Federal Register / Vol. 76, No. 42 / Thursday, March 3, 2011 / Proposed Rules 11701 

1 5 U.S.C. 552. 

2The Commission’s regulations are found at 17 

CFR Ch. I (2010) and can be accessed through the 

Commission’s Web site, http://www.cftc.gov. 

3See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Pub. L. No. 111–203, 124 

Stat. 1376 (2010). The text of the Dodd-Frank Act 

may be accessed at http://www.cftc.gov/ucm/ 

groups/public/@swaps/documents/file/ 

hr4173_enrolledbill.pdf. 

4Pursuant to Section 701 of the Dodd-Frank Act, 

Title VII may be cited as the ‘‘Wall Street 

Transparency and Accountability Act of 2010.’’ 

5 7 U.S.C. 1 et seq. (2006). The CEA also can be 

accessed through the Commission’s web site. 

6See Section 721(a) of the Dodd-Frank Act, 

which re-organized (and in some cases amended) 

existing definitions in, and added new definitions 

to, Section 1a of the CEA. The CPO and CTA 

definitions, as amended, are to be codified 

respectively at CEA sections 1a(11) and 1a(12). 

7See, e.g., Regulations 4.21 and 4.31, which 

respectively require registered CPOs and CTAs to 

deliver a Disclosure Document to prospective pool 

participants and clients. See also Regulation 4.41, 

which proscribes fraudulent advertising by CPOs, 

CTAs, and their principals. 

8See, e.g., Regulations 4.24(l) and 4.34(k), which 

currently do not include ‘‘swap dealer’’ among the 

intermediaries for whom a CPO or CTA must 

provide information concerning material litigation 

in its Disclosure Document. See also Regulations 

4.24(g) and 4.34(g), which do not specify any risks 

unique to trading swaps in calling for disclosure of 

principal risk factors. 

9Part 4 applies to CPOs with respect to their 

activities affecting pool participants and to CTAs 

with respect to their activities affecting clients. 

Depending on the nature of its activities, a CPO or 

CTA may also come within the definition of the 

term ‘‘swap dealer’’ or ‘‘major swap participant’’ in 

new CEA Section 1a(49) or 1a(33), respectively 

(added to the CEA by Section 721(a) of the DoddFrank Act). As directed by the Dodd-Frank Act, the 

Commission has proposed new regulations that 

would establish business conduct standards for 

swap dealers and major swap participants. See 75 

FR 80638 (Dec. 22, 2010). These new regulations 

would apply to swap dealers and major swap 

participants with respect to the counterparties with 

whom they transact swap business, and would 

govern different activity than that to which the Part 

4 regulations apply. 

10See, e.g., Commodity Pool Operators and 

Commodity Trading Advisors: Amendments to 

Compliance Obligations, 76 FR 7976 (Feb. 11, 

2011); and Swap Data Recordkeeping and Reporting 

Requirements; Proposed Rule, 75 FR 76574 (Dec. 8, 

2010). 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 4 

RIN 3038–AD49 

Amendments to Commodity Pool 

Operator and Commodity Trading 

Advisor Regulations Resulting From 

the Dodd-Frank Act 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Proposed rules. 

SUMMARY: The Commodity Futures 

Trading Commission (Commission or 

CFTC) is proposing to amend its 

regulations affecting the operations and 

activities of commodity pool operators 

(CPOs) and commodity trading advisors 

(CTAs) (Proposal) in order to have those 

regulations reflect changes made to the 

Commodity Exchange Act (CEA) by the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank 

Act). 

DATES: Comments must be received on 

or before May 2, 2011. 

ADDRESSES: You may submit comments, 

identified by RIN 3038–AD49, by any of 

the following methods: 

• Agency Web Site, via its Comments 

Online process: http:// 

comments.cftc.gov. Follow the 

instructions for submitting comments 

through the Web site. 

• Mail: David A. Stawick, Secretary, 

Commodity Futures Trading 

Commission, 1155 21st Street, NW., 

Washington, DC 20581. 

• Hand delivery/Courier: Same as 

mail above. 

• Federal eRulemaking Portal: 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 (FOIA),1 a 

petition for confidential treatment of the 

exempt information may be submitted 

according to the procedures set forth in 

Commission Regulation 145.9.2

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: 

Barbara S. Gold, Associate Director, or 

Christopher W. Cummings, Special 

Counsel, Division of Clearing and 

Intermediary Oversight, 1155 21st 

Street, NW., Washington, DC 20581. 

Telephone number: 202–418–5450 and 

electronic mail: bgold@cftc.gov or 

ccummings@cftc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On July 21, 2010, President Obama 

signed the Dodd-Frank Act.3 Title VII of 

the Dodd-Frank Act 4 amended the 

CEA 5 to establish a comprehensive new 

regulatory framework for swaps and 

security-based swaps. The goal of this 

legislation was to reduce risk, increase 

transparency, and promote market 

integrity within the financial system by, 

among other things: (1) Providing for the 

registration and comprehensive 

regulation of SDs and MSPs; (2) 

imposing clearing and trade execution 

requirements on standardized derivative 

products; (3) creating robust 

recordkeeping and real-time reporting 

regimes; and (4) enhancing the 

Commission’s rulemaking and 

enforcement authorities with respect to, 

among others, all registered entities and 

intermediaries subject to the 

Commission’s oversight. Among the 

changes made by the Dodd-Frank Act to 

the CEA were to include within the CPO 

definition the operator of a collective 

investment vehicle that trades swaps, 

and to include within the CTA 

definition a person who provides advice 

concerning swaps.6

Part 4 of the Commission’s regulations 

sets forth a comprehensive regulatory 

scheme for the operations and activities 

of CPOs and CTAs. It includes 

disclosure, reporting and recordkeeping 

requirements for registered CPOs and 

CTAs, registration and compliance 

exemptions for CPOs and CTAs, and 

other provisions, including anti-fraud 

provisions, applicable to CPOs and 

CTAs regardless of registration status. 

Many of the Part 4 regulations generally 

apply to CPOs and CTAs and, thus, they 

will be applicable to CPOs and CTAs 

with respect to their swap activities.7 In 

other instances, however, the text of 

certain Part 4 regulations is specific to 

activities involving futures contracts, 

commodity options, and off-exchange 

retail foreign currency transactions, and 

it does not include, refer to or otherwise 

take account of swap activities.8 The 

Proposal is intended to clarify and 

ensure that the requirements governing 

the operations and activities of CPOs 

and CTAs continue to apply to these 

intermediaries in the context of their 

involvement with swap transactions.9

The Commission is proposing still 

other rulemakings in response to the 

Dodd-Frank Act that could affect the 

Part 4 regulations.10 The Commission 

intends to resolve any discrepancies 

that may arise between any of these 

other rulemakings and the Proposal in 


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11See, e.g., Regulations 4.10(f) and (g), which 

respectively define the terms ‘‘direct’’ and ‘‘trading 

program;’’ 4.12(b)(1)(i)(D), which provides an 

exemption from CPO registration where, among 

other things, the pool at issue ‘‘will trade * * * 

commodity interests in a manner solely incidental 

to its securities trading activities;’’ 4.22(a)(1), which 

requires itemization in a pool’s periodic Account 

Statement of certain information concerning 

commodity interest trading; 4.23 and 4.33, which 

respectively require CPOs and CTAs to make and 

keep certain books and records relating to 

commodity interest trading; and 4.24 and 4.34, 

which respectively require CPOs and CTAs to 

disclose specified information with respect to 

‘‘commodity interests.’’ 

12Section 721(a) of the Dodd-Frank Act added 

this new definition to Section 1a of the CEA. 

13See Proposed Regulation 45.2, 75 FR 76574. In 

this regard, the Commission notes that it intends to 

propose regulations concerning recordkeeping and 

reporting requirements for ‘‘pre-enactment swaps’’ 

and ‘‘transition swaps,’’ as those terms will be 

defined in that proposal. The Commission further 

intends to provide a cross-reference in Regulations 

4.23(b)(1) and 4.33(b)(1) to any such requirements 

it may adopt. 

14The Commission intends to address the 

circumstances in which non-bank swap dealers may 

be required or permitted to accept margin payments 

in uncleared swap transactions in a future proposed 

rulemaking. Accordingly, this proposed amendment 

to Regulation 4.30 should not be interpreted to 

impose or authorize any such margin requirements. 

15Subject to certain limited exceptions, the 

provisions of the Dodd-Frank Act become effective 

360 days after its enactment (Jul. 21, 2010). 

16 5 U.S.C. 601 et seq. 

17By its terms, the RFA does not apply to 

‘‘individuals.’’ See 48 FR 14933, n. 115 (Apr. 6, 

1983). 

the course of finalizing its rulemaking 

under the Dodd-Frank Act. 

II. The Proposal 

The Part 4 regulations employ the 

term ‘‘commodity interest’’ throughout.11

This term currently is defined in 

Regulation 1.3(yy) to mean: 

(1) Any contract for the purchase or sale of 

a commodity for future delivery; 

(2) Any contract, agreement or transaction 

subject to Commission regulation under 

section 4c or 19 of the Act; and 

(3) Any contract, agreement or transaction 

subject to Commission jurisdiction under 

section 2(c)(2) of the Act. 

To ensure that the Part 4 regulations 

adequately and accurately encompass 

swap transactions, the Proposal would 

adopt in new Regulation 4.10(a) a 

definition of the term ‘‘commodity 

interest’’ to be employed for the 

purposes of Part 4. That definition 

would include the text of existing 

Regulation 1.3(yy) along with reference 

to the term ‘‘swap’’ as defined in Section 

1a(47) of the CEA.12

At various regulations throughout Part 

4, the Proposal would insert ‘‘swap,’’ 

‘‘swap transaction’’ or a similar term. See 

the proposed amendments to 

Regulations 4.23(a)(1), 4.24(g), (h)(1), 

and (i)(2) for CPOs and Regulations 

4.34(g) and 4.34(i)(2) for CTAs. For 

example, regulation 4.23(a)(1) would be 

amended to include ‘‘swap type and 

counterparty’’ in the itemized daily 

record that a CPO must make and keep 

with respect to a pool’s commodity 

interest transactions. 

At other Part 4 regulations, the 

Proposal would include the term ‘‘swap 

dealer’’ among the persons for whom a 

CPO or CTA must provide information 

in its Disclosure Document and a CPO 

must provide information in a pool’s 

periodic Account Statement. See the 

proposed amendments to Regulations 

4.22(a)(3), 4.24(j)(1), (j)(3), (l)(1), and 

(l)(2) for CPOs and Regulations 

4.34(j)(1), (j)(3), (k)(1) and (k)(2) for 

CTAs. For example, Regulations 4.24(j) 

and 4.34(j) would be amended to 

include swap dealers in the group of 

persons as to which conflicts of interest 

must be disclosed by CPOs and CTAs. 

Also, the Proposal would include a 

registered swap dealer among the 

persons listed in Regulation 4.7(a)(2) 

that do not have to satisfy a portfolio 

requirement in order to be a qualified 

eligible person (QEP), such that a CPO 

or CTA that has claimed relief under 

Regulation 4.7 may accept the swap 

dealer as a pool participant or advisory 

client without regard to the size of its 

investment portfolio. This would be 

consistent with the current treatment of 

other financial intermediaries registered 

with the Commission (such as futures 

commission merchants and retail 

foreign exchange dealers) as QEPs under 

Regulation 4.7(a)(2). 

Yet other proposed amendments 

would require a CPO or CTA to make 

and keep certain books and records 

generated by the swap transactions in 

which they engage on behalf of not only 

their pool participants and clients, but 

also themselves. See the proposed 

amendments to Regulations 4.23(a)(7) 

and (b)(1) for CPOs and Regulations 

4.33(a)(6) and (b)(1) for CTAs. The 

proposed amendments to Regulations 

4.23(a)(7) and 4.33(a)(6) would require 

CPOs and CTAs to retain each 

acknowledgment of a swap transaction 

received from a swap dealer. The 

proposed amendments to Regulations 

4.23(b)(1) and 4.33(b)(1) would make 

clear that if a CPO or CTA was a 

counterparty to a swap transaction, then 

it would be subject to the swap data 

recordkeeping and reporting 

requirements of Part 45.13

The Proposal would also amend 

Regulation 4.30. Currently, this 

regulation provides: 

No commodity trading advisor may solicit, 

accept or receive from an existing or 

prospective client funds, securities or other 

property in the trading advisor’s name (or 

extend credit in lieu thereof) to purchase, 

margin, guarantee or secure any commodity 

interest of the client; Provided, however, That 

this section shall not apply to a futures 

commission merchant that is registered as 

such under the Act or to a leverage 

transaction merchant that is registered as a 

commodity trading advisor under the Act or 

to a retail foreign exchange dealer that is 

registered as such under the Act. 

Because swap dealers will generally fall 

within the statutory definition of CTA, 

and because a swap dealer engaging in 

uncleared swap transactions may be 

accepting funds or other property from 

its counterparties as variation and initial 

margin payments,14 the Commission is 

proposing to amend Regulation 4.30 by 

excluding a registered swap dealer from 

the regulation’s prohibition in 

connection with a swap that is not 

cleared through a derivatives clearing 

organization. This action would result 

in four distinct categories of 

intermediaries being excluded from the 

operative requirements of Regulation 

4.30. Accordingly, the Commission also 

is proposing to amend the regulation by 

reorganizing its text where applicable to 

these exclusions. 

Finally, the Proposal would delete 

Regulation 4.32. This regulation deals 

with trading by a registered CTA on or 

subject to the rules of a derivatives 

transaction execution facility (DTEF) for 

non-institutional numbers. Section 

734(a) of the Dodd-Frank Act repeals 

Section 5a of the CEA, which is the 

section establishing and providing for 

the regulation of DTEFs. Accordingly, 

because subsequent to the effective date 

of the Dodd-Frank Act 15 Regulation 

4.32 will no longer have a statutory 

basis or purpose, the Proposal would 

remove and reserve Regulation 4.32. 

The Commission requests comment 

on the foregoing. In addition, the 

Commission seeks comment on any 

other amendments it should make to the 

Part 4 regulations to clarify and ensure 

that that the requirements governing the 

operations and activities of CPOs and 

CTAs continue to apply to these 

intermediaries in the context of their 

involvement with swap transactions. 

III. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) 16 requires that agencies, in 

proposing rules, consider the impact of 

those rules on small businesses.17 The 

Commission previously has established 

certain definitions of ‘‘small entities’’ to 

be used by the Commission in 

evaluating the impact of its rules on 

such entities in accordance with the 


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18See 47 FR 18618 (Apr. 30, 1982). 

19 Id. at 18619–20. 

20While the Proposal would amend Regulation 

4.30, which concerns prohibited activities by a CTA 

regardless of registration status, that amendment 

would extend to persons registered as a swap dealer 

the existing exclusion from the regulation’s scope. 

21 44 U.S.C. 3501 et seq. 

22 7 U.S.C. 19(a). 

RFA.18 With respect to CPOs, the 

Commission previously has determined 

that a CPO is a small entity for the 

purpose of the RFA if it meets the 

criteria for an exemption from 

registration under Regulation 

4.13(a)(2).19 Thus, because the Proposal 

applies to registered CPOs, the RFA is 

not applicable to it. As for CTAs, the 

Commission previously has stated that 

it would evaluate within the context of 

a particular rule proposal whether all or 

some affected CTAs would be 

considered to be small entities and, if 

so, the economic impact on them of the 

particular rule. In this regard, the 

Commission notes that the Proposal 

applies to registered CTAs. Moreover, 

the Proposal would not have a 

significant economic impact on any 

CPO or CTA who would be affected 

thereby, because it would merely bring 

within the current Part 4 regulatory 

structure of disclosure, reporting and 

recordkeeping information with respect 

to swap activities. It would not impose 

any additional operative requirements 

or otherwise direct or confine the 

activities of CPOs and CTAs.20

Accordingly, the Chairman, on behalf of 

the Commission, hereby certifies 

pursuant to 5 U.S.C. 605(b) that the 

Proposal would not have a significant 

economic impact on a substantial 

number of small entities. However, the 

Commission invites the public to 

comment on this certification. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA) 21 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 Proposal would not, if adopted, 

require any new collection of 

information from any entity that would 

be subject to the affected regulations. 

Accordingly, for purposes of the PRA, 

the Chairman, on behalf of the 

Commission, certifies that the proposed 

amendments to Part 4, if adopted, 

would not impose any new reporting or 

recordkeeping requirements. 

C. Cost-Benefit Analysis 

Section 15(a) of the CEA 22 requires 

the Commission to consider the costs 

and benefits of its actions before issuing 

a rulemaking under the CEA. By its 

terms, Section 15(a) does not require the 

Commission to quantify the costs and 

benefits of a rule or to determine 

whether the benefits of the rulemaking 

outweigh its costs; rather, it simply 

requires that the Commission ‘‘consider’’ 

the costs and benefits of its actions. 

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 may in its discretion give 

greater weight to any one of the five 

enumerated areas and could in its 

discretion determine that, 

notwithstanding its costs, a particular 

rule is necessary or appropriate to 

protect the public interest or to 

effectuate any of the provisions or 

accomplish any of the purposes of the 

CEA. 

Summary of Proposed Amendments. 

As is explained above, the proposed 

amendments to Part 4 would ensure that 

the Commission’s regulations governing 

the operations and activities of CPOs 

and CTAs reflect changes made to the 

CEA by the Dodd-Frank Act by, e.g., 

including swap dealers among the 

intermediaries for whom CPOs and 

CTAs must disclose information to 

prospective pool participants and 

clients, and swap transaction 

confirmations among the books and 

records that CPOs and CTAs must make 

and keep. 

Costs. With respect to costs, the 

Commission has determined that the 

costs of the Proposal would not be 

significant. This is because the Proposal 

would simply conform the language of 

the existing Part 4 regulatory scheme to 

take into account the changes made to 

the Commission’s overall regulatory 

scheme as a result of the Dodd-Frank 

Act. There will be additional disclosure 

and recordkeeping requirements on 

CPOs and CTAs as a result of the 

Proposal. The information required for 

compliance should be readily available, 

with minimal administrative burdens, to 

CPOs and CTAs. 

Benefits. With respect to benefits, the 

Commission has determined that the 

benefits of the Proposal would be 

significant. This is because it would 

enhance the customer protections 

currently provided under Part 4 by 

increasing the transparency of swap 

activities by CPOs and CTAs to their 

pool participants and clients. This will 

be accomplished by including 

information on swap activities in the 

disclosure, reporting and recordkeeping 

scheme already existing under Part 4. 

Public Comment. The Commission 

invites public comment on its costbenefit 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 4 

Advertising, Brokers, Commodity 

futures, Commodity pool operators, 

Commodity trading advisors, Customer 

protection, Reporting and recordkeeping 

requirements, Swaps. 

For the reasons presented above, the 

Commission proposes to amend Chapter 

I of Title 17 of the Code of Federal 

Regulations as follows: 

PART 4—COMMODITY POOL 

OPERATORS AND COMMODITY 

TRADING ADVISORS 

1. The authority citation for part 4 is 

amended to read as follows: 

Authority: 7 U.S.C. 1a, 2, 6b, 6c, 6l, 6m, 6n, 

6o, 12a and 23, as amended by Title VII of 

the Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Pub. L. 111–203, 

124 Stat. 1376 (Jul. 21, 2010). 

2. Section 4.7 is amended by adding 

paragraph (a)(2)(i)(C) to read as follows: 

§ 4.7 Exemption from certain part 4 

requirements for commodity pool operators 

with respect to offerings to qualified eligible 

persons and for commodity trading 

advisors with respect to advising qualified 

eligible persons. 

* * * * * 

(a) * * * 

(2) * * * 

(i) * * * 

(C) A swap dealer registered pursuant 

to section 4s(a)(1) of the Act, or a 

principal thereof; 

* * * * * 

3. Section 4.10 is amended by adding 

paragraph (a) to read as follows: 

§ 4.10 Definitions. 

* * * 

(a) Commodity interest means: 

(1) Any contract for the purchase or 

sale of a commodity for future delivery; 

(2) Any contract, agreement or 

transaction subject to Commission 

regulation under section 4c or 19 of the 

Act; 

(3) Any contract, agreement or 

transaction subject to Commission 

jurisdiction under section 2(c)(2) of the 

Act; and 


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(4) A swap as defined under section 

1a(47) of the Act and any Commission 

regulations implemented thereunder. 

* * * * * 

4. Section 4.22 is amended by revising 

paragraph (a)(3) to read as follows: 

§ 4.22 Reporting to pool participants. 

(a) * * * 

(3) The Account Statement must also 

disclose any material business dealings 

between the pool, the pool’s operator, 

commodity trading advisor, futures 

commission merchant, retail foreign 

exchange dealer, swap dealer, or the 

principals thereof that previously have 

not been disclosed in the pool’s 

Disclosure Document or any 

amendment thereto, other Account 

Statements or Annual Reports. 

* * * * * 

5. Section 4.23 is amended by: 

a. Revising paragraphs (a)(1) and 

(a)(7); and 

b. Revising paragraph (b)(1), to read as 

follows: 

§ 4.23 Recordkeeping. 

* * * * * 

(a) * * * 

(1) An itemized daily record of each 

commodity interest transaction of the 

pool, showing the transaction date, 

quantity, commodity interest, and, as 

applicable, price or premium, delivery 

month or expiration date, whether a put 

or a call, strike price, underlying 

contract for future delivery or 

underlying physical, swap type and 

counterparty, the futures commission 

merchant and/or retail foreign exchange 

dealer carrying the account and the 

introducing broker, if any, whether the 

commodity interest was purchased, sold 

(including, in the case of a retail forex 

transaction, offset), exercised, expired 

(including, in the case of a retail forex 

transaction, whether it was rolled 

forward), and the gain or loss realized. 

* * * * * 

(7) Copies of each confirmation or 

acknowledgment of a commodity 

interest transaction of the pool, and 

each purchase and sale statement and 

each monthly statement for the pool 

received from a futures commission 

merchant or retail foreign exchange 

dealer or swap dealer. 

* * * * * 

(b) * * * 

(1) An itemized daily record of each 

commodity interest transaction of the 

commodity pool operator and each 

principal thereof, showing the 

transaction date, quantity, commodity 

interest, and, as applicable, price or 

premium, delivery month or expiration 

date, whether a put or a call, strike 

price, underlying contract for future 

delivery or underlying physical, the 

futures commission merchant or retail 

foreign exchange dealer carrying the 

account and the introducing broker, if 

any, whether the commodity interest 

was purchased, sold, exercised, or 

expired, and the gain or loss realized; 

Provided, however, that if the pool 

operator is a counterparty to a swap, it 

must comply with the swap data 

recordkeeping and reporting 

requirements of part 45 of this chapter. 

* * * * * 

6. Section 4.24 is amended by: 

a. Revising paragraph (g); 

b. Revising paragraph (h)(1)(i); 

c. Revising paragraph (i)(2)(xii); 

d. Revising paragraphs (j)(1)(vi) and 

(j)(3); and 

e. Revising paragraphs (l)(1)(iii), (l)(2) 

introductory text and (l)(2)(i), to read as 

follows: 

§ 4.24 General disclosures required. 

* * * * * 

(g) Principal risk factors. A discussion 

of the principal risk factors of 

participation in the offered pool. This 

discussion must include, without 

limitation, risks relating to volatility, 

leverage, liquidity, counterparty 

creditworthiness, as applicable to the 

types of trading programs to be 

followed, trading structures to be 

employed and investment activity 

(including retail forex and swap 

transactions) expected to be engaged in 

by the offered pool. 

(h) * * * 

(1) * * * 

(i) The approximate percentage of the 

pool’s assets that will be used to trade 

commodity interests, securities and 

other types of interests, categorized by 

type of commodity or market sector, 

type of swap, type of security (debt, 

equity, preferred equity), whether 

traded or listed on a regulated exchange 

market, maturity ranges and investment 

rating, as applicable; 

* * * * * 

(i) * * * 

(2) * * * 

(xii) Any costs or fees included in the 

spread between bid and asked prices for 

retail forex or, if known, swap 

transactions; and 

* * * * * 

(j) * * * 

(1) * * * 

(vi) Any other person providing 

services to the pool, soliciting 

participants for the pool, or acting as a 

counterparty to the pool’s retail forex 

transactions, acting as a swap dealer 

with respect to the pool, or acting as a 

counterparty to the pool’s swap 

transactions. 

* * * * * 

(3) Included in the description of such 

conflicts must be any arrangement 

whereby a person may benefit, directly 

or indirectly, from the maintenance of 

the pool’s account with the futures 

commission merchant and/or retail 

foreign exchange dealer and/or from the 

maintenance of the pool’s positions 

with a swap dealer, or from the 

introduction of the pool’s account to a 

futures commission merchant and/or 

retail foreign exchange dealer and/or 

swap dealer by an introducing broker 

(such as payment for order flow or soft 

dollar arrangements) or from an 

investment of pool assets in investee 

pools or funds or other investments. 

* * * * * 

(l) * * * 

(1) * * * 

(iii) The pool’s futures commission 

merchants and/or retail foreign 

exchange dealers and/or swap dealers 

and its introducing brokers, if any. 

(2) With respect to a futures 

commission merchant and/or retail 

foreign exchange dealer and/or swap 

dealer or an introducing broker, an 

action will be considered material if: 

(i) The action would be required to be 

disclosed in the notes to the futures 

commission merchant’s, retail foreign 

exchange dealer’s, swap dealer’s or 

introducing broker’s financial 

statements prepared pursuant to 

generally accepted accounting 

principles; 

* * * * * 

7. Section 4.30 is revised to read as 

follows: 

§ 4.30 Prohibited activities. 

(a) Except as provided in paragraph 

(b) of this section, no commodity 

trading advisor may solicit, accept or 

receive from an existing or prospective 

client funds, securities or other property 

in the trading advisor’s name (or extend 

credit in lieu thereof) to purchase, 

margin, guarantee or secure any 

commodity interest of the client. 

(b) The prohibition in paragraph (a) of 

this section shall not apply to: 

(1) A futures commission merchant 

that is registered as such under the Act; 

(2) A leverage transaction merchant 

that is registered as a commodity trading 

advisor under the Act; 

(3) A retail foreign exchange dealer 

that is registered as such under the Act; 

or 

(4) A swap dealer that is registered as 

such under the Act, with respect to 

funds, securities or other property 

accepted to purchase, margin, guarantee 


srobinson on DSKHWCL6B1PROD with PROPOSALS
Federal Register / Vol. 76, No. 42 / Thursday, March 3, 2011 / Proposed Rules 11705 

or secure any swap that is not cleared 

through a derivatives clearing 

organization. 

§ 4.32 [Removed and Reserved] 

7. Section 4.32 is removed and 

reserved. 

8. Section 4.33 is amended by 

a. Revising paragraph (a)(6); and 

b. Revising paragraph (b)(1), to read as 

follows: 

§ 4.33 Recordkeeping. 

* * * * * 

(a) * * * 

(6) Copies of each confirmation or 

acknowledgment of a commodity 

interest transaction, and each purchase 

and sale statement and each monthly 

statement received from a futures 

commission merchant or a retail foreign 

exchange dealer or a swap dealer. 

* * * * * 

(b) * * * 

(1) An itemized daily record of each 

commodity interest transaction of the 

commodity trading advisor, showing the 

transaction date, quantity, commodity 

interest, and, as applicable, price or 

premium, delivery month or expiration 

date, whether a put or a call, strike 

price, underlying contract for future 

delivery or underlying physical, the 

futures commission merchant and/or 

retail foreign exchange dealer carrying 

the account and the introducing broker, 

if any, whether the commodity interest 

was purchased, sold (including, in the 

case of a retail forex transaction, offset), 

exercised, expired (including, in the 

case of a retail forex transaction, 

whether it was rolled forward), and the 

gain or loss realized; Provided, however, 

that if the trading advisor is a 

counterparty to a swap, it must comply 

with the swap data recordkeeping and 

reporting requirements of part 45 of this 

chapter. 

* * * * * 

9. Section 4.34 is amended by 

a. Revising paragraph (g); 

b. Revising paragraph (i)(2); 

c. Revising paragraph (j)(3); and 

d. Revising paragraphs (k)(1)(iii), 

(k)(2) introductory text and (k)(2)(i), to 

read as follows: 

§ 4.34 General disclosures required. 

* * * * * 

(g) Principal risk factors. A discussion 

of the principal risk factors of this 

trading program. This discussion must 

include, without limitation, risks due to 

volatility, leverage, liquidity, and 

counterparty creditworthiness, as 

applicable to the trading program and 

the types of transactions and investment 

activity expected to be engaged in 

pursuant to such program (including 

retail forex and swap transactions, if 

any). 

* * * * * 

(i) * * * 

(2) Where any fee is determined by 

reference to a base amount including, 

but not limited to, ‘‘net assets,’’ ‘‘gross 

profits,’’ ‘‘net profits,’’ ‘‘net gains,’’ ‘‘pips’’ 

or ‘‘bid-asked spread,’’ the trading 

advisor must explain how such base 

amount will be calculated. Where any 

fee is based on the difference between 

bid and asked prices on retail forex or 

swap transactions, the trading advisor 

must explain how such fee will be 

calculated; 

* * * * * 

(j) * * * 

(3) Included in the description of any 

such conflict must be any arrangement 

whereby the trading advisor or any 

principal thereof may benefit, directly 

or indirectly, from the maintenance of 

the client’s commodity interest account 

with a futures commission merchant 

and/or retail foreign exchange dealer, 

and/or from the maintenance of the 

client’s positions with a swap dealer or 

from the introduction of such account 

through an introducing broker (such as 

payment for order flow or soft dollar 

arrangements). 

(k) * * * 

(1) * * * 

(iii) Any introducing broker through 

which the client will be required to 

introduce its account to the futures 

commission merchant and/or retail 

foreign exchange dealer and/or swap 

dealer. 

(2) With respect to a futures 

commission merchant, retail foreign 

exchange dealer, swap dealer or 

introducing broker, an action will be 

considered material if: 

(i) The action would be required to be 

disclosed in the notes to the futures 

commission merchant’s, retail foreign 

exchange dealer’s, swap dealer’s or 

introducing broker’s financial 

statements prepared pursuant to 

generally accepted accounting 

principles; 

* * * * * 

Issued in Washington, DC, on February 24, 

2011, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Appendices to Amendments to 

Commodity Pool Operator and 

Commodity Trading Advisor 

Regulations Resulting from the DoddFrank Act—Commission Voting 

Summary and Statements of 

Commissioners 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Gensler and 

Commissioners Dunn, Sommers, Chilton and 

O’Malia voted in the affirmative; no 

Commissioner voted in the negative. 

Appendix 2—Statement of Chairman 

Gary Gensler 

I support the proposed rule that will 

amend certain provisions of Part 4 of the 

Commission’s regulations regarding the 

operations and activities of commodity pool 

operators (CPOs) and commodity trading 

advisors (CTAs). The proposed amendments 

would ensure that CFTC regulations with 

regard to CPOs and CTAs reflect changes 

made to the Commodity Exchange Act by the 

Dodd-Frank Act. Consistent with the DoddFrank Act revisions to the definitions of 

CPOs and CTAs to include pools involved in 

swaps and advising on swaps, the proposed 

amendments will enhance current customer 

protections by increasing the transparency of 

swap activities by CPOs and CTAs to their 

pool participants and clients. The proposed 

rule would require that this information be 

included in the disclosure, reporting and 

recordkeeping scheme that currently exists 

for CPOs and CTAs under Part 4. 

[FR Doc. 2011–4657 Filed 3–2–11; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF JUSTICE 

28 CFR Part 26 

[Docket No. OJP (DOJ) 1540; AG Order No. 

3255–2011] 

RIN 1121–AA77 

Office of the Attorney General; 

Certification Process for State Capital 

Counsel Systems 

AGENCY: Department of Justice. 

ACTION: Proposed rule. 

SUMMARY: Section 2265 of title 28, 

United States Code, instructs the 

Attorney General to promulgate 

regulations to implement certification 

procedures for States seeking to qualify 

for the expedited Federal habeas corpus 

review procedures in capital cases 

under chapter 154 of title 28. The 

procedural benefits of chapter 154 are 

available to States that establish 

mechanisms for providing counsel to 

indigent capital defendants in State 

postconviction proceedings that satisfy 

certain statutory requirements. This 

proposed rule sets forth the required 

regulations for the certification 

procedure. 

DATES: Written comments must be 

postmarked and electronic comments 

must be submitted on or before June 1, 

2011. Comments received by mail will 

be considered timely if they are 


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