[Federal Register Volume 78, Number 208 (Monday, October 28, 2013)]
[Rules and Regulations]
[Pages 64173-64175]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-25279]


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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: Final rule.

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SUMMARY: The Commodity Futures Trading Commission is adopting an 
amendment to its regulations to clarify certain responsibilities of a 
swap dealer or major swap participant regarding its employees who 
solicit, accept or effect swaps in a clerical or ministerial capacity.

DATES: Effective November 27, 2013.

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

SUPPLEMENTARY INFORMATION: 

I. Introduction

A. Background

    The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Dodd-Frank Act) \1\ was signed into law July 21, 2010. The Dodd-Frank 
Act amended the Commodity Exchange Act (CEA or Act) \2\ to require the 
registration of swap dealers (SDs) and major swap participants (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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    \1\ 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 be accessed through the Commission's Web site, 
http://www.cftc.gov.
    \2\ 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 provides 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

[[Page 64174]]

(or any person occupying a similar status or performing similar 
functions), in any capacity that involves: (i) The solicitation or 
acceptance of swaps; or (ii) the supervision of any person or persons 
so engaged. The definition contains an exclusion, however, stating that 
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 Commodity Futures Trading 
Commission (Commission or CFTC) 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.\3\ Among these new regulations were Regulation 1.3(aa)(6),\4\ 
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). With respect to SDs or MSPs, Regulation 
1.3(aa)(6) provides that the term ``associated person'' means any 
natural person who is associated with an SD or MSP 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. 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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    \3\ See 77 FR 2613 (Jan. 19, 2012).
    \4\ 17 CFR 1.3(aa)(6). The Commission's regulations also can be 
accessed through the Commission's Web site.
    \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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B. 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), in 
November 2012 the National Futures Association (NFA) \6\ 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 proposed to amend paragraph (a) 
of Regulation 23.22 (``Proposal'') \7\ to clarify that the Prohibition 
does not apply to an individual employed by an SD or MSP in a clerical 
or ministerial capacity.\8\
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    \7\ 78 FR 20848 (Apr. 8, 2013).
    \8\ In this regard, the Commission noted in the Proposal that 
pursuant to the authority granted it in CEA section 4s(b)(6), it had 
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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II. Comments on the Proposal

    The Commission received one comment letter on the Proposal. It 
stated that adoption of the Proposal would ``reduce regulatory burden 
and reduce the costs of determining whether a clerical or ministerial 
employee is statutorily disqualified'' and, further, that ``[t]he 
Proposed rule is reasonable and will improve regulatory efficiency.'' 
\9\
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    \9\ Comment letter from Chris Barnard at page 1 (June 3, 2013).
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III. The Final Regulation

    In light of the foregoing, the Commission is adopting as proposed 
an amendment to 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.

IV. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) \10\ requires federal 
agencies, in promulgating regulations, to consider whether those 
regulations will have a significant economic impact on small entities 
and, if so, to provide a regulatory flexibility analysis respecting the 
impact.\11\ The Commission previously has determined that SDs and MSPs 
are not ``small entities'' for RFA purposes.\12\ Moreover, adoption of 
the amendment to Regulation 23.22(a) as proposed will not have a 
significant economic impact on any person who will be affected thereby, 
because it will not impose any additional operational requirements or 
otherwise direct or confine the activities of affected persons.
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    \10\ 5 U.S.C. 601 et seq. (2006).
    \11\ By its terms, the RFA does not apply to ``individuals.'' 
See 48 FR 14933, 14954 n. 115 (Apr. 6, 1983).
    \12\ See 77 FR 2613, 2620 (Jan. 19, 2012).
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    The Commission did not receive any comments regarding its RFA 
analysis in the Proposal. Accordingly, pursuant to 5 U.S.C. 605(b), the 
Chairman, on behalf of the Commission, hereby certifies that the 
regulation being published in this Federal Register release will not 
have a significant economic impact on a substantial number of small 
entities.

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) \13\ 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 regulation being published in 
this Federal Register release clarifies that the Prohibition does not 
apply where the person in question is employed in a clerical or 
ministerial capacity. As discussed in the Proposal, the amendment will 
not impose a ``burden'' or ``collection of information'' as those terms 
are defined in the PRA.\14\
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    \13\ 44 U.S.C. 3501 et seq.
    \14\ 78 FR 20848, 20849 (Apr. 8, 2013).
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    The Commission did not receive any comments regarding its PRA 
analysis in the Proposal. Accordingly, for purposes of the PRA, the 
Chairman, on behalf of the Commission, certifies that the regulation 
being published in this Federal Register release will not impose any 
new reporting or recordkeeping requirements.

C. Cost-Benefit Considerations

    CEA section 15(a) requires the Commission to consider the costs and 
benefits of its actions before issuing a

[[Page 64175]]

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.
    As is explained above, the amendment to Regulation 23.22(a) makes a 
clarifying change to the text of one of the Commission's regulations 
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 adoption 
of the amendment to Regulation 23.22(a) will not impose any costs. This 
is because the amendment clarifies 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 does not believe that any 
new costs will be imposed.
    Benefits. With respect to benefits, as discussed in the Proposal, 
the Commission believes that the amendment to Regulation 23.22(a) 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 existing cost of compliance 
with CEA section 4s(b)(6). As such, it is an ``other public interest 
consideration'' under CEA section 15(a), referred to above.
    Public Comment. The Commission invited public comment on its cost-
benefit considerations, but no such comments were received.

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 Commodity Futures Trading 
Commission hereby amends 17 CFR part 23 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. Amend Sec.  23.22 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 October 22, 2013, by the 
Commission.
Christopher J. Kirkpatrick,
Deputy Secretary of the Commission.

Appendix to Swap Dealers and Major Swap Participants; Clerical or 
Ministerial Employees--Commission Voting Summary

    Note:  The following appendix will not appear in the Code of 
Federal Regulations.

Commission Voting Summary

    On this matter, Chairman Gensler and Commissioners Chilton, 
O'Malia, and Wetjen voted in the affirmative; no Commissioner voted 
in the negative.

[FR Doc. 2013-25279 Filed 10-25-13; 8:45 am]
BILLING CODE 6351-01-P