[Federal Register Volume 64, Number 141 (Friday, July 23, 1999)]
[Rules and Regulations]
[Pages 39912-39913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-18805]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 3


Compliance With Commission Regulation 3.31 Requirements for 
Reporting Deficiencies, Inaccuracies, and Changes Resulting From 
Exchange Disciplinary and Access Denial Actions

AGENCY: Commodity Futures Trading Commission.

ACTION: Advisory.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'') 
advises registrants and applicants for registrant status that they are 
relieved of filing a Form 3-R, as required under Commission regulation 
3.31, if the information to be reported is solely the result of an 
exchange disciplinary or access denial action. The Commission has 
recently delegated to the National Futures Association (``NFA'') the 
duty to receive and to process exchange disciplinary and access denial 
action information filed by the exchanges in accordance with Commission 
Regulation 9.11. Thus, the NFA will possess the foregoing information 
that registrants and applicants for registrant status would otherwise 
be required to include in a Form 3-R.

EFFECTIVE DATE: July 23, 1999.

FOR FURTHER INFORMATION CONTACT: Rachel F. Berdansky, Special Counsel, 
or Joshua R. Marlow, Attorney-Advisor, Division of Trading and Markets, 
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st 
Street, NW, Washington, DC 20581. Telephone: (202) 418-5490.

SUPPLEMENTARY INFORMATION:

I. Introduction

    The Commission has published elsewhere today in the Federal 
Register an Advisory and a Notice and Order relating to the filing, 
processing, and maintenance of exchange disciplinary or access denial 
actions required under Regulation 9.11 (``Regulation 9.11 
notices'').\1\ The Advisory, among other things, permits exchanges to 
file either electronic or written Regulation 9.11 notices with the NFA 
rather than filing these notices with the Commission. The Notice and 
Order accompanying the Advisory delegates to the NFA the duty to 
receive and to process disciplinary and access denial action 
information filed by exchanges pursuant to Regulation 9.11(a). As part 
of this delegation, the NFA will serve as the official custodian of 
records for exchange disciplinary and access denial actions.
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    \1\ Regulation 9.11(a) requires that whenever an exchange 
decision pursuant to which a disciplinary or access denial action is 
to be imposed has become final, the exchange must provide written 
notice of such action to the person against whom the action was 
taken and the Commission within 30 days thereafter.
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    Information contained in exchange Regulation 9.11 notices must be 
reported by registrants--and applicants awaiting registration--on Form 
3-R, pursuant to Regulation 3.31. Regulation 3.31(a) requires an 
applicant or registrant as a futures commission merchant, commodity 
trading advisor, commodity pool operator, introducing broker, or 
leverage transaction merchant to correct promptly any deficiency or 
inaccuracy in Form 7-R or Schedule D to Form 7-R which has rendered the 
information contained therein non-current or inaccurate. These 
corrections must be made on Form 3-R. Section (b) imposes a similar 
requirement on an applicant or registrant as a floor broker, floor 
trader, associated person, any person qualifying for temporary no-
action under Part 1.66 of the Commission's regulations,\2\ and each 
principal of a futures commission merchant, commodity trading advisor, 
commodity pool operator, introducing broker, or leverage transaction 
merchant. These individuals must use Form 3-R to make changes to Form 
8-R.
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    \2\ Regulation 1.66 grants no-action relief to those floor 
traders granted trading privileges on a contract market on or before 
April 26, 1993 from the then-new registration requirements for floor 
traders under Regulation 3.11.
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    As the official custodian of records for exchange Regulation 9.11 
filings, the NFA will now have disciplinary information currently 
required to be reported in a Form 3-R prior to an individual or entity 
subject to an exchange disciplinary or access denial action actually 
filing the form. Therefore, to avoid duplicative regulatory reporting, 
the Commission hereby advises all individuals and entities subject to 
Regulation 3.31 that they are relieved from Regulation 3.31 reporting 
obligations resulting from an exchange disciplinary or access denial 
action and reported by an exchange pursuant to a Regulation 9.11 
notice.

II. Compliance With Regulation 3.31

    The NFA has apprised the Commission that exchange Regulation 9.11 
notices will be regularly reviewed by the NFA's registration processing 
group staff.\3\ This is the same staff

[[Page 39913]]

currently responsible for receiving and processing Form 3-Rs filed 
pursuant to Regulation 3.31. Exchange disciplinary information reported 
in Regulation 9.11 filings will be posted on the NFA's Background 
Affiliation Status Information Center (``BASIC'') database.\4\ On a 
daily basis, the NFA will print copies of all entries made in BASIC. 
These copies will be forwarded to the registration processing group and 
treated as substitutes for Form 3-Rs. The registration processing group 
will then update the necessary registration records and the paper copy 
will be placed in the registrant's or potential registrant's file.
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    \3\ Pursuant to Section 8a(10) of the Commodity Exchange Act, 
the NFA has been delegated numerous registration functions by the 
Commission. Part 3 of Commission Regulations, 17 C.F.R. Sec. 3 
(1998), is dedicated to registration. Most registration functions 
were delegated to the NFA in 1983. 49 FR 35158 (August 3, 1983) 
(``NFA's registration rules . . . apply to all persons required to 
be registered under the Act (and not otherwise exempt by Commission 
rule or order) . . . [A]ll documents referred to in [Part 3] 
regulations will be filed with, submitted to or given by NFA at its 
Chicago office instead of the Commission.'') Subsequent orders have 
added to, or clarified, this delegation. See 48 FR 51809 (November 
14, 1983); 48 FR 8226 (March 5, 1984); 49 FR 39593 (October 9, 
1984), amended by 49 FR 45418 (November 16, 1984); 50 FR 34885 
(August 28, 1985); 51 FR 25929 (July 17, 1986); 51 FR 34490 
(September 29, 1986); 54 FR 19594 (May 8, 1989); 54 FR 41133 
(October 5, 1989); 58 FR 19657 (April 15, 1993); 59 FR 38957 (August 
1, 1994); 62 FR 36050 (July 3, 1997); 63 FR 18821 (April 16, 1998); 
and 63 FR 63913 (November 17, 1998). An earlier Notice and Order 
delegated to the NFA limited registration functions with respect to 
introducing brokers and their associated persons. See 49 FR 15940 
(April 13, 1983).
    \4\ A description of BASIC and how exchange disciplinary data is 
posted on the system can be found in the Advisory and Notice and 
Order published elsewhere today in the Federal Register.
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III. Conclusion

    The information contained in a Form 3-R filed as a result of an 
exchange disciplinary or access denial action is identical to that 
included in an exchange Regulation 9.11 filing. Pursuant to the 
Commission's delegation to the NFA to receive and to process exchange 
Regulation 9.11 notices and to maintain a database of the information 
contained therein, the NFA will have timely access to exchange 
Regulation 9.11 notices. Therefore, the Commission, in order to avoid 
duplicative regulatory reporting, is permitting any individual or 
entity otherwise required under Regulation 3.31(a) or (b) to file a 
Form 3-R as a result of an exchange disciplinary or access denial 
action to forego this reporting obligation. The Commission emphasizes 
that this relief applies only with respect to exchange disciplinary or 
access denial actions. All other reporting obligations under Regulation 
3.31 remain unchanged.

    Issued in Washington, D.C. on July 19, 1999 by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 99-18805 Filed 7-22-99; 8:45 am]
BILLING CODE 6351-01-M