[Federal Register Volume 74, Number 33 (Friday, February 20, 2009)]
[Proposed Rules]
[Pages 7838-7843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-3551]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 1, 30, and 140

RIN 3038-AC72


Acknowledgment Letters for Customer Funds and Secured Amount 
Funds

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is proposing to amend its regulations regarding the required 
content of the acknowledgment letter that a registrant must obtain from 
any depository holding its segregated customer funds or funds of 
foreign futures or foreign options customers, and certain technical 
changes.

DATES: Submit comments on or before March 23, 2009.

ADDRESSES: You may submit comments, identified by RIN number, by any of 
the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency Web Site: http://www.cftc.gov. Follow the 
instructions for submitting comments on the Web site.
     E-mail: [email protected]. Include the RIN number in the 
subject line of the message.
     Fax: 202-418-5521.
     Mail: David A. Stawick, Secretary of the Commission, 
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st 
Street, NW., Washington, DC 20581.
     Hand Delivery/Courier: Same as mail above.

FOR FURTHER INFORMATION CONTACT: Eileen A. Donovan, Special Counsel, 
202-418-5096, [email protected]; Division of Clearing and Intermediary 
Oversight, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1155 21st Street, NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

    Regulation 1.20 (17 CFR 1.20) requires futures commission merchants 
(FCMs) that accept customer funds and derivatives clearing 
organizations (DCOs) that accept customer funds from FCMs to segregate 
and separately account for those funds.\1\ Currently, Regulation 1.20 
requires such FCMs and DCOs to obtain from the bank, trust company, FCM 
or DCO holding customer funds in the capacity of a depository (each, a 
``Depository'') a written acknowledgment that the Depository was 
informed that the customer funds deposited therein are those of 
commodity or option customers and are being held in accordance with the 
provisions of the Commodity Exchange Act (Act) \2\ and CFTC

[[Page 7839]]

regulations.\3\ Regulation 1.26 (17 CFR 1.26), which requires FCMs and 
DCOs to segregate and separately account for instruments purchased with 
customer funds, repeats the requirement to obtain an acknowledgment 
letter. FCMs also must obtain a similar written acknowledgment from 
Depositories holding ``secured amount'' funds \4\ required under 
Regulation 30.7 (17 CFR 30.7), which governs the treatment of money, 
securities, and property held for or on behalf of the FCM's foreign 
futures and foreign options customers.
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    \1\ See 17 CFR 1.3(gg) (defining the term ``customer funds'').
    \2\ 7 U.S.C. 1 et seq.
    \3\ 17 CFR Parts 1-199.
    \4\ See 17 CFR 1.3(rr) (defining the term ``foreign futures or 
foreign options secured amount'').
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    The proposed amendments to Regulations 1.20, 1.26, and 30.7 set out 
specific representations that would be required in these acknowledgment 
letters in order to reaffirm and clarify the obligations Depositories 
incur when accepting customer funds or secured amount funds. The 
Commission also is proposing several technical changes to Regulations 
1.20, 1.26, 30.7, and 140.91. The Commission invites public comment on 
all aspects of the proposed regulations.

II. Discussion of the Proposed Regulations

A. Regulations 1.20 and 1.26

    The Commission is proposing to add paragraphs (d) and (e) to 
Regulation 1.20 to set out specific representations that Depositories 
would have to include in the acknowledgment letter required by 
paragraphs (a) and (b) of the regulation. Proposed paragraph (d) 
concerns the letter required by paragraph (a), which applies to 
customer funds being held for an FCM by a bank, trust company, DCO or 
another FCM. Proposed paragraph (e) concerns the letter required by 
paragraph (b), which applies to customer funds being held for a DCO by 
a bank or trust company.
    Proposed paragraphs (d)(1)(i) and (e)(1)(i) require the Depository 
to acknowledge that the FCM or DCO, respectively, has established the 
account for the purpose of depositing customer funds. The FCM or DCO 
may have other accounts, in addition to the customer account, with the 
same Depository, and therefore the Depository must recognize that the 
funds being deposited in this particular account belong not to the FCM 
or DCO, but to customers.
    Proposed paragraphs (d)(1)(ii) and (e)(1)(ii) require the 
Depository to acknowledge that the customer funds deposited therein are 
those of commodity or option customers of the FCM, or clearing members 
of the DCO, respectively, and that those funds are to be segregated in 
accordance with the provisions of the Act and Part 1 of the CFTC 
regulations. These provisions would reaffirm the Depository's 
obligation to segregate customer funds from any other funds that the 
Depository may hold on behalf of the FCM or DCO.
    Proposed paragraphs (d)(1)(iii) and (e)(1)(iii) require the 
Depository to acknowledge that the customer funds shall not be subject 
to any right of offset, or lien, for or on account of any indebtedness, 
obligations or liabilities owed by the FCM or DCO, respectively. The 
FCM or DCO may hold other non-customer funds with the Depository that 
do not carry such restrictions.
    Proposed paragraphs (d)(1)(iv) and (e)(1)(iv) require the 
Depository to acknowledge that it must treat the customer funds in 
accordance with the Act and CFTC regulations. These provisions restate 
requirements currently included in paragraphs (a) and (b), 
respectively.
    Proposed paragraphs (d)(1)(v) and (e)(1)(v) require the Depository 
to acknowledge that it must immediately release the customer funds upon 
proper notice and instruction from the FCM or DCO, respectively, or 
from the Commission. The Commission is not proposing specific standards 
for what constitutes ``proper notice.'' This is because reasonable 
actions could vary, depending on the situation. For example, in certain 
circumstances, it may not be possible to expeditiously provide written 
notice, and a telephone call would be sufficient and even preferable. 
The Commission recognizes that the release of funds may be delayed by 
practical considerations--for example, electronic transfers may not be 
possible if the Fedwire is unavailable. But the Depository must make 
every effort to execute the transfer as soon as possible. The transfer 
of customer funds from a segregated account cannot be delayed due to 
concerns about the financial status of the FCM or DCO that deposited 
the funds.
    Proposed paragraphs (d)(1)(vi) and (e)(1)(vi) require the 
Depository to acknowledge that the FCM or DCO has informed the 
Depository that the FCM or DCO will provide the Commission with a copy 
of the written acknowledgment.
    Proposed paragraphs (d)(2) and (e)(2) require the written 
acknowledgment to include the account number for each account covered 
by the acknowledgment. If multiple accounts are covered by a single 
written acknowledgment, the account numbers may be listed on an 
attachment to the written acknowledgment.
    Proposed paragraphs (d)(3) and (e)(3) require that a copy of the 
written acknowledgment be filed with the regional office of the 
Commission with jurisdiction over the state in which the FCM's or DCO's 
principal place of business is located.
    The proposed changes to Regulation 1.26 would affirm that the 
written acknowledgment required for instruments in which customer funds 
are invested is identical to the written acknowledgment required under 
Regulation 1.20 and therefore must meet the requirements set out in 
Regulation 1.20.

B. Regulation 30.7

    The Commission is proposing to amend Regulation 30.7 to set out 
specific representations that Depositories holding secured amount funds 
would have to include in the acknowledgment letter required by the 
regulation.\5\
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    \5\ The Commission has issued an interpretative statement with 
respect to the secured amount requirement set forth in Regulation 
30.7. See 17 CFR Part 30, App. B.
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    Proposed paragraph (c)(2)(i)(A) requires the Depository to affirm 
that it meets the requirement set out in Regulation 30.7(c)(1). 
Regulation 30.7(c)(1) lists the types of depositories that may accept 
secured amount funds.
    Proposed paragraph (c)(2)(i)(B) requires the Depository to 
acknowledge that the FCM has established the account for the purpose of 
depositing money, securities, or property for or on behalf of customers 
that include, but are not limited to, foreign futures and foreign 
options customers. The FCM may have other accounts, in addition to the 
secured amount account, with the same Depository, and therefore the 
Depository must recognize that the funds being deposited in this 
particular account are obligated not to the FCM but to the FCM's 
foreign futures and foreign options customers.
    Proposed paragraph (c)(2)(i)(C) requires the Depository to 
acknowledge that the money, securities, or property deposited therein 
are held on behalf of foreign futures and foreign options customers of 
the FCM and may not be commingled with the FCM's own funds or any other 
funds that the Depository may hold, in accordance with the provisions 
of the Act and Part 30 of the CFTC regulations. This provision would 
reaffirm the Depository's obligation to keep the money, securities, or 
property held for the FCM's foreign futures and options customers 
separate from any

[[Page 7840]]

other funds that the Depository may hold on behalf of the FCM, 
including those customer funds required to be separately accounted for 
and segregated under Section 4d of the Act.\6\
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    \6\ See 17 CFR 30.7(d).
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    Proposed paragraph (c)(2)(i)(D) requires the Depository to 
acknowledge that the money, securities, or property shall not be 
subject to any right of offset, or lien, for or on account of any 
indebtedness, obligations or liabilities owed by the FCM. The FCM may 
hold other funds with the Depository that do not carry such 
restrictions.
    Proposed paragraph (c)(2)(i)(E) requires the Depository to 
acknowledge that it must treat the money, securities, or property in 
accordance with the provisions of the Act and CFTC regulations. Under 
this provision, the Depository must recognize not only the prohibition 
against commingling referenced in proposed paragraph (c)(2)(ii), but 
all of its legal obligations as a holder of customer money, securities, 
or property.
    Proposed paragraph (c)(2)(i)(F) requires the Depository to 
acknowledge that it must release immediately, subject to requirements 
of applicable foreign law,\7\ the money, securities, or property upon 
proper notice and instruction from the FCM or the Commission. The 
Commission is not proposing specific standards for what constitutes 
``proper notice.'' This is because reasonable actions could vary, 
depending on the situation. For example, in certain circumstances, it 
may not be possible to expeditiously provide written notice, and a 
telephone call would be sufficient and even preferable. The Commission 
recognizes that the release of money, securities, or property may be 
delayed by practical considerations--for example, electronic transfers 
may not be possible if the Fedwire is unavailable. But the Depository 
must make every effort to execute the transfer as soon as possible. The 
transfer cannot be delayed due to concerns about the financial status 
of the FCM that deposited the money, securities, or property.
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    \7\ The Commission notes that under the laws of some foreign 
countries, immediate release of customer funds may not always be 
possible. Regulation 30.6(a) (17 CFR 30.6(a)) requires FCMs to 
furnish customers with a separate written disclosure statement 
containing the language set forth in Regulation 1.55(b) (17 CFR 
1.55(b)). Regulation 1.55(b)(7) states in relevant part:
    No domestic organization regulates the activities of a foreign 
exchange * * * and no domestic regulator has the power to compel 
enforcement of the rules of the foreign exchange or the laws of the 
foreign country. Moreover, such laws or regulations will vary 
depending on the foreign country in which the transaction occurs. * 
* * [F]unds received from customers to margin foreign futures 
transactions may not be provided the same protections as funds 
received to margin futures transactions on domestic exchanges.
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    Proposed paragraph (c)(2)(i)(G) requires the Depository to 
acknowledge that the FCM has informed the Depository that the FCM will 
provide the Commission with a copy of the written acknowledgment.
    Proposed paragraph (c)(2)(ii) requires the written acknowledgment 
to include the account number for each account covered by the 
acknowledgment. If multiple accounts are covered by a single written 
acknowledgment, the account numbers may be listed on an attachment to 
the written acknowledgment.
    Proposed paragraph (c)(2)(iii) requires the FCM to file a copy of 
the written acknowledgment with the regional office of the Commission 
with jurisdiction over the state in which the FCM's principal place of 
business is located.

C. Technical Amendments

    Regulation 1.20(a) imposes upon ``[e]ach registrant'' the 
requirement to obtain and retain a written acknowledgment when customer 
funds are deposited with ``any bank, trust company, clearing 
organization, or another futures commission merchant.'' Regulation 
1.20(a) applies to FCMs, as distinguished from Regulation 1.20(b), 
which applies to DCOs. Therefore, the Commission proposes to substitute 
the term ``futures commission merchant'' for the term ``registrant'' to 
more accurately reflect the intent and meaning of Regulation 1.20(a). 
In connection with this, the Commission further proposes to insert the 
word ``other'' before the term ``futures commission merchant'' that 
appears subsequently in the same sentence, to distinguish between the 
FCM holding the funds of its own customers and an FCM holding customer 
funds of another FCM.
    Regulations 1.20, 1.26, and 30.7 currently require that 
acknowledgment letters be retained for the period specified in 
Regulation 1.31, which applies to all recordkeeping required by the Act 
and CFTC regulations. Regulation 1.31 requires records to be kept for 
five years and to be readily accessible for the first two years of that 
five-year period. The proposed revisions would make clear that an 
acknowledgment letter is to be kept readily accessible for as long as 
the account remains open and that the retention requirements that would 
otherwise apply under Regulation 1.31 would only take effect once the 
account has been closed. For example, if the account remains open for 
ten years, the letter must be kept readily accessible for twelve years 
(the ten years during which the account is open plus the two years 
required by Regulation 1.31) and then for an additional three years, 
also as required by Regulation 1.31.
    Regulations 1.20 and 1.26 use the term ``clearing organization'' to 
describe an entity that performs clearing functions. The Act, as 
amended by the Commodity Futures Modernization Act of 2000,\8\ now 
provides that a clearing organization for a contract market must 
register as a ``derivatives clearing organization.'' \9\ To be 
consistent with the Act and other CFTC regulations, the Commission 
proposes to replace the term ``clearing organization,'' wherever it 
appears in Regulations 1.20 and 1.26, with the term ``derivatives 
clearing organization.''
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    \8\ Appendix E of Public Law 106-554, 114 Stat. 2763 (2000).
    \9\ See Section 5b of the Act, 7 U.S.C. 7a-1. See also Section 
1a(9) of the Act, 7 U.S.C. 1a(9) (defining the term ``derivatives 
clearing organization'').
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    Finally, the Commission also is proposing technical amendments to 
Regulation 140.91 to explicitly delegate to the Director of the 
Division of Clearing and Intermediary Oversight the authority to 
perform certain functions that are reserved to the Commission under the 
proposed changes to Regulations 1.20 and 30.7. Thus, for example, the 
Director of the Division of Clearing and Intermediary Oversight would 
have delegated authority to instruct the Depository to release customer 
funds or secured amount funds.

D. Proposed Effective Date

    FCMs and DCOs will need to obtain new acknowledgment letters that 
comply with the proposed regulations before the final regulations take 
effect. The Commission recognizes the need for time to obtain the 
letters; therefore, the proposed effective date of the amendments to 
Regulations 1.20, 1.26, and 30.7 is 180 days from the date of 
publication of the final regulations in the Federal Register.

III. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') \10\ requires Federal 
agencies, in promulgating regulations, to consider the impact of those 
regulations on small businesses. The amendments adopted herein will 
affect FCMs and DCOs. The Commission has previously established certain 
definitions of ``small entities'' to be used by the Commission in

[[Page 7841]]

evaluating the impact of its regulations on small entities in 
accordance with the RFA.\11\ The Commission has previously determined 
that FCMs \12\ and DCOs \13\ are not small entities for the purpose of 
the RFA. Accordingly, pursuant to 5 U.S.C. 605(b), the Acting Chairman, 
on behalf of the Commission, certifies that the proposed regulations 
will not have a significant economic impact on a substantial number of 
small entities.
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    \10\ 5 U.S.C. 601 et seq.
    \11\ 47 FR 18618 (Apr. 30, 1982).
    \12\ Id. at 18619.
    \13\ 66 FR 45604, 45609 (Aug. 29, 2001).
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B. Paperwork Reduction Act

    The Paperwork Reduction Act (``PRA'') \14\ imposes certain 
requirements on Federal agencies in connection with their conducting or 
sponsoring any collection of information as defined by the PRA. The 
regulations to be amended under this proposal are part of an approved 
collection of information (OMB Control No. 3038-0024). The proposed 
amendments would not result in any material modification to this 
approved collection. Accordingly, for purposes of the PRA, the 
Commission certifies that these proposed amendments, if promulgated in 
final form, would not impose any new reporting or recordkeeping 
requirements.
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    \14\ 44 U.S.C. 3501 et seq.
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C. Cost-Benefit Analysis

    Section 15(a) of the Act requires that the Commission, before 
promulgating a regulation under the Act or issuing an order, consider 
the costs and benefits of its action. By its terms, Section 15(a) does 
not require the Commission to quantify the costs and benefits of a new 
regulation or determine whether the benefits of the regulation outweigh 
its costs. Rather, Section 15(a) simply requires the Commission to 
``consider the costs and benefits'' of its action.
    Section 15(a) further specifies that costs and benefits shall be 
evaluated in light of the following considerations: (1) Protection of 
market participants and the public; (2) efficiency, competitiveness, 
and financial integrity of futures markets; (3) price discovery; (4) 
sound risk management practices; and (5) other public interest 
considerations. Accordingly, the Commission could, in its discretion, 
give greater weight to any one of the five considerations and could, in 
its discretion, determine that, notwithstanding its costs, a particular 
regulation was necessary or appropriate to protect the public interest 
or to effectuate any of the provisions or to accomplish any of the 
purposes of the Act.
    The Commission has evaluated the costs and benefits of the proposed 
regulations in light of the specific considerations identified in 
Section 15(a) of the Act, as follows:
    1. Protection of market participants and the public. The proposed 
regulations would benefit FCMs and DCOs, as well as customers of the 
futures and options markets, by reaffirming the legal obligation of 
Depositories holding customer funds or secured amount funds to treat 
those funds in accordance with the requirements of the Act and CFTC 
regulations.
    2. Efficiency and competition. The proposed regulations are not 
expected to have an effect on efficiency or competition.
    3. Financial integrity of futures markets and price discovery. The 
proposed regulations would enhance and strengthen the protection of 
customer funds and secured amount funds, thus contributing to the 
financial integrity of the futures and options markets as a whole. 
This, in turn, would further support the price discovery and risk 
transfer functions of such markets.
    4. Sound risk management practices. The proposed regulations would 
reinforce the sound risk management practices already required of FCMs 
and DCOs holding customer funds or secured amount funds.
    5. Other public considerations. Requiring specific representations 
in a Depository's written acknowledgment would reduce the likelihood 
that the Depository would misinterpret its obligations in connection 
with the safekeeping and administration of customer funds and secured 
amount funds.
    Accordingly, after considering the five factors enumerated in the 
Act, the Commission has determined to propose the regulations set forth 
below.

List of Subjects

17 CFR Parts 1 and 30

    Commodity futures, Consumer protection.

17 CFR Part 140

    Authority delegations (Government agencies), Conflict of interests, 
Organization and functions (Government agencies).

    For the reasons stated in the preamble, the Commission proposes to 
amend 17 CFR parts 1, 30, and 140 as follows:

PART 1--GENERAL REGULATIONS

    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).

    2. Revise Sec.  1.20 to read as follows:


Sec.  1.20  Customer funds to be segregated and separately accounted 
for.

    (a) All customer funds shall be separately accounted for and 
segregated as belonging to commodity or option customers. Such customer 
funds when deposited with any bank, trust company, derivatives clearing 
organization or another futures commission merchant shall be deposited 
under an account name which clearly identifies them as such and shows 
that they are segregated as required by the Act and this part. Each 
futures commission merchant shall obtain and maintain readily 
accessible in its files, for as long as the account remains open, and 
thereafter for the period provided in Sec.  1.31, a written 
acknowledgment from such bank, trust company, derivatives clearing 
organization, or other futures commission merchant, in accordance with 
the requirements of paragraph (d) of this section: Provided, however, 
that an acknowledgment need not be obtained from a derivatives clearing 
organization that has adopted and submitted to the Commission rules 
that provide for the segregation as customer funds, in accordance with 
all relevant provisions of the Act and the rules and orders promulgated 
thereunder, of all funds held on behalf of customers. Under no 
circumstances shall any portion of customer funds be obligated to a 
derivatives clearing organization, any member of a contract market, a 
futures commission merchant, or any depository except to purchase, 
margin, guarantee, secure, transfer, adjust or settle trades, contracts 
or commodity option transactions of commodity or option customers. No 
person, including any derivatives clearing organization or any 
depository, that has received customer funds for deposit in a 
segregated account, as provided in this section, may hold, dispose of, 
or use any such funds as belonging to any person other than the option 
or commodity customers of the futures commission merchant which 
deposited such funds.
    (b) All customer funds received by a derivatives clearing 
organization from a member of the derivatives clearing

[[Page 7842]]

organization to purchase, margin, guarantee, secure or settle the 
trades, contracts or commodity options of the clearing member's 
commodity or option customers and all money accruing to such commodity 
or option customers as the result of trades, contracts or commodity 
options so carried shall be separately accounted for and segregated as 
belonging to such commodity or option customers, and a derivatives 
clearing organization shall not hold, use or dispose of such customer 
funds except as belonging to such commodity or option customers. Such 
customer funds when deposited in a bank or trust company shall be 
deposited under an account name which clearly shows that they are the 
customer funds of the commodity or option customers of clearing 
members, segregated as required by the Act and these regulations. The 
derivatives clearing organization shall obtain and maintain readily 
accessible in its files, for as long as the account remains open, and 
thereafter for the period provided in Sec.  1.31, a written 
acknowledgment from such bank or trust company, in accordance with the 
requirements of paragraph (e) of this section.
    (c) Each futures commission merchant shall treat and deal with the 
customer funds of a commodity customer or of an option customer as 
belonging to such commodity or option customer. All customer funds 
shall be separately accounted for, and shall not be commingled with the 
money, securities or property of a futures commission merchant or of 
any other person, or be used to secure or guarantee the trades, 
contracts or commodity options, or to secure or extend the credit, of 
any person other than the one for whom the same are held: Provided, 
however, That customer funds treated as belonging to the commodity or 
option customers of a futures commission merchant may for convenience 
be commingled and deposited in the same account or accounts with any 
bank or trust company, with another person registered as a futures 
commission merchant, or with a derivatives clearing organization, and 
that such share thereof as in the normal course of business is 
necessary to purchase, margin, guarantee, secure, transfer, adjust, or 
settle the trades, contracts or commodity options of such commodity or 
option customers or resulting market positions, with the derivatives 
clearing organization or with any other person registered as a futures 
commission merchant, may be withdrawn and applied to such purposes, 
including the payment of premiums to option grantors, commissions, 
brokerage, interest, taxes, storage and other fees and charges, 
lawfully accruing in connection with such trades, contracts or 
commodity options: Provided, further, That customer funds may be 
invested in instruments described in Sec.  1.25.
    (d)(1) The written acknowledgment made by a bank, trust company, 
derivatives clearing organization or other futures commission merchant, 
as required under paragraph (a) of this section, shall include the 
following representations:
    (i) That the futures commission merchant has established the 
account for the purpose of depositing customer funds;
    (ii) That the customer funds deposited therein are those of 
commodity or option customers of the futures commission merchant and 
shall be segregated from the futures commission merchant's own funds in 
accordance with the provisions of the Act and this part;
    (iii) That the customer funds shall not be subject to any right of 
offset, or lien, for or on account of any indebtedness, obligations or 
liabilities owed by the futures commission merchant;
    (iv) That the customer funds shall be treated in accordance with 
the provisions of the Act and Commission regulations;
    (v) That the customer funds shall be released immediately upon 
proper notice and instruction from the futures commission merchant or 
the Commission; and
    (vi) That the futures commission merchant has informed the bank, 
trust company, derivatives clearing organization, or other futures 
commission merchant that the futures commission merchant will provide 
the Commission with a copy of the written acknowledgment.
    (2) The written acknowledgment shall include the account number for 
each account covered by the acknowledgment.
    (3) The futures commission merchant shall file a copy of the 
written acknowledgment with the regional office of the Commission with 
jurisdiction over the state in which the futures commission merchant's 
principal place of business is located.
    (e)(1) The written acknowledgment made by a bank or trust company, 
as required under paragraph (b) of this section, shall include the 
following representations:
    (i) That the derivatives clearing organization has established the 
account for the purpose of depositing customer funds;
    (ii) That the customer funds deposited therein are those of 
commodity or option customers of clearing members and shall be 
segregated from the derivatives clearing organization's own funds in 
accordance with the provisions of the Act and this part;
    (iii) That the customer funds shall not be subject to any right of 
offset, or lien, for or on account of any indebtedness, obligations or 
liabilities owed by the derivatives clearing organization;
    (iv) That the customer funds shall be treated in accordance with 
the provisions of the Act and Commission regulations;
    (v) That the customer funds shall be released immediately upon 
proper notice and instruction from the derivatives clearing 
organization or the Commission; and
    (vi) That the derivatives clearing organization has informed the 
bank or trust company that it will provide the Commission with a copy 
of the written acknowledgment.
    (2) The written acknowledgment shall include the account number for 
each account covered by the acknowledgment.
    (3) The derivatives clearing organization shall file a copy of the 
written acknowledgment with the regional office of the Commission with 
jurisdiction over the state in which the derivatives clearing 
organization's principal place of business is located.
    3. Revise Sec.  1.26 to read as follows:


Sec.  1.26  Deposit of instruments purchased with customer funds.

    (a) Each futures commission merchant who invests customer funds in 
instruments described in Sec.  1.25 shall separately account for such 
instruments and segregate such instruments as belonging to such 
commodity or option customers. Such instruments, when deposited with a 
bank, trust company, derivatives clearing organization or another 
futures commission merchant, shall be deposited under an account name 
which clearly shows that they belong to commodity or option customers 
and are segregated as required by the Act and this part. Each futures 
commission merchant upon opening such an account shall obtain and 
maintain readily accessible in its files, for as long as the account 
remains open, and thereafter for the period provided in Sec.  1.31, a 
written acknowledgment from such bank, trust company, derivatives 
clearing organization or other futures commission merchant, in 
accordance with the requirements of paragraph (d) of Sec.  1.20: 
Provided, however, that an acknowledgment need not be obtained

[[Page 7843]]

from a derivatives clearing organization that has adopted and submitted 
to the Commission rules that provide for the segregation as customer 
funds, in accordance with all relevant provisions of the Act and the 
rules and orders promulgated thereunder, of all funds held on behalf of 
customers and all instruments purchased with customer funds. Such bank, 
trust company, derivatives clearing organization or other futures 
commission merchant shall allow inspection of such instruments at any 
reasonable time by representatives of the Commission.
    (b) Each derivatives clearing organization which invests money 
belonging or accruing to commodity or option customers of its clearing 
members in instruments described in Sec.  1.25 shall separately account 
for such instruments and segregate such instruments as belonging to 
such commodity or option customers. Such instruments, when deposited 
with a bank or trust company, shall be deposited under an account name 
which will clearly show that they belong to commodity or option 
customers and are segregated as required by the Act and this part. Each 
derivatives clearing organization upon opening such an account shall 
obtain and maintain readily accessible in its files, for as long as the 
account remains open, and thereafter for the period provided in Sec.  
1.31, a written acknowledgment from such bank or trust company, in 
accordance with the requirements of paragraph (e) of Sec.  1.20. Such 
bank or trust company shall allow inspection of such instruments at any 
reasonable time by representatives of the Commission.

PART 30--FOREIGN FUTURES AND OPTIONS TRANSACTIONS

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

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

    5. Revise paragraph (c)(2) of Sec.  30.7 to read as follows:


Sec.  30.7  Treatment of foreign futures or foreign options secured 
amount.

* * * * *
    (c) * * *
    (2)(i) Each futures commission merchant must obtain and maintain 
readily accessible in its files, for as long as the account remains 
open, and thereafter for the period provided in Sec.  1.31, a written 
acknowledgment from such depository that shall include the following 
representations:
    (A) That the depository meets the requirement set out in Sec.  
30.7(c)(1);
    (B) That the futures commission merchant has established the 
account for the purpose of depositing money, securities, or property 
for or on behalf of customers that include, but are not limited to, 
foreign futures and foreign options customers;
    (C) That the money, securities, or property deposited therein are 
held for or on behalf of customers that include, but are not limited 
to, foreign futures and foreign options customers of the futures 
commission merchant and may not be commingled with the futures 
commission merchant's own funds or any other funds that the depository 
may hold, in accordance with the provisions of the Act and this part;
    (D) That the money, securities, or property shall not be subject to 
any right of offset, or lien, for or on account of any indebtedness, 
obligations or liabilities owed by the futures commission merchant;
    (E) That the money, securities, or property shall be treated in 
accordance with the provisions of the Act and Commission regulations;
    (F) That the money, securities, or property shall be released 
immediately, subject to requirements of applicable foreign law, upon 
proper notice and instruction from the futures commission merchant or 
the Commission; and
    (G) That the futures commission merchant has informed the 
depository that the futures commission merchant will provide the 
Commission with a copy of the written acknowledgment.
    (ii) The written acknowledgment shall include the account number 
for each account covered by the acknowledgment.
    (iii) The futures commission merchant shall file a copy of the 
written acknowledgment with the regional office of the Commission with 
jurisdiction over the state in which the futures commission merchant's 
principal place of business is located.
* * * * *

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

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

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

    7. In Sec.  140.91, redesignate paragraph (a)(8) as paragraph 
(a)(10) and paragraph (a)(7) as paragraph (a)(8); and add new 
paragraphs (a)(7) and (a)(9) to read as follows:


Sec.  140.91  Delegation of authority to the Director of the Division 
of Clearing and Intermediary Oversight.

    (a) * * *
    (7) All functions reserved to the Commission in Sec.  1.20 of this 
chapter.
* * * * *
    (9) All functions reserved to the Commission in Sec.  30.7 of this 
chapter.
* * * * *

    Issued in Washington, DC, on February 13, 2009 by the 
Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. E9-3551 Filed 2-19-09; 8:45 am]
BILLING CODE 6351-01-P