[Federal Register: January 9, 2001 (Volume 66, Number 6)]
[Rules and Regulations]
[page 1574-1576]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09ja01-6]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 140
Delegation of Authority to Disclose and Request Information
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rules.
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SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC)
is amending Rule 140.73, which delegates authority to members of the
Commission's staff to provide information to other government agencies,
to conform the rule with the provisions of the Commodity Exchange Act
(Act) that authorize such information sharing. The Commission is also
making certain technical corrections to Rules 140.72 and 140.73 to
clarify its delegations of authority.
EFFECTIVE DATE: January 9, 2001.
FOR FURTHER INFORMATION CONTACT: Lawrence B. Patent, Associate Chief
Counsel, Ky Tran-Trong, Attorney-Advisor, or Julie R. Windhorn, Law
Clerk, Division of Trading and Markets, Commodity Futures Trading
Commission, 1155 21st Street, NW, Washington, DC 20581. Telephone:
(202) 418-5450.
Supplementary Information:
I. Background
Commission Rule 140.73 delegates the authority of the Commission to
provide information to other government agencies to specified members
of the Commission's staff. The Commission is authorized to promulgate
this rule under Sections 2(a)(11), 8a(5) and 8(e) of the Act.\1\ The
Commission's original delegation was granted to the Director of the
Division of Enforcement (and, in his absence, to each Deputy Director
of the Division) in order to "eliminate the necessity of the
Commission itself authorizing the release of information" in each
instance where other federal agencies requested information.\2\
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\1\ Section 2(a)(11), 7 U.S.C. 4a(j), authorizes the Commission
to "promulgate such rules and regulations as it deems necessary to
govern the operating procedures and conduct of the business of the
Commission." Section 8a(5), 7 U.S.C. 12a(5), gives the Commission
the authority to "promulgate such rules and regulations as, in the
judgment of the Commission, are reasonably necessary to effectuate
any of the provisions or to accomplish any of the purposes of [the]
Act." Section 8(e), 7 U.S.C. 12(e), is the provision that permits
the agency to release information.
\2\ 44 FR 72107 (Dec. 13, 1979).
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II. Discussion
A. 17 CFR 140.73(a)(1)
As originally adopted, Rule 140.73 limited the information that
could be disclosed by authorized Commission staff to another federal
agency to that which was "within the scope of [the requesting
agency's] jurisdiction in the investigation or prosecution of any
violation of federal law." \3\ In 1983, after the Futures Trading Act
of 1982 (1982 Act) made various amendments to Section 8(e) of the Act,
the Commission revised Rule 140.73 to add State and foreign authorities
to the list of agencies to which information could be released.\4\ The
1983 expansion of the Commission's information-sharing
[[page 1575]]
authority to include disclosure to State and foreign authorities was
not limited to matters within the scope of the requesting agency's
jurisdiction involving "the investigation or prosecution of any
violation of law." However, the Commission at that time did not make a
conforming change to Rule 140.73(a)(1) to remove the restriction in
connection with requests for information from other federal
authorities.
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\3\ Id.
\4\ 48 FR 22133 (May 17, 1983). The Commission also authorized
several additional members of the Commission's staff to disclose
information. Id. The delegation of authority was further expanded in
1996, and more recently in October 2000. See 61 FR 1708 (Jan. 23,
1996); 65 FR 64136 (Ot. 26, 2000).
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The retention of the "violation of law" requirement in Rule
140.73(a)(1) leads to an incongruous result that is inconsistent with
the language of section 8(e) of the Act. Section 8(e), with respect to
the disclosure of information to federal agencies, provides in relevant
part that:
Upon the request of any department or agency of the Government
of the United States, acting within the scope of its jurisdiction,
the Commission may furnish to such department or agency any
information in the possession of the Commission obtained in
connection with the administration of [the] Act.
The 1982 Act amended Section 8(e) to permit similar information-sharing
arrangements between the Commission and State and foreign authorities
where the State or foreign agency or department made a request while
"acting within the scope of its jurisdiction." \5\ In its subsequent
revision of Rule 140.73, the Commission added paragraphs (a)(2) and
(a)(3) "to conform the Commission's rules to the Commodity Exchange
Act, as amended by the Futures Trading Act of 1982." \6\ As adopted,
those provisions authorize certain Commission designees, "to furnish
information in the possession of the Commission obtained in connection
with the administration of the Act, upon written request" to any
department or agency of any state or foreign government, or any
political subdivision thereof, "acting within the scope of its
jurisdiction." \7\ However, although the relevant portions of section
8(e) of the Act addressing the conditions under which information could
be shared with either Federal or State and foreign agencies were
identical, the Commission did not revise Rule 140.73(a)(1) to eliminate
that provision's requirement that Commission staff only disclose
information to other federal authorities acting within the scope of
their jurisdiction "in the investigation or prosecution of any
violation of law." Consequently, under Rule 140.73 as currently
written, Commission staff are authorized to disclose information
obtained in connection with the Commission's administration of the Act
to other Federal agencies under more limited circumstances than is
permitted in response to similar requests for information from State or
foreign agencies. This result is not supported by the statutory
language of section 8(e) of the Act \8\ and, accordingly, the
Commission finds it appropriate to remove the "violation of law"
limitation from Rule 140.73(a)(1).
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\5\ In relevant part, Section 8(e) of the Act provides with
respect to disclosure of information to State and foreign
authorities.
Upon the request of any department or agency of any State or any
political subdivision thereof, acting within the scope of its
jurisdiction, any foreign futures authority, or any department or
agency of any foreign government or any political subdivision
thereof, acting within the scope of its jurisdiction, the Commission
may furnish to such foreign futures authority, department or agency
and information in the possession of the Commission obtained in
connection with the administration of [the] Act.
\6\ 48 FR at 22133.
\7\ 17 CFR 140.73(a)(2), (3).
\8\ Section 8(e) of the Act does state, however, that "any
information furnished under this subsection to any Federal
department or agency shall not be disclosed by such department or
agency except in any action or proceeding under the laws of the
United States to which it, the Commission, or the United States is a
party." This limitation exists for both State and foreign
authorities as well, and is incorporated into paragraph (c) of Rule
140.73.
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The Commission also believes that it is necessary to revise Rule
140.73(a)(1) at this time in order to facilitate the Commission's
ability to provide financial reports submitted by, and reports of
examinations of, CFTC-regulated entities to the Board of Governors of
the Federal Reserve System (FRB) pursuant to Section 111 of the Gramm-
Leach-Bliley Act of 1999 (GLB Act).\9\ Under the GLB Act, the FRB has
supervisory oversight authority and responsibility for financial
holding companies (FHCs).\10\ Such FHCs may own a variety of financial
companies that are "functionally regulated" by different regulatory
agencies, e.g., a national bank regulated by the Office of the
Comptroller of the Currency (OCC), a broker-dealer or investment
advisor regulated by the Securities and Exchange Commission (SEC), or a
futures commission merchant regulated by the Commission. Although the
GLB Act establishes the FRB as the "umbrella supervisor" of an FHC,
Section 111 directs the FRB, in discharging its responsibilities as
umbrella supervisor, to rely "to the fullest extent possible" on
financial reports filed with, or prepared by, the FHC's or nonbank
subsidiary's functional regulator, as well as on publicly available
information for both regulated and non-regulated subsidiaries.\11\ In
addition, the GLB Act also requires the FRB to rely "to the fullest
extent possible" on examinations of the FHC or nonbank subsidiary
carried out by the appropriate functional regulator.\12\ Accordingly,
as the functional regulator of an FHC or nonbank subsidiary thereof
engaging in CFTC-regulated activities, the Commission would be expected
to provide financial reports submitted by, and reports of examinations
of, those firms upon the FRB's request to enable the FRB to carry out
its oversight and supervisory responsibilities. Absent a revision of
Rule 140.73(a)(1), however, Commission staff arguably would be
prohibited from sharing such information with the FRB unless the report
or examination was required in connection with "the investigation or
prosecution of any violation of law." This could inhibit the FRB's
role as the FHC's umbrella regulator and is inconsistent with
Congressional intent. Therefore, the Commission has determined to
revise Rule 140.73(a)(1) to delete the "violation of law" requirement
from the rule.
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\9\ Pub. L. No. 106-102, 113 Stat. 1338 (1999) (codified in
scattered sections of 12 U.S.C. and 15 U.S.C.).
\10\ FHCs are qualifying bank holding companies (BHCs) that
engage in a diversified range of financial activities. To qualify as
an FHC, a BHC must be well-capitalized, well-managed and have a
Community Reinvestment Act rating of "satisfactory" or better. See
GLB Act Sec. 103, codified at 12 U.S.C. 1843(k).
\11\ GLB Act Sec. 111, codified at 12 U.S.C. 1844c). See also
FRB Supervisory Letter SR 00-13 (Aug. 15, 2000) (Framework for
Financial Holding Company Supervision), available at http://www.federalreserve.gov.
\12\ Id.
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B. 17 CFR 140.72(a) and 17 CFR 140.73(a)
As noted above, Commission Rule 140.73 delegates authority to
certain specified members of the Commission's staff to share
information obtained in connection with the administration of the Act
with other government agencies upon written request. Similarly,
Commission Rule 140.72 delegates authority to certain specified members
of the Commission's staff to share "any information necessary or
appropriate to effectuate the purposes of the Act, including, but not
limited to[,] the full facts concerning any transaction or market
operation, including the names of the parties thereto" with officials
of any contract market, registered futures association, or self-
regulatory organization.\13\ The Commission has
[[page 1576]]
determined to amend both rules to add the Regional Counsel of the
Division of Enforcement as persons authorized in appropriate cases to
disclose certain non-public information to other governmental, judicial
or market authorities in carrying out his or her duties. This authority
will facilitate the Commission's ability to coordinate and share
information with other authorities for regulatory oversight, fitness
inquiries and other regulatory purposes. In addition, because the
position of Program Coordinator of the Division of Enforcement no
longer exists, the Commission is also revising Rules 140.72(a) and
140.73(a) to remove the delegations of authority provided therein to
the Program Coordinator of the Division of Enforcement.
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\13\ Disclosure of confidential information under Rule 140.72
requires a prior determination by the Commission or its designees
that "the transaction or market operation disrupts or tends to
disrupt any market or is otherwise harmful or against the best
interests of producers, consumers, or investors or that disclosure
is necessary or appropriate to effectuate the purposes of the Act."
See Sec. 140.72(a).
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III. Related Matters
The Commission has determined that these amendments relate solely
to agency organization, procedure and practice. Therefore, the
provisions of the Administrative Procedure Act, which generally require
notice of proposed rulemaking and provide other opportunities for
public participation,\14\ are not applicable. The Commission further
finds that, because the rules have no adverse effect upon a member of
the public, and these changes are being made solely for the purpose of
conforming the language of the regulation to the language of the
statute, there is good cause to make them effective immediately upon
publication in the Federal Register.
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\14\ 5 U.S.C. 553(b) generally requires notice of proposed
rulemaking to be published in the Federal Register. That provision
states, however, that except when notice or hearing is required by
statute, notice is not required for:
(A) * * * interpretative rules, general statements of policy, or
rules of agency organization, procedure or practice; or
(B) when the agency for good cause finds (and incorporates the
finding and a brief statement of reasons therefor in the rules
issued) that notice and public procedure thereon are impracticable,
unnecessary or contrary to the public interest.
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List of Subjects in 17 CFR Part 140
Authority delegations, organization, functions and procedures of
the Commission.
In consideration of the foregoing and pursuant to the authority
contained in the Act and, in particular, Sections 2(a), 8 and 8a, 7
U.S.C. 4a, 12 and 12a, the Commission hereby amends Part 140 of Chapter
I of Title 17 of the Code of Federal Regulations as follows:
PART 140--ORGANIZATION, FUNCTIONS AND PROCEDURES OF THE COMMISSION
1. The authority citation for Part 140 continues to read as
follows:
Authority: 7 U.S.C. 4a and 12a.
2. Section 140.72 is amended by revising paragraph (a) to read as
follows:
Sec. 140.72 Delegation of authority to disclose confidential
information to a contract market, registered futures association or
self-regulatory organization.
(a) Pursuant to the authority granted under sections 2(a)(11),
8a(5) and 8a(6) of the Act, the Commission hereby delegates, until such
time as the Commission orders otherwise, to the Executive Director, the
Deputy Executive Director, the Special Assistant to the Executive
Director, the Director of the Division of Trading and Markets, each
Deputy Director of the Division of Trading and Markets, the Chief
Accountant, the General Counsel, each Deputy General Counsel, the
Director of the Division of Economic Analysis, each Deputy Director of
the Division of Economic Analysis, the Director of the Market
Surveillance Section, the Director of the Division of Enforcement, each
Deputy Director of the Division of Enforcement, each Associate Director
of the Division of Enforcement, the Chief Counsel of the Division of
Enforcement, each Regional Counsel of the Division of Enforcement, each
of the Regional Coordinators, each of the Directors of the Market
Surveillance Branches, the Director of the Office of International
Affairs, and the Deputy Director of the Office of International
Affairs, the authority to disclose to an official of any contract
market, registered futures association, or self-regulatory organization
as defined in section 3(a)(26) of the Securities Exchange Act of 1934,
any information necessary or appropriate to effectuate the purposes of
the Act, including, but not limited to, the full facts concerning any
transaction or market operation, including the names of the parties
thereto. This authority to disclose shall be based on a determination
that the transaction or market operation disrupts or tends to disrupt
any market or is otherwise harmful or against the best interests of
producers, consumers, or investors or that disclosure is necessary or
appropriate to effectuate the purposes of the Act. The authority to
make such a determination is also delegated by the Commission to the
Commission employees identified in this section. A Commission employee
delegated authority under this section may exercise that authority on
his or her own initiative or in response to a request by an official of
a contract market, registered futures association or self-regulatory
organization.
* * * * *
3. Section 140.73 is amended by revising paragraph (a) introductory
text and paragraph (a)(1) to read as follows:
Sec. 140.73 Delegation of authority to disclose information to United
States, States, and foreign government agencies and foreign futures
authorities.
(a) Pursuant to sections 2(a)(11), 8a(5) and 8(e) of the Act, the
Commission hereby delegates, until such time as the Commission orders
otherwise, to the General Counsel or, in his or her absence, to each
Deputy General Counsel, the Director of the Division of Enforcement,
each Deputy Director of the Division of Enforcement, the Chief Counsel
of the Division of Enforcement, each Associate Director of the Division
of Enforcement, each Regional Counsel of the Division of Enforcement,
the Director of the Division of Economic Analysis or, in his or her
absence, each Deputy Director of the Division, the Director of the
Market Surveillance Section, the Director of the Division of Trading
and Markets or, in his or her absence, each Deputy Director of the
Division of Trading and Markets, and the Director of the Office of
International Affairs or, in his or her absence, the Deputy Director of
the Office of International Affairs, the authority to furnish
information in the possession of the Commission obtained in connection
with the administration of the Act, upon written request, to:
(1) Any department or agency of the United States, including for
this purpose an independent regulatory agency, acting within the scope
of its jurisdiction;
* * * * *
Issued in Washington, DC on January 4, 2001, by the Commission.
Catherine D. Dixon,
Assistant Secretary of the Commission.
[FR Doc. 01-595 Filed 1-8-01; 8:45 am]
BILLING CODE 6351-01-P
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