[Federal Register Volume 78, Number 67 (Monday, April 8, 2013)]
[Proposed Rules]
[Pages 20848-20849]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-07538]



[[Page 20848]]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 23

RIN 3038-AE00


Swap Dealers and Major Swap Participants; Clerical or Ministerial 
Employees

AGENCY: Commodity Futures Trading Commission.

ACTION: Proposed rule.

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SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC) 
is proposing to amend its regulations (Proposal) to clarify certain 
responsibilities of a swap dealer (SD) or major swap participant (MSP) 
regarding its employees who solicit, accept or effect swaps in a 
clerical or ministerial capacity.

DATES: Comments must be received on or before June 7, 2013.

ADDRESSES: You may submit comments, identified by RIN number 3038-AE00, 
by any of the following methods:
     Agency Web site: http://www.cftc.gov.
     Mail: 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.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow instructions for submitting comments.
    All comments must be submitted in English, or if not, accompanied 
by an English translation. Comments will be posted as received to 
www.cftc.gov. You should submit only information that you wish to make 
available publicly. If you wish the Commission to consider information 
that is exempt from disclosure under the Freedom of Information Act, a 
petition for confidential treatment of the exempt information may be 
submitted according to the procedure established in CFTC Regulation 
145.9.\1\
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    \1\ The Commission's regulations are found at 17 CFR Ch. I 
(2012) and can be accessed through the Commission's Web site, 
www.cftc.gov.
_____________________________________-

    The Commission reserves the right, but shall have no obligation, to 
review, pre-screen, filter, redact, refuse or remove any or all of your 
submission from www.cftc.gov that it may deem to be inappropriate for 
publication, such as obscene language. All submissions that have been 
redacted or removed that contain comments on the merits of the 
rulemaking will be retained in the public comment file and will be 
considered as required under the Administrative Procedure Act and other 
applicable laws, and may be accessible under the Freedom of Information 
Act.

FOR FURTHER INFORMATION CONTACT: Christopher W. Cummings, Special 
Counsel, (202) 418-6700, [email protected], or Barbara S. Gold, 
Associate Director, (202) 418-6700, [email protected], Division of Swap 
Dealer and Intermediary Oversight, Commodity Futures Trading 
Commission, 1155 21st Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

    The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Dodd-Frank Act) \2\ was signed into law July 21, 2010. The Dodd-Frank 
Act amended the Commodity Exchange Act (CEA or Act) \3\ to require the 
registration of SDs and MSPs, and to establish a comprehensive new 
regulatory framework for swaps. One such amendment was new CEA Section 
4s(b)(6), which states: that except to the extent otherwise 
specifically provided by rule, regulation, or order, it shall be 
unlawful for a swap dealer or a major swap participant to permit any 
person associated with a swap dealer or a major swap participant who is 
subject to a statutory disqualification to effect or be involved in 
effecting swaps on behalf of the swap dealer or major swap participant, 
if the swap dealer or major swap participant knew, or in the exercise 
of reasonable care should have known, of the statutory disqualification 
[``Prohibition''].
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    \2\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the 
Dodd-Frank Act can also be accessed through the Commission's Web 
site.
    \3\ 7 U.S.C. 1 et seq. The CEA also can be accessed through the 
Commission's Web site.
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    A related amendment that the Dodd-Frank Act made was to add a 
definition of ``associated person of a swap dealer or major swap 
participant'' in new CEA Section 1a(4), which states that the term 
``associated person of a swap dealer or major swap participant'' means 
a person who is associated with a swap dealer or major swap participant 
as a partner, officer, employee, or agent (or any person occupying a 
similar status or performing similar functions), in any capacity that 
involves the solicitation or acceptance of swaps; or the supervision of 
any person or persons so engaged. Other than for purposes of CEA 
section 4s(b)(6), the term ``associated person of a swap dealer or 
major swap participant'' does not include any person associated with a 
swap dealer or major swap participant the functions of which are solely 
clerical or ministerial.
    Thus, except to the extent that the Commission specifically 
provided by rule, regulation, or order, an SD or MSP would be subject 
to the prohibition against permitting a person associated with the SD 
or MSP (including a person employed in a clerical or ministerial 
capacity) to effect or be involved in effecting swaps if the associated 
person were subject to a statutory disqualification.
    On January 19, 2012, the Commission published in the Federal 
Register regulations that provide for the registration of SDs and 
MSPs.\4\ Among these new regulations were Regulation 1.3(aa)(6), which 
amended the existing definition of ``associated person'' in the 
Commission's regulations to include associated persons of SDs and MSPs, 
and Regulation 23.22, which incorporated the prohibition set forth in 
CEA Section 4s(b)(6). Specifically, Regulation 1.3(aa)(6) (17 CFR 
1.3(aa)(6) provides that the term ``associated person'' means any 
natural person who is associated in any of the following capacities 
with a swap dealer or major swap participant as a partner, officer, 
employee, agent (or any natural person occupying a similar status or 
performing similar functions), in any capacity that involves the 
solicitation or acceptance of swaps (other than in a clerical or 
ministerial capacity); or the supervision of any person or persons so 
engaged.
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    \4\ See 77 FR 2613 (Jan. 19, 2012).
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    The exclusion in Regulation 1.3(aa)(6) from the definition of 
associated person of an SD or MSP for persons who act in a clerical or 
ministerial capacity is consistent with the definition (and exclusion 
for clerical or ministerial activity) in the other provisions in 
Regulation 1.3(aa) that define the term ``associated person'' in the 
context of other Commission registrants.\5\
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    \5\ See also CEA Section 4k(1), which excludes from associated 
person registration a person who, in a clerical or ministerial 
capacity, solicits or accept customer orders for a futures 
commission merchant or an introducing broker.
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II. The Proposal

    Regulation 23.22, by its terms, applies to an associated person of 
an SD or MSP ``as defined in section 1a(4) of the Act and [Regulation] 
1.3(aa).'' Because Regulation 1.3(aa)(6) contains a general exclusion 
from the associated person definition for a person employed in a 
clerical or ministerial capacity, and the exclusion in CEA Section 
1a(4) must be read in conjunction with CEA Section 4s(b)(6), the 
National Futures

[[Page 20849]]

Association (NFA) \6\ has recommended that the Commission clarify that 
the prohibition in CEA Section 4s(b)(6) does not bar association with 
an SD or MSP by employees who are employed in a clerical or ministerial 
capacity.
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    \6\ Letter from Thomas W. Sexton, Senior Vice President and 
General Counsel, NFA, to Gary Barnett, Director of the Division of 
Swap Dealer and Intermediary Oversight, dated November 12, 2012. NFA 
is a registered futures association (and the sole association so 
registered) under CEA Section 17.
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    In light of NFA's recommendation, and in accordance with the 
language in CEA Section 4s(b)(6) that qualifies the Prohibition 
(``Except to the extent otherwise specifically provided by rule, 
regulation, or order''), the Commission is proposing to amend paragraph 
(a) of Regulation 23.22 to clarify that the Prohibition does not apply 
to an individual employed by an SD or MSP in a clerical or ministerial 
capacity.\7\
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    \7\ In this regard, the Commission notes that pursuant to this 
authority in CEA Section 4s(b)(6), it previously adopted an 
exception from the Prohibition for a person already listed as a 
principal of, or already registered as an associated person of, 
another Commission registrant, notwithstanding a statutory 
disqualification. See Regulation 23.22(b), proviso.
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III. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) \8\ requires that agencies, in 
proposing regulations, consider the impact of those regulations on 
small businesses.\9\ The Commission previously has determined that SDs 
and MSPs are not ``small entities'' for RFA purposes.\10\ Moreover, as 
is explained below, if adopted, the Proposal will not have a 
significant economic impact on any person who would be affected 
thereby, because it will not impose any additional operational 
requirements or otherwise direct or confine the activities of affected 
persons. Accordingly, the Chairman hereby certifies pursuant to 5 
U.S.C. 605(b) that the Proposal will not have a significant economic 
impact on a substantial number of small entities.
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    \8\ 5 U.S.C. 601 et seq. (2006).
    \9\ By its terms, the RFA does not apply to ``individuals.'' See 
48 FR 14933, n. 115 (Apr. 6, 1983).
    \10\ See 77 FR 2613, 2620 (Jan. 19, 2012).
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B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) \11\ 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. The Commission believes that the 
Proposal will not impose new recordkeeping or information collection 
requirements that require approval by the Office of Management and 
Budget under 44 U.S.C. 3501, et seq. Accordingly, the PRA does not 
apply to this rulemaking.
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    \11\ 44 U.S.C. 3501 et seq.
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C. Cost-Benefit Considerations

    CEA Section 15(a) requires the Commission to consider the costs and 
benefits of its actions before issuing a rulemaking under the CEA. CEA 
Section 15(a) further specifies that the costs and benefits shall be 
evaluated in light of five broad areas of market and public concern: 
(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. The Commission considers the costs and 
benefits resulting from its discretionary determinations with respect 
to the Section 15(a) factors.
    Summary of the Proposal. As is explained above, the Proposal would 
make a clarifying change to the text of one of the Commission's 
regulations that were adopted to reflect changes made to the CEA by the 
Dodd-Frank Act, by specifying that the prohibition against an SD or MSP 
permitting a statutorily disqualified person to associate with it does 
not include a person employed in a clerical or ministerial capacity.
    Costs. With respect to costs, the Commission believes that the 
Proposal will not impose any costs. This is because the Proposal would 
clarify that an SD or MSP need not consider whether CEA section 
4s(b)(6) applies to employees performing clerical or ministerial 
duties. Thus the Commission proposes that there will be little (if any) 
costs to persons who will be affected by the Proposal.
    Benefits. With respect to benefits, the Commission proposes that 
the Proposal will benefit SDs and MSPs by reducing the search costs 
associated with determining whether a clerical or ministerial employee 
is statutorily disqualified. This, in turn, mitigates the cost of 
compliance with CEA Section 4s(b)(6).
    Public Comment. The Commission invites public comment on its cost-
benefit considerations. Commenters are also invited to submit any data 
or other information that they may have quantifying or qualifying the 
costs and benefits of the Proposal with their comment letters.

List of Subjects in 17 CFR Part 23

    Associated persons, Commodity futures, Major swap participants, 
Ministerial or clerical employees, Registration, Statutory 
disqualification, Swap dealers, Swaps.

    For the reasons presented above, the Commission hereby proposes to 
amend chapter I of title 17 of the Code of Federal Regulations as 
follows:

PART 23--SWAP DEALERS AND MAJOR SWAP PARTICIPANTS

0
1. The authority citation for part 23 continues to read as follows:

    Authority:  7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1, 6c, 6p, 6r, 6s, 6t, 
9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, and 21.

0
2. Section 23.22 is amended by revising the section heading and 
paragraph (a) to read as follows:


Sec.  23.22  Prohibition against statutory disqualification in the case 
of an associated person of a swap dealer or major swap participant.

    (a) Definition. For purposes of this section, the term ``person'' 
means an ``associated person of a swap dealer or major swap 
participant'' as defined in section 1a(4) of the Act and Sec.  
1.3(aa)(6) of this chapter, but does not include an individual employed 
in a clerical or ministerial capacity.
* * * * *

    Issued in Washington, DC, on March 27, 2013, by the Commission.
Christopher J. Kirkpatrick,
Deputy Secretary of the Commission.
[FR Doc. 2013-07538 Filed 4-5-13; 8:45 am]
BILLING CODE 6351-01-P