[Federal Register Volume 64, Number 103 (Friday, May 28, 1999)]
[Rules and Regulations]
[Pages 28910-28915]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13573]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 30


Representations and Disclosures Required by Certain IBs, CPOs and 
CTAs

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rules.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is 
adopting amendments to Commission Rules 30.5 and 30.6. The amendments 
will revise the procedure by which foreign persons may obtain an 
exemption from registration under Rule 30.5 and will require foreign 
and domestic commodity pool operators and commodity trading advisors to 
provide U.S. retail customers with certain disclosures, regardless of 
whether they are trading on U.S. or foreign markets.

EFFECTIVE DATE: June 28, 1999.

FOR FURTHER INFORMATION CONTACT: Laurie Plessala Duperier, Special 
Counsel, or Andrew Chapin, Staff Attorney, Division of Trading and 
Markets, Commodity Futures Trading Commission, 1155 21st Street, N.W., 
Washington, D.C. 20581. Telephone: (202) 418-5430.


[[Page 28911]]


SUPPLEMENTARY INFORMATION: 

I. Proposed Rules

    On January 11, 1999, the Commission published amendments to Part 30 
of its regulations. Part 30 governs the solicitation and sale of 
foreign futures \1\ and foreign option \2\ contracts to foreign futures 
or foreign options customers.\3\ The activities which are subject to 
regulation and require registration under Part 30 include the 
solicitation or acceptance of funds, or the sale of stock or other 
forms of securities, for the purpose of trading any foreign futures or 
foreign option contract, as well as soliciting or entering into an 
agreement to direct a U.S. customer account or to guide a U.S. customer 
account by means of a systematic program that recommends specific 
transactions in foreign futures or options.\4\
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    \1\ ``Foreign futures'' as defined in Part 30 means ``any 
contract for the purchase or sale of any commodity for future 
delivery made, or to be made, on or subject to the rules of any 
foreign board of trade.'' Commission Rule 30.1(a) Commission rules 
referred to herein are found at 17 CFR Ch. I (1998).
    \2\ ``Foreign option'' as defined in Part 30 means ``any 
transaction or agreement which is or is held out to be of the 
character of, or is commonly known to the trade, an `option', 
`privilege', `indemnity', `bid', `put', `call', `advance guaranty', 
or `decline guaranty', made or to be made on or subject to the rules 
of any foreign board of trade.'' Commission Rules 30.1(b).
    \3\ Pursuant to Commission Rule 30.1(c), ``Foreign futures or 
foreign options customers'' means ``any person located in the United 
States, its territories or possessions who trades in foreign futures 
or foreign options: Provided, That an owner or holder of a 
proprietary account as defined in paragraph (y) of Sec. 1.3 of this 
chapter shall not be deemed to be a foreign futures or foreign 
options customer within the meaning of Secs. 30.6 and 307 of this 
part.
    \4\ See Commission Rule 30.4.
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    Commission Rule 30.5 provides an exemption from the registration 
requirement for any person located outside of the United States, its 
territories or possessions who is required to be registered with the 
Commission under Part 30 of the regulations, other than a person 
required to be registered as a futures commission merchant (``FCM'')--
i.e., an introducing broker (``IB''), commodity pool operator (``CPO'') 
or commodity trading advisor (``CTA''). All persons who are registered 
or required to be registered under Rule 30.4, including persons who are 
exempt pursuant to Rule 30.5, must comply with the disclosure 
requirements of Rule 30.6.\5\
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    \5\ Persons claiming exemption pursuant to Rule 30.5 must also 
comply with Commission Rules 1.37 and 1.57. Rule 30.5(c).
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A. Rule 30.5

    An exemption from registration pursuant to Rule 30.5 currently is 
effective when a foreign IB, CPO or CTA enters into a written agency 
agreement with any of the persons or entities provided for by the rule 
and files the agreement with the National Futures Association 
(``NFA''). CPOs and CTAs who have obtained a Rule 30.5 exemption were 
requested by Commission staff to make certain representations, 
including the representation that they would solicit only qualified 
eligible participants (``QEPs'') and qualified eligible clients 
(``QECs''), as those terms are defined in Rule 4.7. Pursuant to the 
Commission's September 11, 1997 delegation order to the NFA,\6\ NFA has 
continued to request these representations from Rule 30.5 exempt 
persons. Thus, most Rule 30.5 exempt persons have solicited only QEPs 
and QECs, not U.S. ``retail customers,'' defined for the purpose of 
this Federal Register Release as U.S. customers who do not meet the 
definition of a QEP or QEC.
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    \6\ 62 FR 47792 (September 11, 1997).
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    As described below, amended Rule 30.5 will change the procedure by 
which foreign IBs, CPOs and CTAs can obtain a Rule 30.5 exemption to 
ensure that exempt persons meet basic fitness requirements and consent 
to the jurisdiction of the Commission and United States federal and 
state courts with respect to activities governed by Part 30 of the 
regulations.

B. Rule 30.6

    Rule 30.6 sets forth the disclosure requirements that apply to 
domestic and foreign IBs, CPOs and CTAs who are registered or required 
to be registered under Part 30 or who have a Rule 30.5 exemption. As 
currently written, Rule 30.6 does not distinguish between QEPs and 
QECs, who are sophisticated customers, and U.S. retail customers. To 
ensure that adequate risk disclosures are provided in U.S. retail 
customers and pool participants trading in foreign futures and option 
contracts, the Commission proposed to amend Rule 30.6(b)(2) to provide 
that CPOs and CTAs registered or required to be registered under Rule 
30.4 or exempt from registration under Rule 30.5 must provide each 
prospective participant or prospective client with the Disclosure 
Document required by Rule 4.21 for CPOs and Rule 4.31 for CTAs, 
including the disclosure statement required by Rules 4.24 and 4.34, 
respectively, prior to engaging in the activities described in Rule 
30.4. The proposed rule therefore provides that U.S. retail customers 
shall receive similar disclosures whether they trade on domestic or 
foreign markets.
    As discussed below, the Commission also proposed that the required 
disclosures by CPOs and CTAs to QEPs and QECs be decreased to recognize 
the sophistication of these persons. The Commission proposed to retain 
the disclosure language contained in Rule 4.24(b) and Rule 4.34(b)(2), 
however, to ensure that QEPs and QECs were apprised that there are 
different risks of trading foreign futures or foreign options as 
compared with U.S. futures and options.

II. Final Rules

    The Commission received three comment letters on the proposed 
rulemaking: one from a U.S. commodity exchange; one from NFA; and one 
from a bar association. The commenters all supported the Commission's 
proposing the rule amendments. They commended the Commission for 
expanding Rule 30.5 to allow foreign exempt persons to solicit U.S. 
retail customers, not just QEPs and QECs. In addition, commenters were 
supportive of the requirement that all CPOs and CTAs, both foreign and 
domestic, provide certain disclosures to U.S. retail customers, 
regardless of whether those customers are trading on domestic or 
foreign markets. As one commenter stated, ``[t]his requirement will 
level the playing field for foreign and domestic markets with respect 
to the amount of disclosure that must be provided to U.S. retail 
customers.''

A. Rule 30.5  Petitions

    Proposed Rule 30.5 is being adopted by the Commission with only 
minor revisions. It permits a foreign IB, CPO or CTA to solicit any 
U.S. customer--not just QEPs and QECs--after filing a petition that 
establishes that it is qualified for the exemption. A petitioner is 
required to show affirmatively that it qualifies for an exemption by 
representing that (i) the petitioner is located outside of the United 
States, its territories or possessions; (ii) the petitioner does not 
act as a CTA, CPO or IB, respectively, in connection with trading on or 
subject to the rules of a designated contract market in the United 
States by, for, on behalf of, or for the benefit of any U.S. customer, 
client or pool;\7\ and (iii) petitioner irrevocably consents to 
jurisdiction in the United States with respect to transactions subject 
to Part 30 of the regulations promulgated under the Commodity

[[Page 28912]]

Exchange Act (``CEA'').\8\ To ensure the fitness of persons who conduct 
business with U.S. customers, the petitioner also must represent that 
it would not be statutorily disqualified from registration under 
Section 8a(2) or 8a(3) of the Act and has not been and would not be 
disqualified from registration or licensing by the home country 
regulator. If the petitioner or its activities are regulated by any 
government entity or self-regulatory organization, it must provide the 
name and address of such government entity or self-regulatory 
organization. In addition, the petitioner must specify whether it is 
applying for an exemption based on activities as an IB, CPO or CTA and 
provide the name, address and telephone number of its main business 
location.\9\
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    \7\ This language differs slightly from the language of the 
proposed rule. The proposed rule required petitioners to represent 
that they would not ``trade'' on U.S. markets on behalf of U.S. 
foreign futures and option customers. The revised language makes 
clear that Rule 30.5 exempt persons may not engage in any of the 
activities of an IB, CPO or CTA on U.S. contract markets with U.S. 
customers, clients or pools.
    \8\ These representations are consistent with the 
representations required of foreign firms claiming exemption from 
registration pursuant to Commission Rule 30.10. (See Commission Rule 
30.10, Appendix A--Part 30, Interpretative Statement with Respect to 
the Commission's Exemptive Authority under Sec. 30.10 of Its Rules).
    \9\ The new rule also clarifies that a Rule 30.5 exempt person 
must designate either a U.S. futures commission merchant through 
which business is done, a registered futures association or any 
other person located in the United States in the business of 
providing services as an agent for service of process to act as the 
agent for service of process in accordance with Rule 30.5(a).
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    The amended rule also states that persons exempt under Rule 30.5 
must use either a U.S. registered FCM or a foreign broker that has 
received confirmation of Rule 30.10 relief to carry accounts for, on 
behalf of or for the benefit of foreign futures or foreign options 
customers, a position previously set forth by Commission staff in 
1989.\10\ For example, a Rule 30.5 exempt commodity pool operator may 
not operate a pool with U.S. foreign futures and options customers as 
participants unless the foreign futures and option trades entered into 
on behalf of the pool are intermediated on a fully disclosed basis by a 
U.S. registered FCM or a Rule 30.10 exempt foreign broker.
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    \10\ This rule codifies the position stated in CFTC 
Interpretative Letter No. 89-3 [1987-1990 Transfer Binder] Comm. 
Fut. L. Rep. (CCH) para. 24,416 (April 4, 1989). The text of the 
introductory language in final Rule 30.5 was modified from the 
language in the proposed rule to more closely parallel the language 
of the interpretative letter.
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    Two commenters questioned why a Rule 30.5 petition would not 
continue to be self-effectuating, but rather must be approved by NFA. 
One of these commenters also requested clarification regarding what 
type of review NFA would make, the time frame in which the review would 
be conducted, and whether NFA would notify the petitioner of the 
disposition of its application.
    NFA currently reviews all petitions for confirmation of Rule 30.10 
relief for compeleteness and conformity with the requisite 
representations and then notifies the foreign firm whether its petition 
is approved, denied, or is deficient in any way. The NFA review 
performs a vital function by ensuring that the petitioner firm has 
consented to U.S. jurisdiction and made other required representations 
prior to the firm's soliciting U.S. customers for trading on foreign 
markets. Since September 1997 when the Commission delegated this 
responsibility to NFA, NFA has carried out its functions in this regard 
thoroughly and expeditiously. In those cases where a Rule 30.10 firm 
has made all of the appropriate representations, NFA usually confirms 
relief to the firm within 30 days.
    Proposed Rule 30.5 sets forth a parallel procedure for Rule 30.5 
exemptions. NFA will review the Rule 30.5 petition to ensure that all 
of the representations required by the rule have been made and to 
verify that a proper agreement with a U.S. agent for service of process 
is on file with NFA. NFA's role will be solely to verify that the 
petitioner has complied with all aspects of the rule. If the petition 
is deficient, NFA will notify the petition of the deficiency. If the 
petition is complete, NFA will confirm to the petitioner that it has a 
Rule 30.5 exemption. As is the case with Rule 30.10 exemptions, the 
Commission believes that it is important for NFA to verify that a Rule 
30.5 petitioner has made all of the necessary representations and 
consents prior to engaging in any of the activities described in Rule 
30.4. Accordingly, the Commission does not believe that the Rule 30.5 
petition should be self-effectuating and has retained in the final rule 
the requirement that NFA review Rule 30.5 petitions.
    The Commission requested comment regarding who should sign a Rule 
30.5 petition on behalf of foreign entities that may not fit within 
traditional U.S. legal structures. One commenter proposed that the rule 
allow ``a natural person involved in the management of the petitioner 
who is legally authorized under local law to make binding agreements 
and representations for the applicant'' to sign the petition. The 
Commission has incorporated similar language into Rule 30.5(e)(7).

B. Rule 30.6  Disclosures

    As an initial matter, the Commission wishes to reiterate that the 
disclosure requirements in Rule 30.6(b), both currently and as 
amended,\11\ apply to both domestic and foreign CPOs and CTAs, whether 
registered with the Commission or exempt pursuant to Rule 30.5, that 
operate pools or advise clients that trade in foreign futures and 
options. Thus, CPOs and CTAs located in the United States with foreign 
futures and options customers must comply with the requirements of Part 
4 and the requirements of Part 30.
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    \11\ The text of Rule 30.6(b)(1) and (b)(2) was modified in the 
final rule to refer back to Rule 30.4 in describing to whom the 
disclosure requirements apply, rather than reiterating the 
registration requirements again in the text of Rule 30.6. The change 
is technical and non-substantive.
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    Amended Rule 30.6(b)(2) requires domestic and foreign CPOs and CTAs 
to provide U.S. foreign futures and options customers that are not QEPs 
or QECs with a disclosure document in accordance with Rule 4.21 for 
CPOs and 4.24 for CTAs.\12\ These Disclosure Documents should be filed 
with NFA in accordance with Rules 4.26 and 4.36 and in compliance with 
the order issued by the Commission in conjunction with this Federal 
Register release, which delegates to NFA the authority to review 
disclosures documents filed pursuant to Rule 30.6.
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    \12\ The disclosure requirements for IBs that solicit or accept 
orders from U.S. foreign futures and option customers are set forth 
in Rule 30.6(a), which is not being amended in this rulemaking.
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    With regard to QEPs and QECs, CPOs and CTAs registered or required 
to be registered or exempt pursuant to Rule 30.5 must provide to QEPs 
and QECs that trade on domestic markets the statements set forth in 
Rule 4.7(a)(2)(i)(A) and 4.7(b)(2)(i)(A), respectively, which disclose 
generally that the materials being provided to the participant or 
client are not required to be and have not been reviewed by the 
Commission (``the general statement''). In addition, Rule 30.6 
currently requires domestic and foreign CPOs and CTAs to provide a 
lengthy disclosure statement to all U.S. foreign futures and options 
customers, including QEPs and QECs, in accordance with Rule 4.24(b) and 
4.34(b). To better harmonize the requirements of Part 4 and Part 30, 
Rule 30.6(b)(1) will require both registered and Rule 30.5 exempt CPOs 
and CTAs to provide the general statement to QEPs and QECs trading 
foreign futures and options. It also will pare down the current 
disclosure statement requirement by specifying that CPOs and CTAs must 
provide QEPs and QECs with the specific disclosure regarding the risks 
of trading in foreign futures and options in Rules 4.24(b)(2) and 
4.34(b)(2), rather than the entire

[[Page 28913]]

disclosure statement contained in Rules 4.24(b) and 4.34(b).
    Even though Rule 30.6(b)(1) as proposed would lessen the current 
disclosure requirement with regard to QEPs and QECs, two commenters 
expressed the view that, since QEPs and QECs are sophisticated 
investors, the Commission should not require any disclosure other than 
the general statement required by Rules 4.7(a)(2)(i)(A) and 
4.7(b)(2)(i)(A). While QEPs and QECs may be sophisticated investors for 
purposes of Rule 4.7, they are not necessarily sophisticated and/or 
knowledgeable regarding the different types of risks present when 
trading on foreign boards of trade. As the Commission recently learned 
in the wake of the collapse of Griffin Trading Company, many Griffin 
customers, including CTAs and other sophisticated investors, claimed 
not to be fully aware of the risks that they undertook when trading on 
foreign markets. In particular, certain ``sophisticated'' clients did 
not appear to understand that the Commission had no legal ability to 
compel actions on foreign exchanges or to compel actions by foreign 
persons who held U.S. foreign futures and options customers' funds.
    Recent Commission experience confirms that it is necessary to 
require disclosure regarding the risks of trading on foreign boards of 
trade to QEPs and QECs, as well as to U.S. retail customers. Moreover, 
the Commission notes that, since the required disclosure is only three 
sentences long and is less disclosure than that which is currently 
required, it does not impose a significant burden on CPOs and CTAs. 
Therefore, after consideration of the comments, the Commission has 
decided to retain the requirement in Rule 30.6(b)(1) that CPOs and CTAs 
provide a risk disclosure statement to QEPs and QECs regarding the risk 
of trading in foreign futures and options.

C. Effect of the Amendments

    The amendments to Rules 30.5 and 30.6 will apply to all regulated 
activities with all new foreign futures and foreign options customers 
as of the effective date of the new rules. An IB, CPO or CTA currently 
exempt under Rule 30.5 will not be required to file a new Rule 30.5 
petition for exemption. However, all CPOs and CTAs will be required to 
provide all new prospective poll participants or new prospective 
customers with the disclosures required by Rule 30.6.

III. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601-611, 
requires that agencies, in adopting rules, consider the impact of those 
rules on small businesses.
    The Commission has previously established certain definitions of 
``small entities'' to be used by the Commission in evaluating the 
impact of its rules on such entities in accordance with the RFA.\13\ 
The Commission previously has determined that registered CPOs are not 
small entities for the purpose of the RFA.\14\ And although IBs might 
be small entities for purposes of the rule, the disclosure required to 
IBs is not changed with this rulemaking, and thus the new rules will 
not have any impact on domestic IBs.
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    \13\ 47 FR 18618-18621 (April 30, 1982).
    \14\ 47 FR 18619-18620.
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    With respect to CTAs, the Commission has stated that it would 
evaluate within the context of a particular rule proposal whether all 
or some affected CTAs would be considered to be small entities and, if 
so, the economic impact on them of any rule.\15\ In this regard, the 
Commission notes that the regulations with respect to CTAs' activities 
relating to foreign futures and foreign option contracts are 
essentially the same as those contained in Part 4 governing CTAs in 
connection with their activities relating to futures contracts and 
options traded or executed on or subject to the rules of a contract 
market designated by the Commission. The Commission has previously 
determined that the disclosure requirements in Part 4 governing CTAs 
will have a significant economic impact on a substantial number of 
small entities.\16\ In fact, Rule 4.31, which governs the disclosure 
requirements for CTAs and to which Rule 30.6(b) refers, was revised in 
1995 for the purpose of reducing the number of disclosures required and 
focusing on succinct disclosure of material information. The Commission 
determined that the revised rule reduced rather than increased the 
requirements of former Rule 4.31. Therefore, the Chairperson, on behalf 
of the Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that 
these regulations will not have a significant economic impact on a 
substantial number of small entities.
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    \15 \47 FR 18618-18620.
    \16 \See 60 FR 38146, 38181 (July 25, 1995) and 48 FR 35248 
(August 3, 1983).
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B. Paperwork Reduction Act

    When publishing final rules, the Paperwork Reduction Act of 1995 
\17\ (``Act'') imposes certain requirements on federal agencies 
(including the Commission) in connection with their conducting or 
sponsoring any collection of information as defined by the Act. In 
compliance with the Act, these final rules and/or their associated 
information collection requirement inform the public of:

    \17\ Pub. L. 104-13 (May 13, 1995).
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    (1) The reasons the information is planned to be and/or has been 
collected: (2) the way such information is planned to be and/or has 
been used to further the proper performance of the functions of the 
agency; (3) an estimate, to the extent practicable, of the average 
burden of the collection (together with a request that the public 
direct to the agency any comments concerning the accuracy of this 
burden estimate and any suggestions for reducing this burden); (4) 
whether responses to the collection of information are voluntary, 
required to obtain or retain a benefit or mandatory; (5) the nature 
and extent of confidentiality to be provided, if any; and (6) that 
fact that an agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it 
displays a current valid OMB control number.

    The Commission previously submitted these rules in proposed form 
and their associated information collection requirement to the Office 
of Management and Budget. The Office of Management and Budget approved 
the collection of information associated with these rules and assigned 
OMB control number 3038-0023 to these rules. The burden associated with 
this entire collection of which these proposed rules are a part, is as 
follows:
    Average burden hours per response: 16.13.
    Number of respondents: 73,435.
    Frequency of response: On occasion.
    The burden associated with these specific proposed rules is as 
follows:

Rule 30.5--
    Average burden hours per response: 100.
    Number of Respondents: 65.
    Frequency of response: On occasion.
Rule 30.6(b)(1)--
    Average burden hours per response: .5.
    Number of Respondents: 40.
    Frequency of response: On occasion.
Rule 30.6(b)(2)--
    Average burden hours per response: 3.0.
    Number of Respondents: 5.
    Frequency of response: On occasion.

Persons wishing to comment on the information which is required by 
these final rules should contact the Desk

[[Page 28914]]

Officer, CFTC, Office of Management and Budget, Room 10202, NEOB, 
Washington, DC 20503, (202) 395-7340. Copies of the information 
collection submission to OMB are available from the CFTC Clearance 
Officer, 1155 21st Street, NW, Washington, DC 20581, (202) 418-5160.

List of Subjects in 17 CFR Part 30

    Definitions, Foreign futures, Foreign options, Reporting and 
recordkeeping requirements, Registration requirements, Risk disclosure 
statements, Treatment of foreign futures and options secured amount, 
Customer protection.

    In consideration of the foregoing, and pursuant to the authority 
contained in the Commodity Exchange Act and, in particular, sections 
2(a)(1), 4(b), 4c and 8a thereof, 7 U.S.C. 2, 6(b), 6c and 12a (1998), 
and pursuant to the authority contained in 5 U.S.C. 552 (1998), the 
Commission hereby amends Chapter I of Title 17 of the Code of Federal 
Regulations as follows:

PART 30--FOREIGN FUTURES AND OPTIONS TRANSACTIONS

    1. The authority citation for part 30 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 4, 6, 6c and 12a, unless otherwise 
noted.

    2. Section 30.5 is amended by adding introductory text, revising 
paragraph (a) and adding paragraph (e) to read as follows:


Sec. 30.5  Alternative procedures for non-domestic persons.

    Any person not located in the United States, its territories or 
possessions, who is required in accordance with the provisions of this 
part to be registered with the Commission, other than a person required 
to be registered as a futures commission merchant, may apply for an 
exemption from registration under this part by filing a petition for 
exemption with the National Futures Association and designating an 
agent for service of process, as specified below. A person who receives 
confirmation of an exemption pursuant to this section must engage in 
all transactions subject to regulation under Part 30 through a 
registered futures commission merchant or a foreign broker who has 
received confirmation of an exemption pursuant to Sec. 30.10 in 
accordance with the provisions of Sec. 30.3(b).
    (a) Agent for service of process. Any person who seeks exemption 
from registration under this part shall enter into a written agency 
agreement with the futures commission merchant located in the United 
States through which business is done, with any registered futures 
association or any other person located in the United States in the 
business of providing services as an agent for service of process, 
pursuant to which agreement such futures commission merchant or other 
person is authorized to serve as the agent of such person for purposes 
of accepting delivery and service of communications issued by or on 
behalf of the Commission, U.S. Department of Justice, any self-
regulatory organization or any foreign futures or foreign options 
customer. If the written agency agreement is entered into with any 
person other than the futures commission merchant through which 
business is done, the futures commission merchant or foreign broker who 
has received confirmation of an exemption pursuant to Sec. 30.10 with 
whom business is conducted must be expressly identified in such agency 
agreement. Service or delivery of any communication issued by or on 
behalf of the Commission, U.S. Department of Justice, any self-
regulatory organization or any foreign futures or foreign options 
customer, pursuant to such agreement, shall constitute valid and 
effective service or delivery upon such person. Unless otherwise 
specified by the Commission, the agreement required by this section 
shall be filed with the Vice President-Registration, National Futures 
Association, 200 West Madison Street, Chicago, Illinois 60606, with a 
copy to the Vice President-Compliance, National Futures Association. 
For the purposes of this section, the term ``communication'' includes 
any summons, complaint, order, subpoena, request for information, or 
notice, as well as any other written document or correspondence 
relating to any activities of such person subject to regulation under 
this part.
* * * * *
    (e) Petition for exemption. Any person seeking an exemption from 
registration as an introducing broker, commodity pool operator or 
commodity trading advisor under this section must file a petition for 
exemption, which will be granted or denied based on compliance with 
Sec. 30.5(a) and the provision of this paragraph. The petition must:
    (1) Be in writing;
    (2) Provide the name, main business address and main business 
telephone number of the petitioner;
    (3) Represent that:
    (i) The petitioner is located outside of the United States, its 
territories or possessions;
    (ii) The petitioner does not act as an introducing broker, 
commodity pool operator or commodity trading advisor, respectively, in 
connection with trading on or subject to the rules of a designated 
contract market in the United States by, for, on behalf of, or for the 
benefit of any U.S. customer, client or pool; and
    (iii) The petitioner irrevocably agrees to the jurisdiction of the 
Commission and state and federal courts in the United States with 
respect to activities and transactions subject to this part;
    (4) Represent that the petitioner would not be statutorily 
disqualified from registration under Section 8a(2) or 8a(3) of the 
Commodity Exchange Act and that the petitioner is not disqualified from 
registration pursuant to the laws or regulations of its home country;
    (5) If the petitioner or its activities are regulated by any 
government entity or self-regulatory organization, state the name and 
address of such government entity or self-regulatory organization;
    (6) State whether the petitioner is applying for a Sec. 30.5 
exemption from registration as an introducing broker, commodity pool 
operator or commodity trading advisor;
    (7) Be signed as follows: If the petitioner is a sole 
proprietorship, by the sole proprietor; if a partnership, by a general 
partner; if a corporation, by the chief executive officer or other 
person(s) legally authorized to bind the corporation; if any other 
business structure, by such person or persons involved in the 
management of the petitioner and legally authorized to bind the 
petitioner; and
    (8) Be filed with the Vice President-Registration, National Futures 
Association, 200 West Madison Street, Chicago, Illinois 60606.
    3. Section 30.6 is amended by revising paragraph to read as 
follows:


Sec. 30.6  Disclosure.

* * * * *
    (b) Commodity pool operators and commodity trading advisors. (1) 
With respect to qualified eligible participants, as defined in 
Sec. 4.7(a)(1)(ii) of this chapter, a commodity pool operator 
registered or required to be registered under this part, or exempt from 
registration pursuant to Sec. 30.5, may not, directly or indirectly, 
engage in any of the activities described in Sec. 30.4(c) unless the 
commodity pool operator, at or before the time it engages in such 
activities, first provides each prospective qualified eligible 
participant with the Risk Disclosure Statement set forth in 
Sec. 4.24.(b)(2) of this chapter and the statement in 
Sec. 4.7(a)(2)(i)(A) of this chapter. With respect to qualified 
eligible clients, as defined in Sec. 4.7(b)(1)(ii) of this chapter,

[[Page 28915]]

a commodity trading advisor registered or required to be registered 
under this part, or exempt from registration pursuant to Sec. 30.5, may 
not, directly or indirectly, engage in any of the activities described 
in Sec. 30.4(d) unless the commodity trading advisor, at or before the 
time it engages in such activities, first provides each qualified 
eligible client with the Risk Disclosure Statement set forth in 
Sec. 4.34(b)(2) of this chapter and the statement in Sec. 4.7(b)(2 
(i)(A) of this chapter.
    (2) With respect to participants who do not satisfy the 
requirements of qualified eligible participants, as defined in 
Sec. 4.7(a)(1)(ii) of this chapter, a commodity pool operator 
registered or required to be registered under this part, or exempt from 
registration pursuant to Sec. 30.5, may not, directly or indirectly, 
engage in any of the activities described in Sec. 30.4(c) unless the 
commodity pool operator, at or before the time it engages in such 
activities, first provides each prospective participant with the 
Disclosure Document required to be furnished to customers or potential 
customers pursuant to Sec. 4.21 of this chapter and files the 
Disclosure Document in accordance with Sec. 4.26 of this chapter. With 
respect to clients who do not satisfy the requirements of qualified 
eligible clients, as defined in Sec. 4.7(b)(1)(ii) of this chapter, a 
commodity trading advisor registered or required to be registered under 
this part, or exempt from registration pursuant to Sec. 30.5, may not, 
directly or indirectly, engage in any of the activities described in 
Sec. 30.4(d) unless the commodity trading advisor, at or before the 
time it engages in such activities, first provides each prospective 
client with the Disclosure Document required to be furnished customers 
or potential customers pursuant to Sec. 4.31 of this chapter and files 
the Disclosure Document in accordance with Sec. 4.36 of this chapter.
* * * * *
    Dated: May 21, 1999.

    By the Commission.
Jean A. Webb,
Seretary of the Commission.
[FR Doc. 99-13573 Filed 5-27-99; 8:45 am]
BILLING CODE 6351-01-M