(3)(D), (E), or (H) of the CEA, if any such
matter existed? If not, please provide specific additional or
alternative requirements for the criminal history background check.
4. This Proposal is limited to Foreign Natural Persons (i.e.,
individuals who have not resided in the United States since reaching 18
years of age). Should the Commission use another measure to determine
whether an individual should be eligible for the proposed alternative
to the Fingerprinting Requirement?
5. This Proposal requires that a background check be completed not
more than one calendar year prior to the date of a Certifying Firm's
related certification. Should the Commission require that the
background check be completed within a different period?
6. Are persons eligible for the DSIO No-Action Relief currently
availing themselves of that alternative to the Fingerprinting
Requirement? To the extent that such persons are not, please provide
reasons as to why they are not.
7. Are there any other matters that the Commission should consider
in determining whether to adopt this Proposal?
IV. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') \23\ 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.
This Proposal would affect 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.\24\ The
Commission has previously determined that FCMs, RFEDS, CPOs, SDs, MSPs,
and LTMs are not small
[[Page 1362]]
entities for purposes of the RFA.\25\ 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.\26\ As certain of these registrants may
be small entities for purposes of the RFA, the Commission considered
whether this rulemaking would have a significant economic impact on
such registrants. This Proposal will solely provide an optional
alternative to complying with the Fingerprinting Requirement, which
already applies to such registrants, and would, therefore, not impose
any new regulatory obligations on affected registrants. This Proposal
is not expected to impose any new burdens on market participants.
Rather, to the extent that this Proposal 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 this Proposal. Consequently, the
Commission finds that no significant economic impact on small entities
will result from this Proposal.
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\23\ 5 U.S.C. 601 et seq.
\24\ This Proposal will also directly affect 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.
\25\ 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).
\26\ 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, the Chairman, on behalf of the Commission, hereby
certifies pursuant to 5 U.S.C. 605(b) that this Proposal 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'') \27\ imposes certain
requirements on Federal agencies (including the Commission) in
connection with conducting or sponsoring any collection of information
as defined by the PRA. This Proposal would result in a collection of
information within the meaning of the PRA, as discussed below. The
Commission therefore is submitting this Proposal to the Office of
Management and Budget (``OMB'') for review.
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\27\ 44 U.S.C. 3501 et seq.
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This Proposal contains collections of information for which the
Commission has previously received control numbers from OMB. The titles
for these collections of information are ``Commodity Pool Operators and
Commodity Trading Advisors: Amendments to Compliance Obligations, OMB
control number 3038-0023'' \28\ and ``Registration of Swap Dealers and
Major Swap Participants, OMB control number 3038-0072.'' \29\
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\28\ See OMB Control No. 3038-0023, http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0023# (last visited
Dec. 22, 2015). The collection is being retitled ``Registration
Under the Commodity Exchange Act.''
\29\ See OMB Control No. 3038-0072, http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0072# (last visited
Dec. 22, 2015).
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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 this Proposal would provide an
optional alternative to complying with the Fingerprinting Requirement
(as described above). Eligible persons would have the option to elect
the certification process, but no obligation to do so. For this reason,
except to the extent that the Commission is amending the subject OMB
control numbers for PRA purposes to reflect the alternative
certification process, this Proposal is not expected to impose any new
burdens on market participants. Rather, to the extent that this
Proposal 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, this Proposal would add a new exemption that
would incorporate 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 this Proposal, including submitting the required
certification to NFA and maintaining records of the criminal history
background check and the results thereof. Requiring such actions would
result in revisions to collections 3038-0023 and 3038-0072. Therefore,
the Commission proposes to revise each of collections 3038-0023 and
3038-0072.
The Commission understands that NFA has received approximately 110
requests in each of 2014 and 2015 from market participants asking to
avail themselves of the DSIO No-Action Relief. However, as discussed
above, the relief provided by this Proposal is broader than the DSIO
No-Action relief in that it extends the relief to certain natural
persons connected to FBs and FTs. Therefore, the Commission estimates
that Certifying Firms will submit 200 certifications per year to take
advantage of the alternative provided in this Proposal.
As of November 23, 2015, there were (i) 9,259 Commission-registered
FCMs, RFEDs, IBs, CPOs, CTAs, LTMs, FBs, and FTs and (ii) 103
Commission-registered SDs and MSPs, making an aggregate total of 9,362
registrants.\30\ Of these registrants, SDs and MSPs make up
approximately 1% and the other registrants make up approximately 99%.
Based on the assumption that there is an equal distribution of
certifications among the Certifying Firms eligible to provide them, the
Commission estimates that approximately 198 \31\ FCMs, RFEDs, IBs,
CPOs, CTAs, LTMs, FBs, and FTs and 2 \32\ SDs and MSPs will submit the
required certification.
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\30\ These numbers are slightly overstated, as certain
registrants are registered as SDs or MSPs and as an FCM, RFED, IB,
CPO, CTA, LTM, FB, or FT.
\31\ 198 was calculated by multiplying the number of estimated
requests per year (200) by the proportion of registrants discussed
above that are FCMs, RFEDs, IBs, CPOs, CTAs, LTMs, FBs, or FTs
(approximately 99%).
\32\ 2 was calculated by multiplying the number of estimated
requests per year (200) by the proportion of registrants discussed
above that are SDs or MSPs (approximately 1%).
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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. Based on the above,
the estimated additional hour burden for collection 3038-0023 of 495
hours is calculated as follows:
Number of registrants: 198.
[[Page 1363]]
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.\33\
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\33\ 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. Based on the above, the estimated additional hour 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.\34\
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\34\ See n.33, supra.
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Estimated aggregate annual hour burden: 5 (2 registrants x 2.5
hours per registrant).
3. Information Collection Comments
The Commission invites the public and other Federal agencies to
comment on any aspect of the proposed information collection
requirements discussed above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the
Commission solicits comments in order to: (1) Evaluate whether the
proposed collection of information is necessary for the proper
performance of the functions of the Commission, including whether the
information will have practical utility; (2) evaluate the accuracy of
the Commission's estimate of the burden of the proposed collection of
information; (3) determine whether there are ways to enhance the
quality, utility, and clarity of the information to be collected; and
(4) minimize the burden of the collection of information on those who
are to respond, including through the use of automated collection
techniques or other forms of information technology.
Comments may be submitted directly to the Office of Information and
Regulatory Affairs, by fax at (202) 395-6566, or by email at
[email protected]. Please provide the Commission with a copy
of submitted comments so that all comments can be summarized and
addressed in the final rule preamble. Refer to the ADDRESSES section of
this notice of proposed rulemaking for comment submission instructions
to the Commission. A copy of the supporting statements for the
collection of information discussed above may be obtained by visiting
http://RegInfo.gov. OMB is required to make a decision concerning the
collection of information between 30 and 60 days after publication of
this document in the Federal Register. Therefore, a comment is best
assured of having its full effect if OMB receives it within 30 days of
publication.
C. Cost-Benefit Considerations
Section 15(a) of the Act \35\ 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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\35\ 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
Because this Proposal will solely provide an optional 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, the Commission
believes that this Proposal will not impose any costs on such persons.
b. Other Costs
Because the amendment to Commission regulation will allow 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 exception from the Fingerprinting Requirement. The
Commission expects that the costs of such activities will not be
significant.
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, this Proposal would help
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 persons
located outside of the United States 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, this Proposal is consistent with the
principles of international comity.
3. 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
This Proposal will continue 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
This Proposal may increase the efficiency and competitiveness of
the markets by encouraging more participation in United States markets
by persons located outside of the United States. The Commission does
not believe that the integrity of financial
[[Page 1364]]
markets would be harmed, because this proposal 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.
iv. Sound Risk Management Practices
As explained above, 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.\36\ 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 the Commission.\37\ 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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\36\ See n.6, supra.
\37\ See n.7, supra.
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v. Other Public Interest Considerations
The Commission believes that, by providing an alternative for
persons outside the United States, this Proposal is consistent with the
principles of international comity.
vi. Request for Comments
The Commission invites public comment on its cost-benefit
considerations, including the Section 15(a) factors described above.
Commenters are also invited to submit any data or other information
that they may have quantifying or qualifying the costs and benefits of
this Proposal with their comment letters.
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 proposes to amend 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 January 4, 2016, by the Commission.
Robert N. Sidman,
Deputy Secretary of the Commission.
Note: The following appendix will not appear in the Code of
Federal Regulations.
Appendix to Alternative to Fingerprinting Requirement for Foreign
Natural Persons--Commission Voting Summary
On this matter, Chairman Massad and Commissioners Bowen and
Giancarlo voted in the affirmative. No Commissioner voted in the
negative.
[FR Doc. 2016-00045 Filed 1-11-16; 8:45 am]
BILLING CODE 6351-01-P
Last Updated: January 12, 2016