2015-23040
Federal Register, Volume 80 Issue 177 (Monday, September 14, 2015)
[Federal Register Volume 80, Number 177 (Monday, September 14, 2015)]
[Notices]
[Pages 55098-55099]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-23040]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
Public Alert--Registration Deficient List
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice; request for comment.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or
``Commission'') is announcing a new program, the Registration Deficient
List (``RED List''), that will post on the Commission's Web site and
distribute to the public certain factual information about foreign
entities that are soliciting or accepting funds from U.S. residents and
are acting in a manner that requires registration but are not
appropriately registered with the CFTC.
DATES: Comments must be received on or before October 14, 2015.
ADDRESSES: You may submit comments, identified by ``Registration
Deficient List,'' by any of the following methods:
The agency's Web site, at http://comments.cftc.gov. Follow
the instructions for submitting comments through the Web site.
Mail: Christopher Kirkpatrick, Secretary of the
Commission, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW., Washington, DC 20581.
Hand Delivery/Courier: Same as Mail above.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Please submit your comments using only one method.
All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received to
www.cftc.gov. You should submit only information that you wish to make
available publicly. If you wish the Commission to consider information
that you believe is exempt from disclosure under the Freedom of
Information Act, a petition for confidential treatment of the exempt
information may be submitted according to the procedures established in
Sec. 145.9 of the Commission's regulations.\1\
---------------------------------------------------------------------------
\1\ 17 CFR 145.9 (2014).
---------------------------------------------------------------------------
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 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: Rick Glaser, Deputy Director, Division
of Enforcement, Commodity Futures Trading Commission, Three Lafayette
Centre, 1151 21st Street NW., Washington, DC 20581, phone: (202) 418-
5358, email: [email protected].
SUPPLEMENTARY INFORMATION: The CFTC today is announcing a new program,
effective immediately, for informing the public about unregistered
foreign entities engaged in the solicitation or acceptance of funds
from U.S. residents at a retail level. These entities solicit and/or
accept funds for investments in, among other things, foreign currency
(``forex'') and binary options. Through this new program, the
Registration Deficient List (``RED List''), the Commission will publish
on its Web site the names of unregistered foreign entities that the
Commission has reason to believe may be required to register with the
CFTC but are not, in fact, registered. Publication does not represent
final Commission disposition or a final Commission order. By making
this information publicly available, the Commission expects investors
to make more informed decisions whether to trade with or through such
an entity. The more U.S. investors trade with and through registered
entities, the more likely that their funds have a better chance of
being protected.
I. Background
The Commission often receives investigative leads relating to
foreign entities that solicit and/or accept funds from U.S. residents
at a retail level. For example, the CFTC's Division of Enforcement
(``Enforcement'') has investigated approximately 60 such cases in the
past twenty-four months. These cases involve unregistered foreign
entities that engage in, among other things, forex in a capacity
similar to Retail Foreign Exchange Dealers, Introducing Brokers,
Commodity Trading Advisors or Commodity Pool Operators and binary
options.\2\ Almost all, if not all, of these foreign entities are
acting in a capacity that requires them to be registered with the
Commission.
---------------------------------------------------------------------------
\2\ The Commission uses forex and binary options merely as
illustrative examples. Any entity that meets the criteria set forth
below is a candidate for inclusion on the RED list.
---------------------------------------------------------------------------
In many cases, there are obstacles to bringing an effective
enforcement action against these types of entities. For example, the
Commission spends considerable resources investigating these matters.
Even if Enforcement is able to develop a legal case against one of
these entities, international service of process is cumbersome, often
takes a very long time to effectuate and is not always successful. Even
if service of process is successful, many of these entities are
judgment proof.
The Commission believes that a consumer protection approach has a
better chance of success than continuing to spend resources on
Enforcement investigations and litigations that have a limited chance
of success. The proposed RED List would disseminate information about
certain foreign entities into the marketplace so that U.S. residents
would be able to make more informed choices about how they trade their
money. This approach is used by other regulators, including the
Securities and Exchange Commission.\3\
---------------------------------------------------------------------------
\3\ There are approximately 47 countries that issue, or have
issued, lists, warning letters, or public statements, including
Belgium, Brazil, British Virgin Islands, Canada (Ontario, British
Columbia and the Quebec provincial regulators), Croatia, Denmark,
Hong Kong, Ireland, Malaysia, Panama, Poland, Cyprus, Singapore,
Spain, Sweden, Switzerland, Thailand, The Netherlands, the United
Kingdom and the U.S.
The International Organization of Securities Commissions
(``IOSCO'') has established an investor Alert Portal on its Web site
to receive and publish alerts and warnings from its members about
firms which are not authorized to provide investment services in the
jurisdiction that issued the alert or warning.
---------------------------------------------------------------------------
[[Page 55099]]
II. The RED List
In light of the challenges associated with taking enforcement
action against such entities, the Commission believes it useful to
educate and empower prospective investors. The goal of the RED List is
to provide prospective investors with information regarding
unregistered soliciting entities before they invest. For a foreign
entity to be listed on the CFTC's RED List, reasonable grounds must
exist to believe that the entity meets the following six criteria:
1. The entity is foreign;
2. The foreign entity has no or limited presence in the United
States; \4\
---------------------------------------------------------------------------
\4\ Merely registering a Web site with a U.S. based domain name
registrar does not constitute physical presence.
---------------------------------------------------------------------------
3. The foreign entity is soliciting and/or accepting funds from
U.S. residents;
4. The foreign entity is offering a product within the Commission's
jurisdiction (e.g. ``forex'');
5. The foreign entity is required to be registered; and
6. The foreign entity is not registered.\5\
---------------------------------------------------------------------------
\5\ If the foreign entity offers binary options there is one
additional criterion: Whether the entity is a foreign board of
trade. If it is a foreign board of trade, then the entity would not
be eligible for the RED list.
---------------------------------------------------------------------------
If the foreign entity meets these criteria, Enforcement will
propose that it be included on a publicly disclosed list stating that
the foreign entity is acting in a capacity that appears to require
registration but is not registered with the Commission. This list will
then be publicized by the Commission's Office of Consumer Outreach by a
variety of different methods and media.
The RED List process contains three separate levels of review
before a recommendation is made to the Commission for inclusion on the
RED List. First the Intake Officer reviews the complaint and makes an
initial determination of whether a foreign entity should potentially be
included in the RED List. This initial determination is passed to a
Triage Officer who will conduct a limited investigation and then make a
recommendation to an Enforcement Deputy Director. The Deputy Director
will, based on the information before him/her, make a decision as to
whether to recommend to the Commission that it include a foreign entity
on the RED List. These levels of review are to ensure that only those
foreign entities that should be included on the RED List are included
on the RED List.
The CFTC is committed to providing accurate information to
investors using the RED List. Before listing an entity on the RED List,
Commission staff will notify the entity by Notice Letter of the
Commission's intent to list the entity. The entity will have the
opportunity to respond to the Commission and provide relevant
documentation. If the foreign entity does not respond to the notice
letter or provides an unsatisfactory response, Enforcement will
recommend to the Commission that a foreign entity should be included on
the RED List.
To implement the RED List, the Commission will post on its public
Web sites, http://www.SmartCheck.gov/REDList, the names, and only the
names, of unregistered soliciting foreign entities that have been
subject of complaints received by the CFTC. The RED list will contain
the following information:
RED (Registration Deficient) LIST
List of Foreign Entities That Have Been Identified as Acting in a
Capacity That Appears To Require Registration but Are Not Appropriately
Registered With the Commission
The Commodity Futures Trading Commission (``CFTC'') frequently
receives investigative leads and questions from the public about
foreign entities that solicit and/or accept funds from U.S.
residents at a retail level. For example these leads and questions
can relate to, among things, foreign entities that engage in foreign
currency (``Forex'') in a capacity similar to Retail Foreign
Exchange Dealers (``RFEDs''), Introducing Brokers, Commodity Trading
Advisors or Commodity Pool Operators http://www.cftc.gov/ConsumerProtection/FraudAwarenessPrevention/ForeignCurrencyTrading/index.htm; and binary options http://www.cftc.gov/PressRoom/PressReleases/fraudadv_binaryoptions. Many of these foreign entities
are acting in a capacity that requires them to be registered with
the CFTC.
If a foreign entity is registered with the CFTC, then it is
subject to CFTC regulations and oversight that apply to registrants.
Generally, foreign entities that solicit you to trade are required
to register with the CFTC. For this reason, it is important for you
to consider whether the foreign entity that solicits you is, in
fact, registered with the CFTC.
In certain cases, a preliminary review by the CFTC reveals that
foreign entities that solicit and/or accept funds from U.S.
residents at a retail level have no or limited U.S. presence, and
act in a capacity that requires registration, but are not in fact
registered. In an effort to warn the public about these entities,
the CFTC is publishing the names of those foreign entities.
The goal of this list is to provide information to U.S.
consumers about foreign entities that are acting in an unregistered
capacity and to help them make more informed decisions about whether
to trade with or through such an entity. The more that U.S.
consumers trade with and through registered entities, the more
likely that their funds will have a greater chance of being
protected.
The named foreign entities currently appear to be acting in a
capacity that requires registration with the CFTC but are NOT
registered with the CFTC.
[Inserted will be a list of all of the foreign entities that
have met the criteria, as approved by the Commission.]
The inclusion of an entity's name on the RED list does not mean
that the CFTC or a Court has concluded that a violation of any
provision of the Commodity Exchange Act or the Commission's Regulations
has occurred.
III. Review of RED List
Twice annually, on or about June 30 and December 31, the Triage
Officer will review the RED List and, if it appears that a minimum of
12 months have elapsed during which no complaints have been received
regarding the a foreign entity and the foreign entity's Web site is
either inactive or taken down, Enforcement will submit a recommendation
for Commission consideration to move the foreign entity from the active
portion of the RED List homepage to the archival portion of such page.
Issued in Washington, DC, on September 9, 2015, by the
Commission.
Robert N. Sidman,
Deputy Secretary of the Commission.
[FR Doc. 2015-23040 Filed 9-11-15; 8:45 am]
BILLING CODE 6351-01-P