COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 30
Limited Marketing Activities From a United States Location by
Certain Firms and Their Employees or Other Representatives Exempted
Under Commodity Futures Trading Commission Regulation 30.10
AGENCY: Commodity Futures Trading Commission.
ACTION: Order.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is
confirming that designated members of the Taiwan Futures Exchange
(``TAIFEX'') may engage in limited marketing conduct with respect to
foreign futures or options contracts within the U.S. through their
employees or representatives consistent with prior Commission orders.
This order is issued pursuant to Commission Regulation 30.10, which
permits persons to file a petition with the Commission for exemption
from the application of certain of the Regulations set forth in Part 30
and authorizes the Commission to grant such an exemption if such action
would not be otherwise contrary to the public interest or to the
purposes of the provision from which exemption is sought.
DATES: Effective Date: July 9, 2008.
FOR FURTHER INFORMATION CONTACT: Andrew Chapin, Special Counsel,
Division of Clearing and Intermediary Oversight, at (202) 418-5430
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street, NW., Washington, DC 20581. Electronic mail: [email protected].
SUPPLEMENTARY INFORMATION: The Commission has issued the following
Order:
Order Issued Pursuant to Regulation 30.10 Confirming That Designated
Members of TAIFEX May Engage in Limited Marketing Conduct With Respect
to Foreign Futures and Options Contracts Within the United States
Through Their Employees or Other Representatives.
Commission regulations governing the offer and sale of commodity
futures and option contracts traded on or subject to the regulations of
a foreign board of trade to customers located in the U.S. are contained
in Part 30 of the Commission's regulations.\1\ These regulations
include requirements for intermediaries with respect to registration,
disclosure, capital adequacy, protection of customer funds,
recordkeeping and reporting, and sales practice and compliance
procedures that are generally comparable to those applicable to
transactions on U.S. markets.
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\1\ Commission regulations referred to herein are found at 17
CFR Ch. I (2007). Appendix A to Part 30, ``Interpretative Statement
With Respect to the Commission's Exemptive Authority Under Sec.
30.10 of Its Rules'' generally sets forth the elements the
Commission will evaluate in determining whether a particular
regulatory program may be found to be comparable for purposes of
exemptive relief pursuant to Regulation 30.10. 52 FR 28990, 29001
(Aug. 5, 1987).
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In formulating a regulatory program to govern the offer and sale of
foreign futures and option products to customers located in the U.S.,
the Commission, among other things, considered the desirability of
ameliorating the potential extraterritorial impact of such a program
and avoiding duplicative regulation of firms engaged in international
business. Based upon these considerations, the Commission determined to
permit persons located outside the U.S. and subject to a comparable
regulatory structure in the jurisdiction in which they were located to
seek an exemption from certain of the requirements under Part 30 of the
Commission's regulations based upon substituted compliance with the
regulatory requirements of the foreign jurisdiction (``Regulation 30.10
relief'').
On October 28, 1992, the Commission issued an order to permit firms
that have obtained confirmation of Regulation 30.10 relief to engage in
limited marketing conduct with respect to foreign futures or options
contracts within the U.S. through their employees or representatives
without prior notification to the Commission.\2\ The Commission stated
that
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\2\ 57 FR 49644 (Nov. 3, 1992).
the success of the [Regulation] 30.10 program as well as the
existence of working relationships established under that program
with foreign regulatory and self-regulatory authorities provide
assurances that the conduct of [Regulation] 30.10 exempted firms
through their employees or other representatives located in the
United States, if of a limited duration and subject to proper
supervisory controls, will not be inconsistent with the Commission's
obligations under the [Commodity Exchange Act] to ensure appropriate
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customer protection.
[[Page 39227]]
To provide the appropriate level of customer protection, the relief was
limited to conduct directed towards certain institutions and
governmental entities as described in Regulation 4.7.\3\ In addition,
the Commission stated that any person who established a fixed location
in the U.S. for the solicitation or acceptance of business, or whose
marketing activities involved long or repeated periods within the U.S.
that can be characterized as a de facto fixed presence, would be
disqualified from Regulation 30.10 relief and would be required to
register with the Commission. On August 4, 1994, the Commission issued
an order expanding the category of persons to whom designated firms may
direct limited marketing conduct to include all ``accredited
investors,'' as that term is defined in section 230.501(a) of
Securities and Exchange Commission Regulation D issued pursuant to the
Securities Act of 1933.\4\ The orders issued by the Commission in 1992
and 1994 are collectively known as the Limited Marketing Orders.
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\3\ The order limited the relief to marketing conduct directed
towards persons whose description in terms of sophistication and
assets was derived generally from the definition of ``qualified
eligible participant'' (``QEP''), as defined in Regulation
4.7(a)(1)(ii). In 2000, the Commission streamlined Regulation 4.7 by
combining into a single definition those persons formerly defined as
QEPs and ``qualified eligible clients'' (``QECs''). As a result of
the revision, both QEPs and QECs are termed ``qualified eligible
persons.'' 65 FR 47848, 47849-50 (Aug. 4, 2000).
\4\ 59 FR 42156 (Aug. 17, 1994).
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Pursuant to the terms set forth therein, a foreign regulatory or
self-regulatory organization must obtain a written confirmation from
the Commission that the Limited Marketing Orders apply to firms in its
jurisdiction with confirmed Regulation 30.10 relief. On March 23, 2007,
the Commission issued an order granting relief under Regulation 30.10
authorizing designated members of TAIFEX to solicit and accept orders
from customers located in the U.S. for otherwise permitted transactions
on TAIFEX.\5\ By letter dated April 16, 2008, counsel for TAIFEX
petitioned the Commission to confirm that designated TAIFEX members may
engage in limited marketing conduct with respect to foreign futures or
options contracts within the U.S. through their employees or other
representatives, as set forth in the Limited Marketing Orders.
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\5\ 72 FR 14413 (Mar. 28, 2007) (``TAIFEX Order'').
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As previously stated, the Commission believes that certain contacts
between firms with confirmed Regulation 30.10 relief and certain
sophisticated customers located in the U.S., who have a high degree of
sophistication and financial resources, would not be contrary to the
public interest. Accordingly, the Commission has determined to issue
this order permitting designated TAIFEX members to engage in limited
marketing conduct with respect to foreign futures or option contracts
within the U.S. through their employees or other representatives, as
set forth in the Limited Marketing Orders.
Prior to engaging in any marketing activity in the U.S., a TAIFEX
member must obtain confirmation of Regulation 30.10 relief from the
National Futures Association (``NFA'').\6\ Any TAIFEX member operating
pursuant to this order will remain subject to all of the terms and
conditions set forth in the Limited Marketing Orders and the TAIFEX
Order. In particular, the Commission notes that every order granting
Regulation 30.10 relief has required a firm seeking relief under such
an order to consent to jurisdiction in the U.S. under the Commodity
Exchange Act and file with NFA a valid and binding appointment of an
agent in the U.S. for service of process.
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\6\ The Commission has delegated to NFA certain
responsibilities, including the responsibility to receive requests
for confirmation of Regulation 30.10 relief on behalf of particular
firms, to verify such firms' fitness and compliance with the
conditions of the appropriate Regulation 30.10 Order and to grant
exemptive relief from registration to qualifying firms. 62 FR 47792,
47793 (Sept. 11, 1997).
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Dated: July 3, 2008.
By the Commission
David Stawick,
Secretary of the Commission.
[FR Doc. E8-15606 Filed 7-8-08; 8:45 am]
BILLING CODE 6351-01-P
Last Updated: July 9, 2008