2017-08558
Federal Register, Volume 82 Issue 81 (Friday, April 28, 2017)
[Federal Register Volume 82, Number 81 (Friday, April 28, 2017)]
[Notices]
[Pages 19665-19704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-08558]
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COMMODITY FUTURES TRADING COMMISSION
Adoption of Revised Registration Form 8-R
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice.
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SUMMARY: The Commodity Futures Trading Commission (the ``Commission''
or ``CFTC'') is revising its Form 8-R, the application form that
individuals must use to register with the Commission as an associated
person of a registrant, floor broker, or floor trader, or to be listed
as a principal of a registrant (collectively, ``applicants'').
DATES: Effective Date: The new, revised version of Form 8-R shall be
effective (and the prior version shall cease to be effective) when the
National Futures Association (``NFA'') makes the new, revised version
of the Form 8-R available on the NFA Web site for use by individual
applicants.
FOR FURTHER INFORMATION CONTACT: Erik F. Remmler, Deputy Director,
(202) 418-7630, [email protected]; Laura Gardy, Associate Director,
(202) 418-7645, [email protected]; or August A. Imholtz III, Special
Counsel, (202) 418-5140, [email protected], Division of Swap Dealer and
Intermediary Oversight, Commodity Futures Trading Commission, 1155 21st
Street NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Background
Individuals acting in certain capacities in the markets regulated
by the Commission must file a completed Form 8-R with NFA.\1\ These
applicants include: Associated persons of futures commission merchants,
retail foreign exchange dealers, introducing brokers, commodity trading
advisors, commodity pool operators, and leverage transaction merchants;
floor brokers; and floor traders.\2\ Additionally, any individual
acting in the capacity as principal of a futures commission merchant,
retail foreign exchange dealer, introducing broker, commodity trading
advisor, commodity pool operator, swap dealer, major swap participant,
floor trader or leverage transaction merchant also must file a
completed Form 8-R.\3\ Lastly, individuals that enter orders for floor
trader firms must file the Form 8-R as well.\4\ Individual applicants
have been required to use Form 8-R since 1977.\5\
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\1\ 17 CFR 3.10(a)(2), 3.11(a), and 3.12(c).
\2\ 17 CFR 3.11(a); 3.12(c).
\3\ 17 CFR 3.1(a); 3.10(a)(2); 3.11(a)(1). While ``principal''
is not technically a registration class and principals do not apply
for registration, for purposes of this Notice, the Form 8-R filings
by principals will be referred to with the other Form 8-R filings as
``registration applications.''
\4\ 17 CFR 3.11(a)(1).
\5\ Revision of Registration Forms and Amendment of Related
Rules, 42 FR 23988 (May 11, 1977) (Form 8-R replaced Forms 2-R, 4-R
and 94).
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Form 8-R requests information about the applicant that can be used
to assess the applicant's fitness to engage in business as a
derivatives professional. Form 8-R is a Commission form maintained and
used primarily by the NFA. NFA is currently the only registered futures
association authorized by the Commission in accordance with Section 17
of the Commodity Exchange Act (``Act'').\6\ Pursuant to Section 17(o)
of the Act,\7\ Regulation 3.2,\8\ and a series of orders, the
Commission delegated to NFA certain registration functions including,
among other things, the processing of all Form 8-R filings.\9\ Since
the first delegation to NFA in 1984, NFA has developed substantial
expertise in registration matters, including reviewing and processing
completed Forms 8-R. In 2002, with the approval of the Commission, NFA
transitioned from a paper-based registration system to an online
registration system that utilizes, among other things, an electronic
version of Form 8-R.\10\
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\6\ 7 U.S.C. 21 (2012).
\7\ 7 U.S.C. 21(o) (2012).
\8\ 17 CFR 3.2.
\9\ See, e.g., Introducing Brokers and Associated Persons of
Introducing Brokers; Authorization of National Futures Association
to Perform Commission Registration Functions, 48 FR 35158 (Aug. 3,
1983); Performance of Registration Functions by National Futures
Association, 49 FR 39593 (Oct. 9, 1984) (futures commission
merchants, commodity pool operators, commodity trading advisors, and
associated persons thereof); Performance of Registration Functions
by National Futures Association; Delegation of Authority, 51 FR
34490 (Sept. 29, 1986) (floor brokers); Performance of Registration
Functions by National Futures Association with Respect to Floor
Traders and Floor Brokers, 58 FR 19657 (Apr. 15, 1993); and
Performance of Registration Functions by National Futures
Association with Respect to Swap Dealers and Major Swap
Participants, 77 FR 2708 (Jan. 19, 2012).
\10\ Registration of Intermediaries, 67 FR 38869 (June 6, 2002).
The transition to an online registration system has permitted
greater efficiencies, including allowing individuals to update their
existing Forms 8-R instead of completing a separate Form 3-R. To
that end, in 2012, the Commission eliminated the requirement that
registrants and individuals use Form 3-R to update information in
their existing Form 7-R or 8-R, and provided that an update to a
registrant's online Form 7-R or 8-R would automatically create a
record of changes equivalent to a completed Form 3-R. Registration
of Intermediaries, 77 FR 51898 (Aug. 28, 2012); see also,
Registration of Intermediaries, 76 FR 12888, 12891 (proposed Mar. 9,
2011).
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[[Page 19666]]
II. Revisions To Commission Form 8-R
NFA has requested that the Commission make several changes to Form
8-R.\11\ Upon consideration of NFA's request, the Commission is
revising and updating Form 8-R. In addition, the Commission is updating
the Form 8-R Privacy Act and Paperwork Reduction Act Statements. The
Form 8-R revisions are described below.\12\
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\11\ Request from NFA to CFTC, dated Sept. 8, 2016, as amended
on Oct. 31, 2016. Both communications are on file with the
Commission.
\12\ This Notice describes the substantive changes to Form 8-R.
The Commission also is making a number of minor, non-substantive, or
technical changes to Form 8-R that are not described herein.
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In the section titled ``Sponsor Information and Registration
Categories,'' Form 8-R previously listed three categories of persons
that could be associated with a sponsor: Associated persons, branch
office managers, and principals.\13\ The revised Form 8-R includes a
fourth category, floor trader order enterer. This addition addresses
the Form 8-R filing requirement for employees of an entity that is a
registered floor trader who execute swap transactions on a swap
execution facility for the floor trader's own account.\14\ In
connection with this change, the revised Form 8-R includes two newly
defined terms: ``Entity floor trader'' and ``floor trader order
enterer.'' ``Entity floor trader'' is defined as an entity that is ``an
applicant or registrant that filed a Form 7-R for registration as a
floor trader.'' \15\ ``Floor trader order enterer'' is defined as ``an
individual responsible for entry of orders from an entity floor
trader's own account.'' \16\
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\13\ Associated persons and principals must file Form 8-R. 17
CFR 1.3(aa), 3.1(a), 3.10(a) and 3.12. Branch Office Manager is a
category that NFA utilizes to ensure proper oversight of branch
offices. See NFA Interpretive Notice 9002, Registration
Requirements; Branch Offices (Staff, Sept. 6, 1985; revised July 1,
2000; Dec. 9, 2005; and Sept. 30, 2010).
\14\ 17 CFR 1.3(ggg)(6)(iv), 3.11(a)(1). Commission Regulation
3.11(a)(1) was amended in 2012 to require individuals that enter
swap orders for the account of an entity floor trader to file a Form
8-R. 77 FR 51898. These individuals are required to file a Form 8-R,
but are not required to register with the Commission in any
specified capacity. Since 2012, NFA has required these individuals
to file a separate, paper version of the Form 8-R titled Floor
Trader Order Enterer Application. The revisions to the Form 8-R
discussed in this paragraph result from combining the pre-existing,
electronic Form 8-R with the paper version for floor trader order
enterers.
\15\ Entities that act as market participants or intermediaries
must use the Commission Form 7-R to register with the Commission. 17
CFR 3.10 and 3.11.
\16\ The revised Form 8-R includes additional conforming changes
to incorporate entity floor traders and floor trader order enterers
as appropriate.
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In the section titled ``Principal Information,'' the prior version
of Form 8-R contained a blank space in which an applicant entered a
title. In the revised Form 8-R, the space is replaced with a menu of
available titles.
In the ``Fingerprint Card Information'' section, revised Form 8-R
adds two new questions. One new question addresses new requirements and
exemptions thereto contained in Commission Regulation 3.21(e)
applicable to non-U.S. persons. A non-U.S. natural person may now claim
an exemption under Commission Regulation 3.21(e) from the fingerprint
submission requirement where the applicant otherwise underwent a
qualifying criminal history background check.\17\ The other new
question addresses the fingerprinting requirement exception for certain
outside directors of registered firms.\18\
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\17\ 17 CFR 3.21(e); Alternative to Fingerprinting Requirements
for Foreign Natural Persons, 81 FR 18743 (Apr. 1, 2016).
\18\ 17 CFR 3.21(c) (permitting an outside director to indicate
that he or she will file the appropriate notice required by
Commission Regulation 3.21(c) instead of supplying his or her
fingerprints).
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The sections in Form 8-R titled ``Disciplinary Information--
Criminal Disclosures,'' ``Disciplinary Information--Regulatory
Disclosures,'' and ``Disciplinary Information--Financial Disclosures''
contain a series of questions that inquire about the disciplinary
history of the applicant. These questions are designed to identify and
gather information that may reflect on the fitness of the applicant and
whether he or she may be subject to a statutory disqualification from
registration.\19\ Among other things, these questions ask about the
disciplinary history of ``any entity of which you [the applicant] were
a principal at the time the [potentially reportable] activities
occurred.'' The term ``principal'' as used in the Disciplinary History
section of Form 8-R was sometimes understood by applicants to mean that
only firms that were subject to Commission registration were relevant.
The long-standing interpretation of the term ``principal'' as used in
that context was not limited to the applicant's status as a principal
only for Commission registrants, but also if the applicant served in
one of the capacities included in the definition of ``principal'' for
any firm. The definition of ``principal'' is revised to clarify this
issue.\20\
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\19\ See 7 U.S.C. 12a(2) and (3) (2012).
\20\ A provision was added to the definition of ``principal''
that states, ``[f]or the purpose of answering Questions A, B, C, D,
E, F, G, I and K of the Disciplinary History sections, principal
also means an individual described in [paragraphs] (1), (2) or (4)
above with respect to any entity whether or not the entity is an
applicant, registrant, or a person required to be registered under
the Act.''
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In the section titled ``Disciplinary Information--Regulatory
Disclosures,'' a new question was added to existing Question E. Among
other things, Question E inquires whether the applicant (or an entity
of which the applicant was a principal) violated, or aided and abetted
the violation of, any investment-related statutes or regulations, a
potential statutory basis for refusing or conditioning
registration.\21\ The new question directs the applicant to disclose
whether he or she has ever been found to have failed to supervise
another person's activities under any investment-related statute or
regulation.\22\ The new question is intended to ensure complete
disclosure of conduct that may result in a refusal or limitation on
registration.
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\21\ 7 U.S.C. 12(a)(3).
\22\ See 7 U.S.C. 12(a)(3)(C).
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In the section titled ``Disciplinary Information--Financial
Disclosures,'' the Commission revised Question J, which asked whether
the applicant has ``currently failed to comply with any order to pay
any futures-related civil monetary penalties, restitution amounts,
disgorgement amounts, reparation amounts or arbitration awards.'' As
revised, Question J now inquires whether the applicant ``failed to pay
any arbitration awards involving CFTC-regulated products, CFTC civil
monetary penalties, CFTC restitution amounts, CFTC disgorgement
amounts, or CFTC reparation amounts.'' The revision is designed to
clarify that this question is not limited solely to unpaid monetary
awards related to futures contracts, but also includes unpaid awards
related to all products subject to the jurisdiction of the Commission.
Lastly, NFA is simplifying the process by which it requests
supplemental information and documentation regarding the applicant's
criminal, regulatory, financial, or employment disclosures. The prior
version of Form 8-R requested that applicants provide a written
explanation of the facts and circumstances regarding any such
disclosures. Applicants were also separately requested to provide NFA
with copies of pertinent documents associated with each disclosure. To
consolidate and modernize this process, the revised Form 8-R allows
applicants
[[Page 19667]]
to complete a separate ``Disclosure Matter Page'' for each matter,
instance, or event requiring disclosure and to simultaneously upload
all pertinent documents associated with each disclosure. The Disclosure
Matter Page provides applicants with an efficient and effective method
of supplying the supplemental information and documentation that NFA
requests in the normal course whenever an applicant responds
affirmatively to any of the questions regarding criminal, regulatory or
financial disclosures.
A revised version of Form 8-R that incorporates the changes
discussed above, as well as other non-substantive changes, is attached
as Appendix A to this Notice.
III. Related Matters
Paperwork Reduction Act. Recordkeeping or information collection
requirements under the Paperwork Reduction Act (``PRA'') related to
Form 8-R exist under current law. The titles for the existing
information collections are ``Registration Under the Commodity Exchange
Act,'' OMB control number 3038-0023, and ``Registration of Swap Dealers
and Major Swap Participants,'' OMB control number 3038-0072. The
preliminary view of the Commission is that the revisions to Form 8-R
may modify the existing recordkeeping or information collection
requirements under the PRA. To ensure compliance with the PRA, the
Commission will publish in the Federal Register a separate notice and
request for comment on the amended PRA burden associated with the
revised Form 8-R.\23\ The Commission also will submit to OMB an
information collection request to amend the information collection, in
accordance with 44 U.S.C. 3506(c)(2)(A) and 5 CFR 1320.8(d).
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\23\ The notice and request for comment on the amended PRA
burden will also address reassigning from Form 3-R to Form 8-R the
PRA burden associated with providing updated information on Form 8-
R.
Issued by the Commission on April, 24 2017, in Washington, DC.
Robert N. Sidman,
Deputy Secretary of the Commission.
Note: The following appendices will not appear in the Code of
Federal Regulations.
Appendices to Adoption of Revised Registration Form 8-R
Appendix 1--Commission Voting Summary
On this matter, Acting Chairman Giancarlo and Commissioner Bowen
voted in the affirmative. No Commissioner voted in the negative.
Appendix A--Individual Application (Form 8-R)
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[FR Doc. 2017-08558 Filed 4-27-17; 8:45 am]
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