[Federal Register Volume 74, Number 249 (Wednesday, December 30, 2009)]
[Rules and Regulations]
[Pages 69004-69009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-31032]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 1

RIN 3038-AB87


Electronic Filing of Financial Reports and Notices

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rules.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is amending certain of its regulations in connection with 
electronic filing of financial reports and related notices. The 
amendments broaden the language in the Commission's regulations 
applicable to electronic filings of financial reports to clarify that, 
to the extent a futures commission merchant (``FCM'') submits a Form 1-
FR to the Commission electronically, it may do so using any user 
authentication procedures established or approved by the Commission. 
The amendments also permit registrants to electronically submit filings 
in addition to financial reports, including an election to use a non-
calendar fiscal year, requests for extensions of time to file 
uncertified financial reports and ``early warning'' notices required 
under Commission regulations. In connection with the filing of 
financial reports, the amendments specify, consistent with other 
requirements and existing practice, that a statement of income and loss 
is included as a required part of the non-certified 1-FR filings for 
FCMs and introducing brokers (``IBs''). The amendments also require 
more immediate, but less prescriptive, documentation regarding a firm's 
capital condition when a firm falls below its required minimum adjusted 
net capital. Finally, the final regulations include several other minor 
amendments to correct certain outdated references and to make other 
clarifications to existing regulations.

DATES: Effective Date: January 4, 2010.

FOR FURTHER INFORMATION CONTACT: Thelma Diaz, Associate Director, 
Division of Clearing and Intermediary Oversight, 1155 21st Street, NW., 
Washington, DC 20581. Telephone number: 202-418-5137; facsimile number: 
202-418-5547; and electronic mail: [email protected], or Lawrence T. 
Eckert, Special Counsel, Division of Clearing and Intermediary 
Oversight, 140 Broadway, New York, New York 10005. Telephone number 
(646) 746-9704; and electronic mail: [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    On October 13, 2009, the Commission published for comment in the 
Federal Register proposed amendments to Regulations 1.10 and 1.12 (the 
``Proposals'').\1\ Commission Regulation 1.10 sets forth the financial 
reporting requirements for FCMs and IBs \2\ and Regulation 1.12 
requires FCMs, IBs and applicants for registration thereof to provide 
notice of a variety of predefined events as or before they occur.\3\
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    \1\ 74 FR 52434 (Oct 13, 2009). The Commission's regulations 
cited in this rulemaking may be found at 17 CFR Ch. 1 (2009).
    \2\ For simplicity, references in this Federal Register release 
to IBs in connection with financial reporting and notice 
requirements are intended to refer to IBs that are not operating 
pursuant to a guarantee agreement.
    \3\ For example, Regulation 1.12(a) requires immediate 
telephonic notice, to be confirmed in writing by facsimile, when a 
registrant's (or applicant's) adjusted net capital falls below that 
required by Regulation 1.17. Other provisions of Regulation 1.12 
require notification to the Commission for certain ``early warning'' 
events. Regulation 1.12(b), for example, requires notification by a 
registrant or applicant if such entity's adjusted net capital drops 
below a specified threshold.
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    The Proposals consisted of several amendments regarding electronic 
filing of financial reports and notices by FCMs and IBs as well as 
amendments to certain other financial reporting requirements. 
Specifically, the Commission proposed amendments to: (1) Broaden 
language in the Commission's regulations concerning authentication 
procedures applicable to electronic filing of financial reports in 
order to enable internet-based filing of such reports in anticipation 
of expected changes to ``WinJammerTM,'' an application used 
by FCMs that file their non-certified financial reports electronically 
with the Commission; (2) expand the types of filings that FCMs and IBs 
may submit electronically to include required ``early warning'' notices 
and certain other notices and filings under Regulations 1.10 and 1.12; 
(3) provide for less prescriptive, but more immediate, documentation to 
be filed regarding a firm's undercapitalized condition; (4) expressly 
include an income statement in the required periodic unaudited 
financial reports of FCMs and IBs; and (5) make several other minor 
amendments to correct certain outdated references and to make other 
clarifications to existing regulations.
    The 30-day public comment period on the Proposals expired on 
November 12, 2009. The Commission received one written comment on the 
Proposals, submitted by the National Futures Association (``NFA''). NFA 
noted its agreement and support of the Commission's Proposals and 
commended the Commission for its review of its electronic filing 
requirements and proposal of changes to reflect technological advances 
and current practices. As discussed below, NFA also encouraged the 
Commission to consider certain additional amendments to further expand 
the use of electronic filing in certain circumstances. NFA did not 
suggest delaying the implementation of the Proposals while these 
additional suggestions made by NFA are under consideration by the 
Commission. The Commission further notes that certain provisions 
included in the additional amendments offered by NFA for consideration 
may require publication in the Federal Register for prior notice and 
comment before they may be adopted. For the reasons set forth below, 
the Commission has therefore determined to adopt the amendments as 
proposed.

II. Rule Amendments

A. Electronic Filing Issues

1. Amendments to Regulation 1.10
    Commission Regulation 1.10(c) generally sets forth the provisions 
governing where and how financial reports required to be filed by FCMs 
and IBs under Regulation 1.10 must be filed. Regulation 1.10(c)(1) 
indicates with whom reports should be filed and Regulation 1.10(c)(2) 
addresses the method for submitting such reports. Electronic submission 
of certified financial reports currently is addressed separately in 
Regulation 1.10(b)(2)(iii).

[[Page 69005]]

This section provides that FCMs must file certified financial reports 
in paper form and IBs must file such reports electronically in 
accordance with electronic filing procedures established by NFA.
    For clarification and ease of reading, the Commission is moving 
Regulation 1.10(b)(2)(iii) into a new subparagraph of Regulation 
1.10(c)(2). Regulation 1.10(c)(2) is being amended as discussed below 
and divided into 2 new subparagraphs: New subparagraph (c)(2)(i) 
addresses electronic filing by FCMs with the Commission and new 
subparagraph (c)(2)(ii) addresses electronic filings with NFA by IBs 
and by applicants for registration as IBs and FCMs.
    Regulation 1.10(c)(2) currently provides that non-certified 
financial reports may be submitted to the Commission ``in electronic 
form using a Commission assigned Personal Identification Number, and 
otherwise in accordance with instructions issued by the Commission * * 
*.'' The adopted amendments to Regulation 1.10(c)(2) broaden the 
language in the regulation relating to user authentication by no longer 
limiting user authentication to the use of a personal identification 
number (``PIN''). As described in the proposing release, the use of 
such a PIN is no longer consistent with the internet-based enhancements 
under development for Winjammer. The revisions to Regulation 1.10(c)(2) 
also permit any filing or other notice submitted under the regulation 
to be transmitted electronically, rather than limiting such submission 
to financial reports as under the current regulation. Such other 
notices would include, for example, an election to use a fiscal year 
other than a calendar year under Regulation 1.10(e) and a request for 
an extension of time to file uncertified financial reports under 
Regulation 1.10(f). Regulation 1.10(d)(4)(iii), which deals with 
electronic filing of Form 1-FR, is being amended by deleting references 
to the use of a PIN.
    As amended, Regulation 1.10(c)(2)(i) provides that all filings or 
other notices or applications prepared by a futures commission merchant 
``[except with respect to the filing of certified financial reports 
which must be filed in paper form], and pursuant to [Regulation 1.10] 
may be submitted to the Commission in electronic form using a form of 
user authentication assigned in accordance with procedures established 
by or approved by the Commission, and otherwise in accordance with 
instruction issued by or approved by the Commission, if the futures 
commission merchant or a designated self-regulatory organization has 
provided the Commission with the means necessary to read and to process 
the information contained in such report.''
    Amended Regulation 1.10(c)(2)(ii) provides that ``[except with 
respect to the filing of certified FOCUS reports by a registered broker 
or dealer with the SEC], all filings or other notices or applications 
prepared by an introducing broker or applicant for registration as an 
introducing broker or futures commission merchant * * * must be filed 
electronically in accordance with electronic filing procedures 
established by the National Futures Association * * *.''
    In its comment letter, NFA indicated that it would support the 
Commission further broadening the permitted use of electronic filing to 
include FCM certified financial statements. The current requirement in 
Regulation 1.10 for FCM certified financial statements to be filed in 
paper form is due in part to the fact that such statements are not 
prepared in a standard format that lends itself easily to electronic 
input. NFA suggested that notwithstanding this lack of standardization, 
the Commission could consider permitting the submission of such 
statements in portable document format (``pdf''). The Commission notes, 
however, that this suggestion requires further review because the pdf 
format is not conducive to the application of automated review of the 
data by the Commission. Further review would also be beneficial in 
light of continuing developments in technology that may at a later date 
result in increased benefits of electronic filing of certified 
financial statements for the filers, the Commission and the DSRO 
recipients. The adoption of the amendments as proposed will not impede 
such further review, and will make available to these same parties 
other recognized enhancements to the current requirements for 
electronic filing.
2. Amendments to Regulation 1.12
    Commission Regulation 1.12 requires FCMs, IBs and applicants for 
registration thereof to provide notice of a variety of predefined 
events as or before they occur.\4\ The Commission proposed to amend 
Regulation 1.12(i), which sets forth the procedures for filing notices 
under Regulation 1.12, to allow FCMs and IBs to submit electronically 
filings otherwise required to be submitted in writing via facsimile.\5\ 
In its comment letter, NFA supported this change, but suggested that 
the Commission consider requiring, rather than simply permitting, 
registrants to electronically file such notices. Although the 
Commission strongly encourages, and believes that most registrants will 
choose to utilize, electronic filing as a more efficient and 
expeditious means to file notices, the Commission nonetheless 
appreciates that there may be times when a registrant would prefer, or 
is otherwise unable, to file electronically. For example, a registrant 
may have a regulatory deadline under the Commission's regulations but 
be unable to satisfy such deadline through electronic means due to 
temporary technological issues with WinJammer\TM\, NFA's EasyFile 
system or the registrants' own systems. Moreover, moving from a 
permissive to mandatory filing requirement may require publication in 
the Federal Register in order to obtain public comment on such a 
proposal. In light of these concerns, the Commission has determined to 
adopt the amendment as proposed.
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    \4\ See footnote 3, above.
    \5\ IBs file notices under Regulation 1.12 with NFA pursuant to 
NFA rules. NFA has indicated that it intends to make changes to the 
EasyFile system and/or NFA rules, as may be necessary to facilitate 
the electronic filing by IBs of notices or other information 
permitted to be submitted electronically by the Proposal but 
currently filed with NFA in paper form.
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    The amendment adopted adds a new subparagraph 1.12(i)(3) to the 
Commission's regulations which provides that ``[e]very notice or report 
required to be provided in writing under [Regulation 1.12] may, in lieu 
of facsimile, be filed via electronic transmission using a form of user 
authentication assigned in accordance with procedures established by or 
approved by the Commission, and otherwise in accordance with 
instructions issued by or approved by the Commission.'' An electronic 
submission is required to clearly indicate the registrant or applicant 
on whose behalf such filing is made and the use of such user 
authentication in submitting such filing would constitute and become a 
substitute for the manual signature of the authorized signer.

B. Income Statement Filing Requirement

    Commission Regulation 1.10(d) sets forth the content requirements 
for financial reports filed with the Commission: The Commission 
proposed to amend Regulation 1.10(d)(1) to require ``statements of 
income (loss)'' to be included as part of FCM and IB non-certified 
financial report filings. The Commission noted that this amendment is 
consistent with Regulation 1.10(d)(2)(ii), which requires FCMs and

[[Page 69006]]

IBs to include an income statement as part of their certified financial 
reports, and is a practice currently followed by most registrants. NFA 
voiced its support of this amendment in its comment letter noting its 
agreement that the income statement provides the Commission with 
important information for monitoring the financial condition of firms. 
The Commission is adopting the amendment as proposed.
    As noted in the Proposals, this amendment does not affect the 
ability of a broker-dealer to file with the Commission in accordance 
with Regulation 1.10(h) the FOCUS report under the Securities and 
Exchange Act of 1934, including the income statement currently provided 
in that report.\6\
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    \6\ Under SEC Regulation 17a-5 and rules of applicable self-
regulatory organizations, certain securities brokers or dealers may 
include as part of their quarterly FOCUS report filings a 
consolidated Statement of Income (Loss) for the relevant quarter 
rather than a Statement of Income (Loss) for the month for which the 
report is being filed (i.e., March, June, September or December). 
Such broker-dealers that also are registered as FCMs would file 
these same reports with the Commission. The Commission wishes to 
make clear that an otherwise complete FOCUS report filing made with 
the Commission that includes such a consolidated Statement of Income 
(Loss) will be deemed an acceptable filing in accordance with 
Commission Regulation 1.10(h).
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C. Net Capital Undercapitalization Documentation

    Regulation 1.12(a) requires a registrant or applicant for 
registration as an FCM or IB that knows or should have known that its 
adjusted net capital is less than the minimum required by the 
Commission or by its designated self-regulatory organization (``DSRO'') 
to provide notice of such event immediately by telephone and confirm 
such telephonic notice in writing by facsimile. Regulations 1.12(a)(2) 
(applicable to FCMs) and 1.12(a)(3) (applicable to IBs) further require 
that, within 24 hours thereafter, the registrant (or applicant) must 
file certain specific financial records with the Commission.\7\
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    \7\ Specifically, Regulation 1.12(a)(2) requires an FCM (or 
applicant) to file with the Commission: (1) A statement of financial 
condition; (2) a statement of the computation of its minimum capital 
requirements; (3) the statements of segregation requirements and 
funds in segregation for customers trading on U.S. commodity 
exchanges and for customers' dealer options accounts; and (4) the 
statement of secured amounts and funds held in separate accounts for 
foreign futures and foreign options customers. Regulation 1.12(a)(3) 
requires an IB (or applicant) to file a statement of financial 
condition and a statement of the computation of its minimum capital 
requirements.
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    The Commission also is amending Regulations 1.12(a)(2) and (a)(3) 
to require more immediate, but less prescriptive, reporting to the 
Commission when a registrant or applicant falls below its minimum net 
capital requirement. NFA supported this amendment, stating its 
agreement with the Commission that it is more beneficial for the 
Commission to receive prompt information concerning a firm's capital 
condition than to receive such information in a specific prescribed 
format. Under the amended regulation, a firm must continue to provide 
immediate telephonic notice, confirmed in writing, in the event that 
its adjusted net capital falls below its required minimum. Amended 
Regulation 1.12(a)(2) requires that together with such initial 
telephonic notice and written confirmation, a firm must provide 
``documentation in such form as necessary to adequately reflect the 
firm's capital condition as of any date such person's adjusted net 
capital is less than the minimum required.'' \8\ The Commission 
envisions that such adequate documentation would at a minimum specify 
the firm's adjusted net capital requirement and actual adjusted net 
capital for any date during which the firm fell below its regulatory 
requirement. The amended regulation also requires a firm to provide 
similar documentation to that initially provided for any other days the 
Commission may request.\9\ By requiring documentation as of ``any'' 
date that adjusted net capital is less than the required minimum, the 
amended regulation makes clear that where a firm is undercapitalized on 
more than one day, documentation related to all such time must be 
provided.
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    \8\ This amendment is consistent with SEC Regulation 17a-11 
which requires a broker or dealer whose net capital falls below its 
required minimum to give notice of the deficiency that same day, 
specifying the broker or dealer's net capital requirement and its 
current amount of net capital.
    \9\ Regulation 1.10(b)(4) already provides that representatives 
of the Commission may upon written notice require Form 1-FR or other 
financial information at such times as specified by the 
representative.
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    Regulation 1.12(a)(3), which provides documentation requirements 
for IBs that provide the Commission with notice of their 
undercapitalized condition, has been deleted because Regulation 
1.12(a)(2) as amended applies to IBs as well as to FCMs. Regulation 
1.12(i)(1) also is being amended by deleting certain language related 
to the method of filing documentation that is no longer required to be 
submitted to the Commission in light of the amendments to Regulation 
1.12(a)(2) discussed above.

D. Miscellaneous Amendments to Regulations

    The Commission proposed a number of minor amendments to Regulations 
1.10 and 1.12 to correct certain outdated references and to otherwise 
clarify existing regulations. NFA noted their support of certain of 
these amendments that eliminated requirements that provided for 
duplicative filing with NFA and the Commission (enumerated as items (1) 
and (2), below). The Commission received no comments on the other 
amendments. The Commission is, therefore, adopting each of the 
amendments as proposed and, as outlined below:
    (1) Regulation 1.10(c)(1) is amended to clarify that FCM and IB 
applicants for registration need file financial reports required as 
part of the application process only with NFA and not also with a 
regional office of the Commission;
    (2) Regulation 1.12(i)(1) is amended to clarify that an applicant 
for registration as an FCM need file any notices required under 
Regulation 1.12 only with NFA and not also with the Commission. The 
amended regulation makes clear that any notice or report filed with NFA 
will be deemed to be filed with, and to be the official record of, the 
Commission;
    (3) The following minor wording amendments are being made to 
Regulation 1.10(c)(1) for the purposes of consistency with other 
provisions of the regulations and/or general clarification:
    (A) The reference to ``[a] report filed by an [IB] pursuant to 
paragraph (b)(2)(i) or (b)(2)(ii)'' is amended to clarify that ``a 
report'' in this context is meant to refer to Form 1-FR;
    (B) The reference to subparagraphs (b)(2)(i) and (b)(2)(ii) is 
being amended for simplicity to refer only to paragraph (b)(2) in 
general; and
    (C) The language of paragraph 1.10(c)(1) is being amended to 
clarify that it is intended to cover not only ``reports'' but all 
reports and other ``information;''
    (4) Regulations 1.10(b)(2)(i) and 1.10(b)(2)(ii) are being amended 
to delete language referring to an option to file financial statements 
on a calendar-year basis which is no longer contained in the 
Commission's regulations;
    (5) Regulation 1.10(b)(3), which permits an FCM or IB to satisfy 
the Commission's Form 1-FR filing requirements if it satisfies certain 
financial reporting standards and reporting requirements of its DSRO, 
is being amended to delete outdated language referring to DSRO 
regulations applicable ``after the effective date of these regulations 
by the Commission''; and
    (6) Language within regulation 1.10(h) that references ``NFA'' is 
amended for consistency purposes by spelling out ``National Futures 
Association.''

[[Page 69007]]

III. Related Matters

A. Administrative Procedure Act

    The Administrative Procedure Act (``APA'') provides that the 
required publication of a substantive rule shall be made not less than 
30 days before its effective date, unless the agency is permitted to 
implement an earlier effective date under one of the exceptions 
recognized by the APA.\10\ The exceptions set forth in the APA are as 
follows: (1) A substantive rule which grants or recognizes an exemption 
or relieves a restriction; (2) interpretative rules and statements of 
policy; or (3) as otherwise provided by the agency for good cause found 
and published with the rule.\11\
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    \10\ 5 U.S.C. 553(b) and (d).
    \11\ 5 U.S.C. 553-(d).
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    The amendments being made to Rules 1.10 and 1.12 will ``grant or 
recognize an exemption or relieve a restriction'' in that they 
generally serve to permit and enable registrants to file notices and 
reports electronically that previously were required to be filed in 
paper form. In addition, the amendments include a number of non-
substantive amendments to correct certain outdated references and to 
otherwise clarify existing regulations.
    With regard to the amendments relating to the timing of 
documentation required by firms that become undercapitalized, the 
Commission has a clear interest in receiving such information 
immediately and believes, therefore, that there is ``good cause'' to 
make such requirement effective in fewer than 30 days. With respect to 
the amendments requiring an income statement, the Commission believes 
that there is also ``good cause'' to make this provision effective on 
January 4, 2010, consistent with the other rule amendments. It would 
not be logical for the income statement requirement to be implemented 
at a time later than the effective date of the remaining rules, as the 
information in the income statement is an integral part of a 
registrant's financial statements. Further, as the SEC and several 
self-regulatory organizations already require dual registrants and 
other FCMs to include the income statement in their financial 
statements, the income statement is already formatted as part of the 
Form 1-FR reports that registrants currently file with the Commission, 
and the data required to complete it is generally already available 
from other parts of the form. In fact, substantially all FCMs and IBs 
already complete the income statement as part of their required 
periodic non-certified financial report filings.
    Accordingly, the Commission has determined to make these amendments 
effective on January 4, 2010, consistent with the anticipated 
availability of the updated WinJammerTM system.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq., 
requires that agencies, in rulemaking, consider the impact of those 
regulations on small businesses. This rulemaking would affect FCMs and 
IBs. The Commission has previously determined that, based upon the 
fiduciary nature of FCM/customer relationships, as well as the 
requirement that FCMs meet minimum financial requirements, FCMs should 
be excluded from the definition of small entity.
    With respect to IBs, the Commission stated that it is appropriate 
to evaluate within the context of a particular rule proposal whether 
some or all IBs should be considered to be small entities and, if so, 
to analyze the economic impact on such entities at that time.\12\ These 
amendments will not place any additional burdens on IBs that are small 
businesses because all such parties, if any, already are subject to the 
financial reporting and notice requirements under Regulations 1.10 and 
1.12 and already file financial reports through NFA's electronic filing 
system. Additionally, although the Commission is amending its 
regulations to add a requirement to include statements of income and 
loss as part of non-certified financial report filings, substantially 
all IBs already are filing this data in practice and, in any event, 
must compute the relevant income and loss data (although not currently 
required to be provided in a separate income statement) in order to 
complete Commission Form 1-FR or the SEC FOCUS report, as applicable, 
under the Commission's regulations.\13\ The Commission's Proposals 
solicited public comment on this analysis.\14\ No comments were 
received. Accordingly, pursuant to Section 3(a) of the RFA, 5 U.S.C. 
605(b), the Chairman, on behalf of the Commission, certifies that the 
action taken herein will not have a significant economic impact on a 
substantial number of small entities.
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    \12\ See 48 FR 35248, 35275-78 (Aug. 3, 1983).
    \13\ See Commission Regulations 1.10(b)(2) and 1.10(h) 
(requiring IBs to file with the Commission Form 1-FR-FCM or, as an 
alternative in the case of a registered broker or dealer with the 
SEC, the FOCUS report).
    \14\ 74 FR at 52438.
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C. Paperwork Reduction Act

    This rulemaking provides an alternative method of collection for a 
required collection of information under Part 1 of the Commission's 
rules, but is not anticipated to change the burden under such 
collection as the actual financial reporting requirements have not 
changed significantly. As required by the Paperwork Reduction Act of 
1995 (44 U.S.C. 3507(d)), the Commission submitted a copy of this 
section to the Office of Management and Budget (``OMB'') for its 
review. No comments were received in response to the Commission's 
invitation in its notice of proposed rulemaking to comment on any 
change in the potential paperwork burden associated with these rule 
amendments.\15\
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    \15\ Id.
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D. Cost-Benefit Analysis

    Section 15(a) of the Act, as amended by Section 119 of the 
Commodity Futures Modernization Act, requires the Commission to 
consider the costs and benefits of its action before issuing a new 
regulation under the Act. By its terms, Section 15(a) as amended does 
not require the Commission to quantify the costs and benefits of a new 
regulation or to determine whether the benefits of the proposed 
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 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. The Commission, in its discretion, can choose to give 
greater weight to any one of the five enumerated areas and determine 
that, notwithstanding its costs, a particular regulation is 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's proposal contained an analysis of its 
consideration of these costs and benefits and solicited public comment 
thereon.\16\ No comments were received with respect to this analysis. 
Therefore, pursuant to such consideration, the Commission has decided 
to adopt these amendments as discussed above.
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    \16\ 74 FR at 52439.

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[[Page 69008]]

List of Subjects in 17 CFR Part 1

    Brokers, Commodity futures, Reporting and recordkeeping 
requirements.

0
In consideration of the foregoing and pursuant to the authority 
contained in the Commodity Exchange Act and, in particular, Sections 
4f, 4g and 8a(5) thereof, 7 U.S.C. 6f, 6g and 12a(5), the Commission 
hereby amends 17 CFR part 1 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).



0
2. Section 1.10 is amended by removing paragraph (b)(2)(iii) and 
revising paragraphs (b)(2)(i), (b)(2)(ii)(A), (b)(3), (c)(1) and 
(c)(2), (d)(1)(ii), (d)(4)(iii), and (h) as follows:


Sec.  1.10  Minimum financial requirements for futures commission 
merchants and introducing brokers.

* * * * *
    (b) * * *
    (2)(i) Except as provided in paragraphs (b)(3) and (h) of this 
section, and except for an introducing broker operating pursuant to a 
guarantee agreement which is not also a securities broker or dealer, 
each person registered as an introducing broker must file a Form 1-FR-
IB semiannually as of the middle and the close of each fiscal year. 
Each Form 1-FR-IB must be filed no later than 17 business days after 
the date for which the report is made.
    (ii)(A) In addition to the financial reports required by paragraph 
(b)(2)(i) of this section, each person registered as an introducing 
broker must file a Form 1-FR-IB as of the close of its fiscal year 
which must be certified by an independent public accountant in 
accordance with Sec.  1.16 no later than 90 days after the close of 
each introducing broker's fiscal year: Provided, however, that a 
registrant which is registered with the Securities and Exchange 
Commission as a securities broker or dealer must file this report not 
later than the time permitted for filing an annual audit report under 
Sec.  240.17a-5(d)(5) of this title.
* * * * *
    (3) The provisions of paragraphs (b)(1) and (b)(2) of this section 
may be met by any person registered as a futures commission merchant or 
as an introducing broker who is a member of a designated self-
regulatory organization and conforms to minimum financial standards and 
related reporting requirements set by such designated self-regulatory 
organization in its bylaws, rules, regulations, or resolutions and 
approved by the Commission pursuant to Section 4f(b) of the Act and 
Sec.  1.52: Provided, however, That each such registrant shall promptly 
file with the Commission a true and exact copy of each financial report 
which it files with such designated self-regulatory organization.
* * * * *
    (c) Where to file reports. (1) Form 1-FR filed by an introducing 
broker pursuant to paragraph (b)(2) of this section need be filed only 
with, and will be considered filed when received by, the National 
Futures Association. Other reports or information provided for in this 
section will be considered filed when received by the regional office 
of the Commission with jurisdiction over the state in which the 
registrant's principal place of business is located and by the 
designated self-regulatory organization, if any; and reports or other 
information required to be filed by this section by an applicant for 
registration will be considered filed when received by the National 
Futures Association. Any report or information filed with the National 
Futures Association pursuant to this paragraph shall be deemed for all 
purposes to be filed with, and to be the official record of, the 
Commission.
    (2)(i) Except as provided in the last sentence of this 
subparagraph, all filings or other notices prepared by a futures 
commission merchant pursuant to this section may be submitted to the 
Commission in electronic form using a form of user authentication 
assigned in accordance with procedures established by or approved by 
the Commission, and otherwise in accordance with instructions issued by 
or approved by the Commission, if the futures commission merchant or a 
designated self-regulatory organization has provided the Commission 
with the means necessary to read and to process the information 
contained in such report. A Form 1-FR required to be certified by an 
independent public accountant in accordance with Sec.  1.16 which is 
filed by a futures commission merchant must be filed in paper form and 
may not be filed electronically.
    (ii) Except as provided in paragraph (h) of this section, all 
filings or other notices or applications prepared by an introducing 
broker or applicant for registration as an introducing broker or 
futures commission merchant pursuant to this section must be filed 
electronically in accordance with electronic filing procedures 
established by the National Futures Association. In the case of a Form 
1-FR-IB that is required to be certified by an independent public 
accountant in accordance with Sec.  1.16, a paper copy of any such 
filing with the original manually signed certification must be 
maintained by the introducing broker or applicant for registration as 
an introducing broker in accordance with Sec.  1.31.
* * * * *
    (d)(1) * * *
    (ii) Statements of income (loss) and a statement of changes in 
ownership equity for the period between the date of the most recent 
statement of financial condition filed with the Commission and the date 
for which the report is made;
* * * * *
    (4) * * *
    (iii) In the case of a Form 1-FR filed via electronic transmission 
in accordance with procedures established by or approved by the 
Commission, such transmission must be accompanied by the user 
authentication assigned to the authorized signer under such procedures, 
and the use of such user authentication will constitute and become a 
substitute for the manual signature of the authorized signer for the 
purpose of making the oath or affirmation referred to in this 
paragraph.
* * * * *
    (h) Filing option available to a futures commission merchant or an 
introducing broker that is also a securities broker or dealer. Any 
applicant or registrant which is registered with the Securities and 
Exchange Commission as a securities broker or dealer may comply with 
the requirements of this section by filing (in accordance with 
paragraphs (a), (b), (c), and (j) of this section) a copy of its 
Financial and Operational Combined Uniform Single Report under the 
Securities Exchange Act of 1934, Part II, Part IIA, or Part II CSE 
(FOCUS Report), in lieu of Form 1-FR; Provided, however, That all 
information which is required to be furnished on and submitted with 
Form 1-FR is provided with such FOCUS Report; and Provided, further, 
That a certified FOCUS Report filed by an introducing broker or 
applicant for registration as an introducing broker in lieu of a 
certified Form 1-FR-IB must be filed according to National Futures 
Association rules, either in paper form or electronically, in 
accordance with procedures established

[[Page 69009]]

by the National Futures Association, and if filed electronically, a 
paper copy of such filing with the original manually signed 
certification must be maintained by such introducing broker or 
applicant in accordance with Sec.  1.31.
* * * * *

0
3. Section 1.12 is amended by:
0
a. Revising paragraphs (a)(2) and (i)(1);
0
b. Removing paragraph (a)(3); and
0
c. Adding paragraph (i)(3) as follows:


Sec.  1.12  Maintenance of minimum financial requirements by futures 
commission merchants and introducing brokers.

    (a) * * *
    (2) Provide together with such notice documentation in such form as 
necessary to adequately reflect the applicant's or registrant's capital 
condition as of any date such person's adjusted net capital is less 
than the minimum required. The applicant or registrant must provide 
similar documentation for other days as the Commission may request.
* * * * *
    (i)(1) Every notice and written report required to be given or 
filed by this section (except for notices required by paragraph (f) of 
this section) by a futures commission merchant or a self-regulatory 
organization must be filed with the regional office of the Commission 
with jurisdiction over the state in which the registrant's principal 
place of business is located, with the principal office of the 
Commission in Washington, DC, with the designated self-regulatory 
organization, if any; and with the Securities and Exchange Commission, 
if such registrant is a securities broker or dealer. Every notice and 
written report required to be given or filed by this section by an 
applicant for registration as a futures commission merchant must be 
filed with the National Futures Association (on behalf of the 
Commission), with the designated self-regulatory organization, if any, 
and with the Securities and Exchange Commission, if such applicant is a 
securities broker or dealer. Any notice or report filed with the 
National Futures Association pursuant to this paragraph shall be deemed 
for all purposes to be filed with, and to be the official record of, 
the Commission.
* * * * *
    (3) Every notice or report required to be provided in writing to 
the Commission under this section may, in lieu of facsimile, be filed 
via electronic transmission using a form of user authentication 
assigned in accordance with procedures established by or approved by 
the Commission, and otherwise in accordance with instructions issued by 
or approved by the Commission. Any such electronic submission must 
clearly indicate the registrant or applicant on whose behalf such 
filing is made and the use of such user authentication in submitting 
such filing will constitute and become a substitute for the manual 
signature of the authorized signer.

    Issued in Washington, DC, on December 24, 2009, by the 
Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. E9-31032 Filed 12-29-09; 8:45 am]
BILLING CODE P