[Federal Register Volume 61, Number 223 (Monday, November 18, 1996)]
[Rules and Regulations]
[Pages 58627-58628]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28842]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 3


Amendment to Interpretative Statement Regarding Statutory 
Disqualification From Registration

AGENCY: Commodity Futures Trading Commission.

ACTION: Publication of Amended Interpretative Statement.

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SUMMARY: The Commodity Futures Trading Commission has determined to 
amend its interpretation of the ``for other good cause'' standard 
contained in the Commission's Interpretative Statement With Respect to 
Section 8a(2) (C) and (E) and Section 8a(3) (J) and (M) of the 
Commodity Exchange Act. The amendment revises the existing statement by 
clarifying that violation of a settlement agreement with a contract 
market, registered futures association or other self-regulatory 
organization to withdraw from registration and/or not to apply for 
registration constitutes ``other good cause'' for adverse registration 
action under Section 8a(3)(M) of the Commodity Exchange Act, 7 U.S.C. 
12a(3)(M).

EFFECTIVE DATE: November 18, 1996.

FOR FURTHER INFORMATION CONTACT:
 Stephen Mihans, Senior Attorney, Division of Enforcement, Commodity 
Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, 
NW, Washington, DC. 20581. Telephone: (202) 418-5399.

SUPPLEMENTARY INFORMATION: The Commodity Futures Trading Commission 
(``Commission'') has determined to amend its Interpretative Statement 
With Respect to Section 8a(2) (C) and (E) and Section 8a(3) (J) and (M) 
of the Commodity Exchange Act (``Interpretative Statement'') by adding 
language clarifying that an applicant's violation of an explicit 
agreement, made in the context of a settlement with a contract market, 
registered futures association or other self-regulatory organization 
(``SRO''), to withdraw from registration and/or not to apply for 
registration constitutes ``other good cause'' for adverse registration 
action under section 8a(3)(M) of the Commodity Exchange Act, 7 U.S.C. 
12a(3)(M).\1\
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    \1\ The Interpretative Statement is printed as Appendix A 
following the Commission's part 3 (Registration) rules, 17 CFR part 
3.
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    The Commission's Interpretative Statement, among other things, 
provides guidance on the scope and meaning of section 8a(3)(M), 7 
U.S.C. 12a(3)(M), by identifying situations in which ``other good 
cause'' to affect a person's registration exists. \2\ The Commission, 
by this release, amends the Interpretative Statement to describe an 
additional situation in which ``other good cause'' will be deemed to 
exist--namely, when a person, in a settlement with a contract market, 
registered futures association or other SRO, agrees to withdraw from 
and/or not to apply for Commission registration and then fails to 
withdraw from registration or applies for registration in violation of 
that agreement. Neither the existing

[[Page 58628]]

Interpretative Statement nor the statutory bases for adverse 
registration action set forth in Section 8a of the Act, 7 U.S.C. 
Sec. 12a, establish a specific basis for denying or otherwise affecting 
registration in this situation. The Commission is publishing its 
amendment of the 8a(3)(M) Interpretative Statement to inform the public 
that failure to comply with an exchange or other SRO settlement 
agreement to withdraw from registration and/or not to apply for 
registration constitutes ``other good cause'' to deny or otherwise 
affect registration under Section 8a(3)(M).
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    \2\ It states, for example, that the Commission interprets 
paragraph (M) as authorizing the Commission to refuse to register a 
person if he or she is the subject of an administrative action 
brought by the Commission to revoke the person's existing 
registration, pending a final determination in that proceeding.
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List of Subjects in 17 CFR Part 3

    Registration, Statutory disqualifications.

PART 3--[AMENDED]

    For the reasons set forth above, part 3 of title 17 of the Code of 
Federal Regulations is amended as follows:
    1. The authority citation for Part 3 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 4, 4a, 6, 6b, 6c, 6d, 6e, 6f, 6g, 6h, 
6i, 6k, 6m, 6n, 6o, 6p, 8, 9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 
21, 23; 5 U.S.C. 552, 552b.

Appendix A to Part 3 [Amended]

    2. Appendix A to part 3 is amended by adding a new paragraph after 
the paragraph which bears the heading ``Section 8a(3)(M),'' to read as 
follows:
* * * * *
    Similarly, the Commission interprets paragraph (M) to authorize the 
Commission to refuse to register, register conditionally or otherwise 
affect the registration of any person if such person has consented, in 
connection with an agreement of settlement with a contract market, a 
registered futures association, or any other self-regulatory 
organization, to comply with an undertaking to withdraw all forms of 
existing or pending registration and/or not to apply for registration 
with the National Futures Association or the Commission in any 
capacity. Such person's effort to violate his or her prior undertaking 
to withdraw from and/or not to apply for registration shall be 
considered to constitute ``other good cause'' under paragraph (M). The 
Commission believes that allowing such a person to be registered would 
be inappropriate and inconsistent with the intention of parties to the 
prior settlement agreement. The failure to withdraw or the attempt to 
register in the face of such an undertaking would indicate the lack of 
fair and honest dealing which the Commission believes constitutes 
``other good cause'' for denying, revoking or conditioning registration 
under the Act. The Commission also believes that allowing registration 
in such a situation would be inconsistent with both Section 8a(2)(A), 
which authorizes the Commission to refuse to register, to register 
conditionally, or to revoke, suspend or place restrictions upon the 
registration of any person if such person's prior registration has been 
suspended (and the period of such suspension has not expired) or has 
been revoked, and Section 8a(3)(J), which authorizes the Commission to 
refuse to register or to register conditionally any person if he or she 
is subject to an outstanding order denying, suspending, or expelling 
such person from membership in a contract market, a registered futures 
association, or any other self-regulatory organization.

    Issued in Washington, D.C., on October 31, 1996.
Jean A. Webb,
Secretary to the Commission, Commodity Futures Trading Commission.
[FR Doc. 96-28842 Filed 11-15-96; 8:45 am]
BILLING CODE 6351-01-M