[Federal Register Volume 81, Number 7 (Tuesday, January 12, 2016)]
[Proposed Rules]
[Pages 1359-1364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-00045]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 3

RIN 3038-AE16


Alternative to Fingerprinting Requirement for Foreign Natural 
Persons

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 existing Commission regulations to 
establish an alternative to fingerprinting to evaluate the fitness of 
natural persons who are required to submit fingerprints under the 
Commission's regulations and who have not resided in the United States 
since reaching 18 years of age (``Proposal'').

DATES: Comments must be received on or before February 11, 2016.

ADDRESSES: You may submit comments, identified by RIN 3038-AE16, by any 
of the following methods:
     Agency Web site: Via its Comments Online process: http://comments.cftc.gov. Follow the instructions on the Web site for 
submitting comments.
     Mail: Send to Christopher Kirkpatrick, Secretary, 
Commodity Futures Trading Commission, 1155 21st Street NW., Washington, 
DC 20581.
     Hand delivery/Courier: Same as Mail above.
     Federal eRulemaking Portal: at http://www.regulations.gov/. Follow the 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 
http://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,\1\ a petition for confidential treatment of the exempt 
information may be submitted according to the procedures set forth in 
Sec.  145.9 of the Commission's regulations.\2\
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    \1\ 5 U.S.C. 552.
    \2\ Commission regulations referred to herein are found at 17 
CFR chapter. 1. Commission regulations are accessible on the 
Commission's Web site,  http://www.cftc.gov.
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    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 http://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: Katherine Driscoll, Associate Chief 
Counsel, 202-418-5544, [email protected]; Jacob Chachkin, Special 
Counsel, 202-418-5496, [email protected]; or Adam Kezsbom, Special 
Counsel, 202-418-5372, [email protected], Division of Swap Dealer and 
Intermediary Oversight, Commodity Futures Trading Commission, Three 
Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

    Subject to certain exceptions and exclusions, persons engaging in 
specified activities involving commodity interests \3\ are required 
pursuant to the Commodity Exchange Act (``CEA'' or ``Act'') and/or 
Commission regulations \4\ to register with the Commission in certain 
registration categories. These include registration as a futures 
commission merchant (``FCM''), retail foreign exchange dealer 
(``RFED''), introducing broker (``IB''), commodity pool operator 
(``CPO''), commodity trading advisor (``CTA''), swap dealer (``SD''), 
major

[[Page 1360]]

swap participant (``MSP''), leverage transaction merchant (``LTM''), 
floor broker (``FB''), and floor trader (``FT'').\5\ One of the 
critically important functions of registration is to allow the 
Commission to ensure that all futures and swaps industry professionals 
who deal with the public meet minimum standards of fitness and 
competency.\6\ The fitness investigations that are part of the 
registration process permit the Commission and/or its delegatees to (a) 
uncover past misconduct that may disqualify an individual or entity 
from registration and (b) help determine if such persons have disclosed 
all matters required to be disclosed in their applications to become 
registered with the Commission.\7\
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    \3\ A commodity interest is (1) any contract for the purchase or 
sale of a commodity for future delivery; (2) any contract, agreement 
or transaction subject to a Commission regulation under section 4c 
or 19 of the Commodity Exchange Act; (3) any contract, agreement or 
transaction subject to Commission jurisdiction under section 2(c)(2) 
of such Act; and (4) Any swap as defined in such Act, by the 
Commission, or jointly by the Commission and the Securities and 
Exchange Commission. 17 CFR 1.3(yy).
    \4\ See, e.g., Commission regulation 3.4(a). 17 CFR 3.4(a).
    \5\ For the definitions of these registration categories (other 
than RFED), see Section 1a of the CEA and Commission regulation 1.3. 
7 U.S.C. 1a and 17 CFR 1.3. For the definition of RFED, see 
Commission regulation 5.1(h). 17 CFR 5.1(h).
    \6\ See, e.g., Commodity Futures Trading Comm'n, Division of 
Clearing and Intermediary Oversight, Public Report on the 
Registration Program of the National Futures Association, June 2010, 
at 1 (citing H.R. REP. NO. 97-565(I), at 48 (1982), reprinted in 
1982 U.S.C.C.A.N. 3871, 3897-3899).
    \7\ See http://www.nfa.futures.org/NFA-registration/index.HTML 
(last visited Dec. 22, 2015), stating that ``[t]he primary purposes 
of registration are to screen an applicant's fitness to engage in 
business as a futures professional and to identify those individuals 
and organizations whose activities are subject to federal 
regulation.''
    Pursuant to Commission regulation 3.60, the Commission may, 
subject to some limitations, deny, grant with conditions, suspend, 
revoke, or restrict registration to an applicant if the Commission 
alleges and is prepared to prove that the registrant or applicant is 
subject to one or more of the statutory disqualifications set forth 
in section 8a(2), 8a(3) or 8a(4) of the Act. 17 CFR 3.60. Sections 
8a(2) and 8a(3) of the Act contain an extensive list of matters that 
provide grounds for refusing or conditioning an applicant's 
registration, including, without limitation, felony convictions, 
commodities or securities law violations, bars or other adverse 
actions taken by financial regulators, and willfully omitting to 
state any material fact in an application. See 7 U.S.C. 12a(2) and 
(3). See also Interpretative Statement With Respect to Section 
8a(2)(C) and (E) and Section 8a(3)(J) and (M) of the Commodity 
Exchange Act, Appendix A to part 3 of the Commission's regulations.
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    Pursuant to the registration process for determining a registrant's 
fitness in part 3 of the Commission's regulations, natural persons \8\ 
that wish to be principals \9\ or associated persons \10\ of Commission 
registrants, or who are responsible for entry of orders from an FB's or 
FT's own account, are required to submit their fingerprints \11\ (the 
``Fingerprinting Requirement'').\12\
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    \8\ As used herein, the terms ``natural person'' and 
``individual'' have the same meaning.
    \9\ See the definition of principal in Commission regulation 
3.1(a). 17 CFR 3.1(a).
    \10\ An ``associated person'' is any natural person who is 
associated in certain capacities with an FCM, RFED, IB, CPO, CTA, 
SD, MSP, or LTM. 17 CFR 1.3(aa).
    \11\ Currently, the Commission may, directly or indirectly, 
require fingerprinting pursuant to Commission regulations 
3.10(a)(2); 3.11(a)(1); 3.12(c)(3), d(2), f(3), or (i)(3); 
3.40(a)(1), (a)(2), or (b); 3.44(a)(5) or (c); or 3.46(a)(3). 17 CFR 
3.10(a)(2); 3.11(a)(1); 3.12(c)(3), d(2), f(3), and (i)(3); 
3.40(a)(1), (a)(2), and (b); 3.44(a)(5) and (c); and 3.46(a)(3).
    \12\ In support of its initial promulgation of the 
fingerprinting requirements, the Commission stated that these 
requirements ``are necessary to permit improvements in the 
Commission's background checking of applicants for registration, to 
permit positive identification of certain individuals with common 
names, to reduce the number of applications filed by individuals who 
are unfit for registration, and to facilitate fitness reviews of 
registrants on a spot and periodic basis.'' See Revision of 
Registration Regulations; Final Rules; Designation of New Part, 45 
FR 80485, 80485 (Dec. 5, 1980).
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    The Commission has delegated to National Futures Association 
(``NFA''), a registered futures association under Section 17 of the 
CEA, the registration functions set forth in subparts A, B, and C of 
part 3 of the Commission's regulations, including the collection and 
review of a completed Form 8-R \13\ and related fingerprint submissions 
from each natural person completing a Form 8-R.\14\ NFA, working with 
law enforcement agencies, uses these fingerprints to conduct background 
checks on these natural persons to assist in determining their fitness.
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    \13\ Generally, Form 8-R is the Commission's application for 
natural persons that are associated persons or principals of a 
registrant.
    \14\ See 17 CFR 3.2(a).
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    In December 2012, the Commission's Division of Swap Dealer and 
Intermediary Oversight (``DSIO''), in response to concerns raised by 
industry participants that the Fingerprinting Requirement was unduly 
burdensome to foreign natural persons and after considering those 
concerns in light of the continued need to evaluate the fitness of 
those persons, issued a no-action letter, CFTC Staff Letter No. 12-
49.\15\ CFTC Staff Letter No. 12-49 provides an alternative to 
complying with the Fingerprinting Requirement for principals of LTMs, 
FCMs, RFEDs, IBs, CPOs, CTAs, SDs, and MSPs that have not resided in 
the United States since reaching 18 years of age. Subject to certain 
conditions specified in the letter, DSIO staff stated that it would not 
recommend that the Commission commence an enforcement action against 
any such firm based solely upon that firm's failure to submit with its 
registration application a fingerprint card for each such principal.
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    \15\ CFTC Staff Letter No. 12-49 (Dec. 11, 2012), available at 
http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/12-49.pdf.
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    To rely on the relief provided in CFTC Staff Letter No. 12-49, DSIO 
staff required that any such firm submit, for each principal, either a 
fingerprint card (as required under Commission regulation 3.10(a)(2)) 
or a certification, signed by a person with authority to bind such 
firm, stating that: (1) A reasonable criminal history background check 
using a reputable commercial service had been conducted; (2) such 
criminal history background check did not reveal any matters that 
constitute a disqualification under Sections 8a(2) or 8a(3) of the 
CEA,\16\ other than those disclosed; and (3) such firm would maintain, 
in accordance with Commission regulation 1.31, records documenting that 
such criminal history background check was performed and the results of 
such background check.\17\
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    \16\ 7 U.S.C. 12a(2) and (3).
    \17\ CFTC Staff Letter No. 12-49, at 2.
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    After issuing CFTC Staff Letter No. 12-49, DSIO staff issued 
similar no-action relief from the Fingerprinting Requirement for 
associated persons of FCMs, RFEDs, IBs, CTAs, CPOs, and LTMs that have 
not resided in the United States since reaching 18 years of age in CFTC 
Staff Letter No. 13-29 \18\ (CFTC Staff Letter No. 13-29, together with 
CFTC Staff Letter No. 12-49, are the ``DSIO No-Action Letters'' and the 
relief provided by such letters is the ``DSIO No-Action Relief'').
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    \18\ CFTC Staff Letter No. 13-29 (Jun. 21, 2013), available at 
http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-29.pdf.
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II. Proposal

    The Commission is proposing to amend the Fingerprinting Requirement 
by adding a new sub-section (e) to the existing list of exemptions from 
the Fingerprinting Requirement in Sec.  3.21 \19\ to codify and clarify 
the DSIO No-Action Relief.
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    \19\ Commission regulation 3.21 provides exemptions to the 
Fingerprinting Requirement, subject to certain conditions, for 
persons whose fingerprints have recently been identified and 
processed by the Federal Bureau of Investigation, for persons whose 
application for initial registration with the Commission in any 
capacity was recently granted, for persons that have a current Form 
8-R on file with the Commission or NFA, and for principals that are 
outside directors. 17 CFR 3.21.
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    This Proposal differs from the DSIO No-Action Relief. First, this 
Proposal would extend the relief to certain natural persons connected 
to FBs and FTs. Second, the Proposal would include all requirements to 
provide a fingerprint card under Part 3 of the Commission's 
regulations, whereas the DSIO No-Action Relief is more limited.\20\ As 
a result, this Proposal broadens the availability of the alternative to 
fingerprinting provided in

[[Page 1361]]

the DSIO No-Action Letters; however, the Commission believes that the 
rationale for providing the alternative to fingerprinting described 
above is equally applicable to natural persons connected to FBs and FTs 
and to all other requirements to provide a fingerprint card under Part 
3 of the Commission's regulations, as explained further below.
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    \20\ The DSIO No-Action Letters provide an alternative solely to 
the requirements of Commission regulations 3.10(a)(2) and 
3.12(c)(3). See DSIO No-Action Letters.
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    Proposed sub-section (e)(2) of Sec.  3.21 would provide that the 
obligation to provide a fingerprint card for a Foreign Natural Person 
under part 3 of the Commission's regulations would be deemed satisfied 
for a Certifying Firm (each, as defined below) if: (a) Such Certifying 
Firm causes a criminal history background check of such Foreign Natural 
Person to be performed; (b) such criminal history background check does 
not reveal any matters that constitute a disqualification under 
Sections 8a(2) or 8a(3) of the CEA,\21\ other than those disclosed to 
NFA; and (c) a person authorized by such Certifying Firm submits, in 
reliance on such criminal history background check, a certification by 
such Certifying Firm to NFA.
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    \21\ 7 U.S.C. 12a(2) and (3).
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    The certification must: (i) State that the conditions described 
above have been satisfied; and (ii) be signed by a person authorized by 
such Certifying Firm to make such certification. In addition, each 
criminal history background check must: (a) Be of a type that would 
reveal all matters listed under Sections 8a(2)(D) or 8a(3)(D), (E), or 
(H) of the CEA \22\ relating to the Foreign Natural Person and (b) be 
completed not more than one calendar year prior to the date that such 
Certifying Firm submits the certification to NFA described in the 
proposed rule.
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    \22\ 7 U.S.C. 12a(2)(D) and 12a(3)(D), (E), and (H). These 
provisions of Sections 8a(2) and (3) of the CEA generally relate to 
criminal convictions.
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    In terms of definitions, proposed paragraph 3.21(e)(1)(i) would 
define Foreign Natural Person, solely for purposes of paragraph (e), as 
any natural person who has not resided in the United States since 
reaching the age of 18 years. Also, proposed paragraph 3.21(e)(1)(ii) 
would define Certifying Firm, also solely for purposes of paragraph 
(e), with respect to natural persons acting in certain specified 
capacities in relation to the firm.
    By way of recordkeeping, proposed paragraph 3.21(e)(3) would 
require that the Certifying Firm maintain, in accordance with 
Commission regulation 1.31, records documenting each criminal history 
background check and the results thereof.
    The Commission believes the proposal, in providing certainly to 
market participants by way of Commission regulation, will make the 
commodity interest markets it oversees more liquid, competitive, and 
accessible by enabling Foreign Natural Persons to demonstrate that they 
meet the minimum standards for fitness and competency without undue 
burden. The alternative to fingerprinting proposed will remove an 
impediment to participation in United States' markets by persons 
located outside of the United States while also ensuring the continued 
protection of market participants and the public. Further, the 
Commission believes that, by providing an alternative for persons 
outside the United States, this Proposal is consistent with the 
principles of international comity.
    As discussed above, in an attempt to provide greater clarity to 
market participants, this Proposal is slightly different than the DSIO 
No-Action Letters. In particular, where the No-Action Relief required 
that ``a reasonable criminal history background check using a reputable 
commercial service'' be performed, this Proposal does not include the 
terms ``reasonable'' or ``reputable.'' Instead, this Proposal requires 
that the background check meet the objective standard described above, 
which relies on the clearly-stated matters under Sections 8a(2)(D) and 
8a(3)(D), (E), and (H) of the CEA. The Commission believes that using 
such an objective standard (one that does not require a market 
participant to make a subjective determination of what is 
``reasonable'' or ``reputable'' for purposes of the alternative) 
furthers its goal of providing certainty to market participants while 
allowing the Commission to continue to ensure the fitness of its 
registrants.
    If adopted, the proposed rule would supersede the DSIO No-Action 
Letters without prejudice to those who are relying on either of the 
DSIO No-Action Letters and have satisfied the requirements thereof 
prior to the date hereof.

III. Request for Comments

    The Commission requests comment generally on all aspects of this 
Proposal. In particular, the Commission requests comment on the 
following:
    1. Should the Commission promulgate a final rule in relation to 
this Proposal to provide an alternative to the Fingerprinting 
Requirement for Foreign Natural Persons?
    2. Please describe the burdens that Foreign Natural Persons face in 
complying with the Fingerprinting Requirement. How are these burdens 
different from those faced by natural persons that are not Foreign 
Natural Persons?
    3. Is the criminal history background check as set forth in the 
Proposal sufficient to reveal the existence of all matters listed under 
Sections 8a(2)(D) or 8a(3)(D), (E), or (H) of the CEA, if any such 
matter existed? If not, please provide specific additional or 
alternative requirements for the criminal history background check.
    4. This Proposal is limited to Foreign Natural Persons (i.e., 
individuals who have not resided in the United States since reaching 18 
years of age). Should the Commission use another measure to determine 
whether an individual should be eligible for the proposed alternative 
to the Fingerprinting Requirement?
    5. This Proposal requires that a background check be completed not 
more than one calendar year prior to the date of a Certifying Firm's 
related certification. Should the Commission require that the 
background check be completed within a different period?
    6. Are persons eligible for the DSIO No-Action Relief currently 
availing themselves of that alternative to the Fingerprinting 
Requirement? To the extent that such persons are not, please provide 
reasons as to why they are not.
    7. Are there any other matters that the Commission should consider 
in determining whether to adopt this Proposal?

IV. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') \23\ requires Federal 
agencies, in promulgating regulations, to consider whether the rules 
they propose will have a significant economic impact on a substantial 
number of small entities and, if so, to provide a regulatory 
flexibility analysis regarding the economic impact on those entities. 
This Proposal would affect certain FCMs, RFEDs, IBs, CPOs, CTAs, SDs, 
MSPs, LTMs, FBs, and FTs that wish to take advantage of the alternative 
to fingerprinting to evaluate the fitness of their Foreign Natural 
Persons for which fingerprints must be submitted to NFA.\24\ The 
Commission has previously determined that FCMs, RFEDS, CPOs, SDs, MSPs, 
and LTMs are not small

[[Page 1362]]

entities for purposes of the RFA.\25\ Therefore, the requirements of 
the RFA do not apply to those entities. With respect to CTAs, FBs, FTs, 
and IBs, the Commission has found it appropriate to consider whether 
such registrants should be deemed small entities for purposes of the 
RFA on a case-by-case basis, in the context of the particular 
Commission regulation at issue.\26\ As certain of these registrants may 
be small entities for purposes of the RFA, the Commission considered 
whether this rulemaking would have a significant economic impact on 
such registrants. This Proposal will solely provide an optional 
alternative to complying with the Fingerprinting Requirement, which 
already applies to such registrants, and would, therefore, not impose 
any new regulatory obligations on affected registrants. This Proposal 
is not expected to impose any new burdens on market participants. 
Rather, to the extent that this Proposal provides an alternative means 
to comply with the Fingerprinting Requirement and is elected by a 
market participant, the Commission believes it is reasonable to infer 
that the alternative is less burdensome to such participant. The 
Commission does not, therefore, expect small entities to incur any 
additional costs as a result of this Proposal. Consequently, the 
Commission finds that no significant economic impact on small entities 
will result from this Proposal.
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    \23\ 5 U.S.C. 601 et seq.
    \24\ This Proposal will also directly affect certain of such 
individuals; however, the Commission has noted that the RFA, by its 
terms, does not apply to individuals. See 48 FR 14933, 14954 n.115 
(Apr. 6, 1983). Therefore, no analysis on the economic impact of 
this rule on individuals is provided.
    \25\ See Policy Statement and Establishment of Definitions of 
``Small Entities'' for Purposes of the Regulatory Flexibility Act, 
47 FR 18618 (Apr. 30, 1982) (FCMs and CPOs); Leverage Transactions, 
54 FR 41068 (Oct. 5, 1989) (LTMs); Regulation of Off-Exchange Retail 
Foreign Exchange Transactions and Intermediaries, 75 FR 55410, 55416 
(Sept. 10, 2010) (RFEDs); and Registration of Swap Dealers and Major 
Swap Participants, 77 FR 2613, 2620 (Jan. 19, 2012) (SDs and MSPs).
    \26\ See 47 FR at 18620 (CTAs and FBs); Registration of Floor 
Traders; Mandatory Ethics Training for Registrants; Suspension of 
Registrants Charged With Felonies, 58 FR 19575, 19588 (Apr. 15, 
1993) (FTs); and Introducing Brokers and Associated Persons of 
Introducing Brokers, Commodity Trading Advisors and Commodity Pool 
Operators; Registration and Other Regulatory Requirements, 48 FR 
35248, 35276 (Aug. 3, 1983) (IBs).
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    Accordingly, the Chairman, on behalf of the Commission, hereby 
certifies pursuant to 5 U.S.C. 605(b) that this Proposal will not have 
a significant economic impact on a substantial number of small 
entities.

B. Paperwork Reduction Act

1. Background
    The Paperwork Reduction Act of 1995 (``PRA'') \27\ imposes certain 
requirements on Federal agencies (including the Commission) in 
connection with conducting or sponsoring any collection of information 
as defined by the PRA. This Proposal would result in a collection of 
information within the meaning of the PRA, as discussed below. The 
Commission therefore is submitting this Proposal to the Office of 
Management and Budget (``OMB'') for review.
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    \27\ 44 U.S.C. 3501 et seq.
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    This Proposal contains collections of information for which the 
Commission has previously received control numbers from OMB. The titles 
for these collections of information are ``Commodity Pool Operators and 
Commodity Trading Advisors: Amendments to Compliance Obligations, OMB 
control number 3038-0023'' \28\ and ``Registration of Swap Dealers and 
Major Swap Participants, OMB control number 3038-0072.'' \29\
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    \28\ See OMB Control No. 3038-0023, http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0023# (last visited 
Dec. 22, 2015). The collection is being retitled ``Registration 
Under the Commodity Exchange Act.''
    \29\ See OMB Control No. 3038-0072, http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0072# (last visited 
Dec. 22, 2015).
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    The responses to these collections of information are mandatory. An 
agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless it displays a currently 
valid control number issued by OMB.
    The collection of information in this Proposal would provide an 
optional alternative to complying with the Fingerprinting Requirement 
(as described above). Eligible persons would have the option to elect 
the certification process, but no obligation to do so. For this reason, 
except to the extent that the Commission is amending the subject OMB 
control numbers for PRA purposes to reflect the alternative 
certification process, this Proposal is not expected to impose any new 
burdens on market participants. Rather, to the extent that this 
Proposal provides an alternative means to comply with the 
Fingerprinting Requirement and is elected by market participants, it is 
reasonable for the Commission to infer that the alternative is less 
burdensome to such participants.
2. Revisions to Collections 3038-0023 and 3038-0072
    Collections 3038-0023 and 3038-0072 are currently in force with 
their control numbers having been provided by OMB.
    As discussed above, this Proposal would add a new exemption that 
would incorporate an alternative to fingerprinting to evaluate the 
fitness of certain Foreign Natural Persons. In order to qualify for 
this alternative, the Certifying Firm must take the steps required 
pursuant to this Proposal, including submitting the required 
certification to NFA and maintaining records of the criminal history 
background check and the results thereof. Requiring such actions would 
result in revisions to collections 3038-0023 and 3038-0072. Therefore, 
the Commission proposes to revise each of collections 3038-0023 and 
3038-0072.
    The Commission understands that NFA has received approximately 110 
requests in each of 2014 and 2015 from market participants asking to 
avail themselves of the DSIO No-Action Relief. However, as discussed 
above, the relief provided by this Proposal is broader than the DSIO 
No-Action relief in that it extends the relief to certain natural 
persons connected to FBs and FTs. Therefore, the Commission estimates 
that Certifying Firms will submit 200 certifications per year to take 
advantage of the alternative provided in this Proposal.
    As of November 23, 2015, there were (i) 9,259 Commission-registered 
FCMs, RFEDs, IBs, CPOs, CTAs, LTMs, FBs, and FTs and (ii) 103 
Commission-registered SDs and MSPs, making an aggregate total of 9,362 
registrants.\30\ Of these registrants, SDs and MSPs make up 
approximately 1% and the other registrants make up approximately 99%. 
Based on the assumption that there is an equal distribution of 
certifications among the Certifying Firms eligible to provide them, the 
Commission estimates that approximately 198 \31\ FCMs, RFEDs, IBs, 
CPOs, CTAs, LTMs, FBs, and FTs and 2 \32\ SDs and MSPs will submit the 
required certification.
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    \30\ These numbers are slightly overstated, as certain 
registrants are registered as SDs or MSPs and as an FCM, RFED, IB, 
CPO, CTA, LTM, FB, or FT.
    \31\ 198 was calculated by multiplying the number of estimated 
requests per year (200) by the proportion of registrants discussed 
above that are FCMs, RFEDs, IBs, CPOs, CTAs, LTMs, FBs, or FTs 
(approximately 99%).
    \32\ 2 was calculated by multiplying the number of estimated 
requests per year (200) by the proportion of registrants discussed 
above that are SDs or MSPs (approximately 1%).
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a. Estimated Additional Hour Burden for Collection 3038-0023
    Collection 3038-0023 relates to collections of information from 
FCMs, RFEDs, IBs, CPOs, CTAs, LTMs, FBs, and FTs. Based on the above, 
the estimated additional hour burden for collection 3038-0023 of 495 
hours is calculated as follows:
    Number of registrants: 198.

[[Page 1363]]

    Frequency of collection: As needed.
    Estimated annual responses per registrant: 1.
    Estimated aggregate number of annual responses: 198.
    Estimated annual hour burden per registrant: 2.5.\33\
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    \33\ This collection's burdens are restricted to (i) registrants 
providing necessary information to commercial service provider(s) to 
conduct a criminal history background check for a Foreign Natural 
Person; (ii) registrants preparing and submitting the certification 
described herein; and (iii) registrants maintaining, in accordance 
with Commission regulation 1.31, records documenting that the 
criminal history background check was completed and the results 
thereof. To the extent that a market participant instead elects to 
conduct the background check internally, it is reasonable for the 
Commission to infer that doing so is less burdensome to such 
participant.
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    Estimated aggregate annual hour burden: 495 (198 registrants x 2.5 
hours per registrant).
b. Estimated Additional Hour Burden for Collection 3038-0072
    Collection 3038-0072 relates to collections of information from SDs 
and MSPs. Based on the above, the estimated additional hour burden for 
collection 3038-0072 of 5 hours is calculated as follows:
    Number of registrants: 2.
    Frequency of collection: As needed.
    Estimated annual responses per registrant: 1.
    Estimated aggregate number of annual responses: 2.
    Estimated annual hour burden per registrant: 2.5.\34\
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    \34\ See n.33, supra.
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    Estimated aggregate annual hour burden: 5 (2 registrants x 2.5 
hours per registrant).
3. Information Collection Comments
    The Commission invites the public and other Federal agencies to 
comment on any aspect of the proposed information collection 
requirements discussed above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the 
Commission solicits comments in order to: (1) Evaluate whether the 
proposed collection of information is necessary for the proper 
performance of the functions of the Commission, including whether the 
information will have practical utility; (2) evaluate the accuracy of 
the Commission's estimate of the burden of the proposed collection of 
information; (3) determine whether there are ways to enhance the 
quality, utility, and clarity of the information to be collected; and 
(4) minimize the burden of the collection of information on those who 
are to respond, including through the use of automated collection 
techniques or other forms of information technology.
    Comments may be submitted directly to the Office of Information and 
Regulatory Affairs, by fax at (202) 395-6566, or by email at 
[email protected]. Please provide the Commission with a copy 
of submitted comments so that all comments can be summarized and 
addressed in the final rule preamble. Refer to the ADDRESSES section of 
this notice of proposed rulemaking for comment submission instructions 
to the Commission. A copy of the supporting statements for the 
collection of information discussed above may be obtained by visiting  
http://RegInfo.gov. OMB is required to make a decision concerning the 
collection of information between 30 and 60 days after publication of 
this document in the Federal Register. Therefore, a comment is best 
assured of having its full effect if OMB receives it within 30 days of 
publication.

C. Cost-Benefit Considerations

    Section 15(a) of the Act \35\ requires the Commission to consider 
the costs and benefits of its actions before issuing a regulation under 
the Act. Section 15(a) further specifies that the costs and benefits 
shall be evaluated in light of the following five broad areas of market 
and public concern: (i) Protection of market participants and the 
public; (ii) efficiency, competitiveness and financial integrity of 
futures markets; (iii) price discovery; (iv) sound risk management 
practices; and (v) other public interest considerations. The Commission 
considers the costs and benefits resulting from its discretionary 
determinations with respect to the Section 15(a) considerations.
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    \35\ 7 U.S.C. 19(a).
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1. Costs
a. Costs to FCMs, RFEDs, IBs, CPOs, CTAs, SDs, MSPs, LTMs, FBs, FTs, 
Associated Persons, and Other Foreign Natural Persons
    Because this Proposal will solely provide an optional alternative 
to complying with the Fingerprinting Requirement, which alternative no 
FCM, RFED, IB, CPO, CTA, SD, MSP, LTM, FB, FT, associated person, or 
other Foreign Natural Person is required to elect, the Commission 
believes that this Proposal will not impose any costs on such persons.
b. Other Costs
    Because the amendment to Commission regulation will allow FCMs, 
RFEDs, IBs, CPOs, CTAs, SDs, MSPs, LTMs, FBs, and FTs to submit, 
subject to the terms and conditions herein, a certification in lieu of 
a fingerprint card for Foreign Natural Persons, NFA will need to 
develop a process to review and retain such certifications and consider 
amending its applications and/or other forms to reflect the 
availability of this exception from the Fingerprinting Requirement. The 
Commission expects that the costs of such activities will not be 
significant.
2. Benefits
    The Commission believes that, by establishing an alternative method 
for evaluating the fitness of Foreign Natural Persons for whom a 
fingerprint card must currently be submitted, this Proposal would help 
keep the United States' commodity interest markets accessible and 
competitive with other markets around the world by removing an 
impediment to participation in United States' markets by persons 
located outside of the United States while also ensuring the continued 
protection of market participants and the public. Further, the 
Commission believes that, by providing an alternative for persons 
outside the United States, this Proposal is consistent with the 
principles of international comity.
3. Section 15(a) Factors
    Section 15(a) of the CEA requires the Commission to consider the 
costs and benefits of its actions before promulgating a regulation 
under the CEA or issuing certain orders. 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: (i) Protection of market 
participants and the public; (ii) efficiency, competitiveness, and 
financial integrity of futures markets; (iii) price discovery; (iv) 
sound risk management practices; and (v) other public interest 
considerations.
i. Protection of Market Participants and the Public
    This Proposal will continue to protect the public by ensuring that 
persons who are currently subject to the Fingerprinting Requirement, 
whether or not they reside in the United States, must have their 
fitness reviewed through the completion of a background check.
ii. Efficiency, Competitiveness, and Financial Integrity of Markets
    This Proposal may increase the efficiency and competitiveness of 
the markets by encouraging more participation in United States markets 
by persons located outside of the United States. The Commission does 
not believe that the integrity of financial

[[Page 1364]]

markets would be harmed, because this proposal requires that the 
background check meet the objective standards which rely on the 
clearly-stated matters under Sections 8a(2)(D) and 8a(3)(D), (E), and 
(H) of the CEA.
iii. Price Discovery
    The Commission generally believes that providing an alternative 
means of ensuring the fitness of a person who resides outside the 
United States for purposes of Commission registration, by reducing the 
burden that the Fingerprinting Requirement could impose on such 
persons, could reduce impediments to transact on a cross-border basis.
iv. Sound Risk Management Practices
    As explained above, one of the critically important functions of 
registration is to allow the Commission to ensure that all futures and 
swaps industry professionals who deal with the public meet minimum 
standards of fitness and competency.\36\ The fitness investigations 
that are part of the registration process permit the Commission and/or 
its delegatees to (a) uncover past misconduct that may disqualify an 
individual or entity from registration and (b) help determine if such 
persons have disclosed all matters required to be disclosed in their 
applications to become registered with the Commission.\37\ Having 
futures and swaps market participants that are not subject to any of 
the matters that would lead to a disqualification of registration under 
Sections 8a(2) or (3) of the CEA is one way to help ensure that a 
Commission registrant will not be a risk to its customers or to the 
market in general.
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    \36\ See n.6, supra.
    \37\ See n.7, supra.
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v. Other Public Interest Considerations
    The Commission believes that, by providing an alternative for 
persons outside the United States, this Proposal is consistent with the 
principles of international comity.
vi. Request for Comments
    The Commission invites public comment on its cost-benefit 
considerations, including the Section 15(a) factors described above. 
Commenters are also invited to submit any data or other information 
that they may have quantifying or qualifying the costs and benefits of 
this Proposal with their comment letters.

List of Subjects in 17 CFR Part 3

    Associated persons, Brokers, Commodity futures, Commodity pool 
operators, Commodity trading advisors, Customer protection, 
Fingerprinting, Foreign exchange, Futures commission merchants, 
Introducing brokers, Leverage transaction merchants, Leverage 
transactions, Major swap participants, Principals, Registration, 
Reporting and recordkeeping requirements, Retail foreign exchange 
dealers, Swap dealers, Swaps.

    For the reasons set forth in the preamble, the Commodity Futures 
Trading Commission proposes to amend part 3 as follows:

PART 3--REGISTRATION

0
1. The authority citation for part 3 continues to read as follows:

    Authority:  5 U.S.C. 552, 552b; 7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1, 
6c, 6d, 6e, 6f, 6g, 6h, 6i, 6k, 6m, 6n, 6o, 6p, 6s, 8, 9, 9a, 12, 
12a, 13b, 13c, 16a, 18, 19, 21, 23.

0
2. In Sec.  3.21, add paragraph (e) to read as follows:


Sec.  3.21  Exemption from fingerprinting requirement in certain cases.

* * * * *
    (e) Foreign Natural Persons. (1) For purposes of this paragraph 
(e):
    (i) The term foreign natural person means any natural person who 
has not resided in the United States since reaching the age of 18 
years.
    (ii) The term certifying firm means:
    (A) For any natural person that is a principal or associated person 
of a futures commission merchant, retail foreign exchange dealer, swap 
dealer, major swap participant, introducing broker, commodity pool 
operator, commodity trading advisor, leverage transaction merchant, 
floor broker, or floor trader, such futures commission merchant, retail 
foreign exchange dealer, swap dealer, major swap participant, 
introducing broker, commodity pool operator, commodity trading advisor, 
leverage transaction merchant, floor broker, or floor trader; and
    (B) For any natural person that is responsible for, or directs, the 
entry of orders from a floor broker's or floor trader's own account, 
such floor broker or floor trader.
    (2) Any obligation in this part to provide a fingerprint card for a 
foreign natural person shall be deemed satisfied with respect to a 
certifying firm if:
    (i) Such certifying firm causes a criminal history background check 
of such foreign natural person to be performed; and
    (ii) The criminal history background check:
    (A) Is of a type that would reveal all matters listed under 
Sections 8a(2)(D) or 8a(3)(D), (E), or (H) of the Act relating to such 
foreign natural person;
    (B) Does not reveal any matters that constitute a disqualification 
under Sections 8a(2) or 8a(3) of the Act, other than those disclosed to 
the National Futures Association; and
    (C) Is completed not more than one calendar year prior to the date 
that such certifying firm submits the certification described in 
paragraph (e)(2)(iii) of this section;
    (iii) A person authorized by such certifying firm submits, in 
reliance on such criminal history background check, a certification by 
such certifying firm to the National Futures Association, that:
    (A) States that the conditions of paragraphs (e)(2)(i) and (ii) of 
this section have been satisfied; and
    (B) Is signed by a person authorized by such certifying firm to 
make such certification.
    (3) The certifying firm shall maintain, in accordance with Sec.  
1.31 of this chapter, records documenting that the criminal history 
background check performed pursuant to paragraph (e)(2)(i) of this 
section was completed and the results thereof.

    Issued in Washington, DC, on January 4, 2016, by the Commission.
Robert N. Sidman,
Deputy Secretary of the Commission.

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

Appendix to Alternative to Fingerprinting Requirement for Foreign 
Natural Persons--Commission Voting Summary

    On this matter, Chairman Massad and Commissioners Bowen and 
Giancarlo voted in the affirmative. No Commissioner voted in the 
negative.

[FR Doc. 2016-00045 Filed 1-11-16; 8:45 am]
BILLING CODE 6351-01-P