[Federal Register Volume 66, Number 6 (Tuesday, January 9, 2001)]
[Rules and Regulations]
[Pages 1574-1576]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-595]


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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