[Federal Register Volume 69, Number 131 (Friday, July 9, 2004)]
[Rules and Regulations]
[Pages 41424-41427]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15523]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 1, 4, 31, 140, 145 and 190


Corrections to Regional Office Information, References to Section 
4d(2) and Criteria for CPO Registration Exemption

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is 
amending its regulations to make a series of technical corrections, as 
follows: To delete references to the Western Regional Office, which was 
closed in 2003; to update addresses for other regional offices; to 
correct references to section 4d(2) of the Commodity Exchange Act to 
read section 4d(a)(2) instead; and to clarify that the participant 
criteria for exemption from commodity pool operator (``CPO'') 
registration under Rule 4.13(a)(3) include persons who meet the 
participant criteria of Rule 4.13(a)(4).

DATES: Effective: July 9, 2004.

FOR FURTHER INFORMATION CONTACT: Thelma Diaz, Special Counsel, at (202) 
418-5137, Division of Clearing and Intermediary Oversight, Commodity 
Futures Trading Commission, Three Lafayette Centre, 1155 21st St., NW., 
Washington DC 20581; electronic mail at [email protected].

SUPPLEMENTARY INFORMATION: 

I. Amendments To Update Regional Office Information

    Commission Rule 140.2 describes the organization of four regional 
offices for the Commission (the Eastern, Central, Southwestern and 
Western Regional offices). Among other things, Rule 140.2 specifies for 
each regional office a list of states for which the office is 
``responsible for enforcement of the [Commodity Exchange Act] and 
administration of programs of the Commission''.\1\ In 2002, the Eastern 
and Central Regional Offices moved to new locations, and the Western 
Regional Office was closed in 2003. The Commission is therefore 
amending Rule 140.2 to update the address information for the Eastern 
and Central Regional Offices, and to delete the reference to the 
Western Regional Office. Rule 140.2 is also amended to add to the list 
of states for the Southwestern Regional Office those states that are 
currently in the list for the Western Regional Office (Alaska, Arizona, 
California, Hawaii, Idaho, Montana, Nevada, Oregon, Utah, Washington, 
and Wyoming).\2\
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    \1\ The Commodity Exchange Act may be found at 7 U.S.C. 1 et 
seq. (2000).
    \2\ The Commission is also making a technical correction to Rule 
140.99, which currently includes two different paragraphs that are 
both designated as paragraph (d)(2). In 2002, the Commission adopted 
amendments to Rule 140.99 that added the text in the first paragraph 
designated as (d)(2) and deleted the text found in the second 
paragraph. See 67 FR 62350, 62353-4 (October 7, 2002). The publisher 
of the Code of Federal Regulations, however, incorrectly included 
the text of both paragraphs, and this final rule adopts a technical 
correction to delete the second of the two paragraphs designated as 
(d)(2).
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    Commission Rules 1.10, 1.12, 1.17 and 31.13 must also be revised to 
reflect the closing of the Western Regional Office. These rules specify 
various reports or notices that are to be filed with the Commission, 
and state further that such reports and notices are considered filed 
when received by the regional office that is the nearest to a firm's 
principal place of business, with the proviso that firms under the 
jurisdiction of the Western Regional Office should file with the 
Southwestern Regional Office instead. The proviso is no longer 
necessary, and the Commission is accordingly amending each of these 
regulations to delete the proviso.
    The Commission is also amending the list of addresses provided in 
Rule 145.6 for requests for public records directed to regional 
offices. As amended, the rule will no longer include the address of the 
closed Division of Enforcement office in the Western Region.

II. Amendments To Update References to Section 4d

    Several Commission regulations include references to section 4d(2) 
of the Commodity Exchange Act. With the enactment of Commodity Futures 
Modernization Act of 2000 (``CFMA''), section 4d(2) has now been 
redesignated as section 4d(a)(2).\3\ The Commission is therefore 
amending Rules 1.16, 1.17, 1.23, 1.30, 31.13, and 190.07 to change the 
references to section 4d(2) to read section 4d(a)(2).
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    \3\ Sec. 1(a)(5) of Pub. L. 106-554 (title II, Sec. 251(f)).

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[[Page 41425]]

III. Amendments To Clarify That the Participant Criteria for Exemption 
From CPO Registration Under Rule 4.13(a)(3) Include Persons Who Meet 
the Criteria of Rule 4.13(a)(4)

    In August 2003, the Commission adopted rules that provide for 
additional exemptions from registration as a CPO.\4\ To be eligible for 
exemption from CPO registration under Rule 4.13(a)(3), the CPO seeking 
exemption must operate pools whose participants meet certain 
sophistication criteria \5\ and that abide by restrictions on the 
amount of the pool's commodity interest trading. To be eligible for 
exemption under Rule 4.13(a)(4), the CPO must operate pools whose 
participants meet significantly higher sophistication criteria.\6\ The 
latter rule does not restrict the amount of the pool's commodity 
interest trading. The Commission is amending Rule 4.13(a)(3) to make 
clear that participants who meet the higher sophistication criteria of 
Rule 4.13(a)(4) may also participate in a pool for which the operator 
claims exemption from CPO registration under Rule 4.13(a)(3).\7\

Related Matters
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    \4\ See 68 FR 47221 (August 8, 2003).
    \5\ Each participant must be an ``accredited investor'' or 
``knowledgeable employee'' under the Federal securities laws, a 
trust formed by an accredited investor for a family member, or a 
``qualified eligible person'' under Rule 4.7(a)(2)(viii)(A). 17 CFR 
4.7(a)(2)(viii)(A) (2003).
    \6\ Each natural person participant must be a ``qualified 
eligible person'' under Rule 4.7(a)(2) and each non-natural person 
must be a ``qualified eligible person'' under Rule 4.7 or an 
``accredited investor'' under sub-paragraphs (a)(1) through (a)(3), 
(a)(7) or (a)(8) of Rule 501 under the Securities Act of 1933. 17 
CFR 230.501(a)(1)-(3), (a)(7) or (a)(8) (2003).
    \7\ In this regard, by letter dated April 14, 2004, Commission 
staff confirmed that persons who meet the participant criteria of 
Rule 4.13(a)(4) may also participate in a pool operated pursuant to 
Rule 4.13(a)(3). See CFTC Interpretative Letter No. 04-13, available 
on the Commission's Web site at http://www.cftc.gov/tm/letters/04letters/tm04-13.htm.
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A. Administrative Procedure Act
    The Administrative Procedure Act (``APA'') generally requires 
notice of proposed agency rulemaking and procedures for public comment 
prior to the adoption of final rules.\8\ The APA provides for an 
exception from this process for ``interpretative rules, general 
statements of policy, or rules of agency organization, procedure, or 
practice,'' or whenever the agency for good cause finds that such 
notice and comment opportunity are ``impracticable, unnecessary, or 
contrary to the public interest.'' \9\ The APA also provides that the 
required publication of a substantive rule shall be made not less than 
30 days before its effective date, but provides several express 
exceptions to this requirement, including where the rule ``grants or 
recognizes an exemption or relieves a restriction.'' \10\
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    \8\ 5 U.S.C. 551 et. seq.
    \9\ 5 U.S.C. 553(b).
    \10\ 5 U.S.C. 553(d).
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    The amendments to revise office address information in Rules 1.10, 
1.12, 1.17, 31.13, 140.2, and 145.6 relate to the agency's internal 
organization, and will also benefit the public by providing correct 
information for the filing of required documents with the 
Commission.\11\ Moreover, when adopting amendments to Rules 4.13(a)(3) 
and (4) last year to provide exemptive relief from CPO registration, 
the Commission determined that such amendments would be effective 
immediately because they granted or recognized an exemption or relieved 
a restriction.\12\ The amendments to Rule 4.13(a) hereby adopted 
clarify and further confirm for industry participants the availability 
of exemptive relief under the rule amendments adopted in August of 
2003. Accordingly, the Commission has determined to make the amendments 
adopted in this final rulemaking effective immediately upon publication 
in the Federal Register.
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    \11\ The public will also benefit from the correction of 
obsolete references to section 4d(2) in Rules 1.16, 1.17, 1.23, 
1.30, 31.13, 140.99, and 190.07.
    \12\ 68 FR at 47230.
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B. Cost-Benefit Analysis
    Section 15 of the Commodity Exchange Act, as amended by the CFMA, 
requires the Commission to consider the costs and benefits of its 
action before promulgating a new regulation under the Act.\13\ The 
Commission undertook such an analysis last year when adopting 
amendments to Rules 4.13(a)(3) and (a)(4) to provide exemptive relief 
from CPO registration.\14\ The amendments to Rule 4.13(a) adopted in 
this final rulemaking do not affect nor alter the Commission's prior 
analysis, and the Commission has further determined that its prior 
analysis supports the adoption of such amendments to Rule 4.13(a).
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    \13\ Section 15(a)(2) specifies that such costs and benefits 
shall be evaluated in light of five broad areas of market and public 
concern: Protection of market participants and the public; 
efficiency, competitiveness, and financial integrity of futures 
markets; price discovery; sound risk management practices; and other 
public interest considerations. Because the amendments that update 
address information relate to internal agency organization, the 
Commission has determined that none of the considerations enumerated 
in section 15(a) are applicable to such amendments. Furthermore, the 
amendments that update references to the Commodity Exhange Act in 
the Commission's rules do not revise any existing regulatory 
requirement, and therefore do not change any existing cost or 
benefit associated with such regulation.
    \14\ 68 FR at 47230.
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C. Paperwork Reduction Act
    The Paperwork Reduction Act of 1995 (``PRA'') imposes certain 
requirements on federal agencies (including the Commission) in 
connection with their conducting or sponsoring any collection of 
information as defined by the PRA.\15\ The rule amendments do not 
require a new collection of information on the part of any entities 
subject to such rule amendments. Accordingly, for purposes of the PRA, 
the Commission certifies that these rule amendments will not impose any 
new reporting or recordkeeping requirements.
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    \15\ 44 U.S.C. 3501 et seq.
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Lists of Subjects

17 CFR Part 1

    Brokers, Commodity futures, Reporting and recordkeeping 
requirements.

17 CFR Part 4

    Advertising, Commodity pool operators, Commodity trading advisors, 
Commodity futures, Commodity options, Customer protection, Reporting 
and Recordkeeping.

17 CFR Part 31

    Leverage transactions; Reporting and recordkeeping requirements.

17 CFR Part 140

    Authority delegations (Government agencies), Organization and 
functions (Government agencies).

17 CFR Part 145

    Confidential business information, Freedom of information.

17 CFR Part 190

    Bankruptcy.

0
Accordingly, 17 CFR parts 1, 4, 31, 140, 145 and 190 are amended as 
follows:

PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT

0
1. The authority citation for part 1 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 6h, 
6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c, 13a, 
13a-1, 16, 16a, 19, 21, 23, and 24, as amended by the Commodity 
Futures Modernization Act of 2000, Appendix E of Pub. L. 106-554, 
114 Stat. 2763 (2000).

Sec.  1.10  [Amended]

0
2. Section 1.10 is amended by:

[[Page 41426]]

0
a. Removing from paragraph (c) the two parenthenticals that currently 
read ``(except that a registrant under the jurisdiction of the 
Commission's Western Regional Office must file such reports with the 
Southwestern Regional Office)'' and ``(except that an applicant under 
the jurisdiction of the Commission's Western Regional Office must file 
such reports with the Southwestern Regional Office)'', and
0
b. Removing from paragraphs (e)(1), (e)(2), and (f)(2) the 
parenthenticals that currently read ``(except that an applicant under 
the jurisdiction of the Commission's Western Regional Office must file 
such a notice with the Southwestern Regional Office)''.


Sec.  1.12  [Amended]

0
3. Section 1.12 is amended by removing from paragraph (i)(1) the 
parenthentical that currently reads ``(except that an applicant, 
registrant or self regulatory organization under the jurisdiction of 
the Commission's Western Regional Office must file such notices and 
reports with the Southwestern Regional Office)''.


Sec.  1.16  [Amended]

0
4. Section 1.16 is amended by removing from paragraph (d)(1) the words 
``section 4d(2)'' wherever they appear in the paragraph and adding in 
their place the words ``section 4d(a)(2)''.


Sec.  1.17  [Amended]

0
5. Section 1.17 is amended by removing from paragraph (h)(3)(vi) the 
parenthentical that currently reads ``(except that a registrant under 
the jurisdiction of the Commission's Western Regional Office shall file 
such copies with the Southwestern Regional Office)''.


Sec.  1.23  [Amended]

0
6. Section 1.23 is amended by removing the words ``section 4d(2)'' and 
adding in their place the words ``section 4d(a)(2)''.


Sec.  1.30  [Amended]

0
7. Section 1.30 is amended by removing the words ``section 4d(2)'' and 
adding in their place the words ``section 4d(a)(2)''.

PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS

0
8. The authority citation for part 4 continues to read as follows:


    Authority: 7 U.S.C. 1a, 2,4, 6(c), 6b, 6c, 6l, 6m, 6n, 6o, 12a 
and 23.

0
9. Section 4.13 is amended by:
0
a. Revising paragraph (a)(3)(iii)(C) and paragraph (a)(3)(iii)(D), and
0
b. Adding new paragraph (a)(3)(iii)(E), to read as follows:


Sec.  4.13  Exemption from registration as a commodity pool operator.

    (a) * * *
    (3) * * *
    (iii) * * *
    (C) A ``knowledgeable employee,'' as that term is defined in Sec.  
270.3c-5 of this title;
    (D) A ``qualified eligible person,'' as that term is defined in 
Sec.  4.7(a)(2)(viii)(A) of this chapter; or
    (E) A person eligible to participate in a pool for which the pool 
operator can claim exemption from registration under paragraph (a)(4) 
of this section; and
* * * * *

PART 31--LEVERAGE TRANSACTIONS

0
10. The authority citation for part 31 continues to read as follows:

    Authority: 7 U.S.C. 12a and 23, unless otherwise noted.


Sec.  31.13  [Amended]

0
11. Section 31.13 is amended by:
0
a. Removing from paragraph (c) the words ``section 4d(2)'' and adding 
in their place the words ``section 4d(a)(2)'', and
0
b. Removing from paragraph (e) all of the text following the colon 
until the end of the paragraph, and by removing the colon and adding a 
period instead.

PART 140--ORGANIZATION, FUNCTIONS, AND PROCEDURES OF THE COMMISSION

0
12. The authority citation for part 140 continues to read as follows:

    Authority: 7 U.S.C. 2 and 12a.


0
13. Section 140.2 is revised read as follows:


Sec.  140.2  Regional Offices--Regional Directors.

    Each of the Regional offices described herein functions as set 
forth in this section under the direction of a Regional Director, who 
is delegated authority and responsibility for the enforcement of the 
Act and administration of the programs of the Commission in the 
particular Region.
    (a) The Eastern Regional Office is located at 140 Broadway, New 
York, New York, 10005 and is responsible for enforcement of the Act and 
administration of programs of the Commission in the States of Alabama, 
Connecticut, Delaware, Florida, Georgia, Kentucky, Maine, Maryland, 
Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North 
Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee, 
Vermont, Virginia, and West Virginia.
    (b) The Central Regional Office is located at 525 West Monroe 
Street, Suite 1100, Chicago, Illinois 60661 and is responsible for 
enforcement of the Act and administration of programs of the Commission 
in the States of Illinois, Indiana, Michigan, Ohio and Wisconsin.
    (c) The Southwestern Regional office is located at 4900 Main 
Street, Suite 721, Kansas City, Missouri 64112, with a sub-office at 
Room 510, Grain Exchange Building, Fourth Street and Fourth Avenue, 
South, Minneapolis, Minnesota 55415, and is responsible for enforcement 
of the Act and administration of the programs of the Commission in the 
States of Alaska, Arizona, Arkansas, California, Colorado, Hawaii, 
Idaho, Iowa, Kansas, Louisiana, Minnesota, Missouri, Montana, Nebraska, 
Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, 
Texas, Utah, Washington, and Wyoming.


Sec.  140.99  [Amended]

0
14. Section 140.99 is amended by removing the second of the two 
paragraphs that are currently both designated (d)(2).

PART 145--COMMISSION RECORDS AND INFORMATION

0
15. The authority citation for Part 145 continues to read as follows:

    Authority: Pub. L. 99-570, 100 Stat. 3207; Pub. L. 89-554, 80 
Stat. 383; Pub. L. 90-23, 81 Stat. 54; Pub. L. 98-502, 88 Stat. 
1561-1564 (5 U.S.C. 552); Sec. 101(a), Pub. L. 93-463, 88 Stat. 1389 
(5 U.S.C. 4a(j)); unless otherwise noted.
0
16. Section 145.6 is amended by revising paragraph (a) to read as 
follows:


Sec.  145.6  Commission offices to contact for assistance; registration 
records available.

    (a) Whenever this part directs that a request be directed to the 
FOI, Privacy and Sunshine Acts compliance staff at the principal office 
of the Commission in Washington, DC, the request shall be made in 
writing and shall be addressed or otherwise directed to the Assistant 
Secretary for FOI, Privacy and Sunshine Acts Compliance, Office of the 
Secretariat, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1155 21st Street, NW., Washington, DC 20581. Requests for 
public records directed to a regional office of the Commission pursuant 
to Sec. Sec.  145.0(c) and 145.2 should be sent to:


[[Page 41427]]


Commodity Futures Trading Commission, 140 Broadway, New York, New 
York 10005, Telephone: (646) 746-9700
Commodity Futures Trading Commission, 525 West Monroe Street, Suite 
1100 North, Chicago, Illinois 60661, Telephone: (312) 596-0700
Commodity Futures Trading Commission, 510 Grain Exchange Building, 
Minneapolis, Minnesota 55415, Telephone: (612) 370-3255
Commodity Futures Trading Commission, 4900 Main Street, Suite 721, 
Kansas City, Missouri 64112, Telephone: (816) 931-7600
* * * * *

PART 190--BANKRUPTCY

0
17. The authority citation for part 190 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 4a, 6c, 6d, 6g, 7a, 12, 19, and 24, 
and 11 U.S.C. 362, 546, 548, 556, and 761-766, unless otherwise 
noted.


Sec.  190.07  [Amended]

0
18. Section 190.07 is amended by removing from paragraph (b)(3)(v) the 
words ``section 4d(2)'' and adding in their place the words ``section 
4d(a)(2)''.

    Issued in Washington, DC, on July 1, 2004, by the Commission.
Catherine D. Dixon,
Assistant Secretary of the Commission.
[FR Doc. 04-15523 Filed 7-8-04; 8:45 am]
BILLING CODE 6351-01-P