12888 Federal Register / Vol. 76, No. 46 / Wednesday, March 9, 2011 / Proposed Rules 

1Commission regulations referred to herein are 

found at 17 CFR Ch. 1 (2010), as amended by 75 

FR 55409, Sep. 23, 2010, and may be accessed on 

the Commission’s Web site. 

2See Dodd-Frank Act, Public Law 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. 

3 7 U.S.C. 1 et seq. 

www.Regulations.gov, Docket No. ITA– 

2010–0012, unless the commenter does 

not have access to the internet. 

Commenters that do not have access to 

the internet may submit their comments 

by mail or hand delivery/courier. All 

comments should be addressed to 

Andrew McGilvray, Executive 

Secretary, Foreign-Trade Zones Board, 

International Trade Administration, 

U.S. Department of Commerce, 1401 

Constitution Avenue, NW., Room 2111, 

Washington, DC 20230. 

All comments received are a part of 

the public record and will generally be 

posted to http://www.Regulations.gov 

without change. All Personal Identifying 

Information (e.g., name, address) 

voluntarily submitted by the commenter 

may be publicly accessible. Do not 

submit Confidential Business 

Information or otherwise sensitive or 

protected information, as such 

information may become part of the 

public record. 

The FTZ Board will accept 

anonymous comments (enter N/A in 

required fields if you wish to remain 

anonymous). Attachments to electronic 

comments will be accepted in Microsoft 

Word, Excel, WordPerfect, or Adobe 

portable document file (pdf) formats 

only. All comments to Regulations.gov 

must be submitted into Docket Number 

ITA–2010–0012, and comments should 

refer to RIN 0625–AA81. The public 

record concerning these regulations will 

be maintained in the Office of the 

Executive Secretary, Foreign-Trade 

Zones Board, International Trade 

Administration, U.S. Department of 

Commerce, 1401 Constitution Avenue, 

NW., Room 2111, Washington, DC 

20230. Written public comments will be 

available at the facility in accordance 

with 15 CFR part 4 and may also be 

available electronically over the internet 

via http://www.trade.gov/ftz or http:// 

www.Regulations.gov. Questions may be 

directed to the Foreign-Trade Zones 

Board staff by calling (202) 482–2862 or 

via e-mail to ftz@trade.gov. 

FOR FURTHER INFORMATION CONTACT: 

Andrew McGilvray, Executive 

Secretary, Foreign Trade Zones Board, 

International Trade Administration, 

U.S. Department of Commerce, 1401 

Constitution Avenue, NW., Room 2111, 

Washington, DC 20230, (202) 482–2862 

or Matthew Walden, Senior Attorney, 

Office of Chief Counsel for Import 

Administration, U.S. Department of 

Commerce, 1401 Constitution Avenue, 

NW., Room 4610, Washington, DC 

20230, (202) 482–2963. 

Dated: March 3, 2011. 

Ronald K. Lorentzen, 

Deputy Assistant Secretary for Import 

Administration, Chairman, Committee of 

Alternates, Foreign-Trade Zones Board. 

[FR Doc. 2011–5387 Filed 3–8–11; 8:45 am] 

BILLING CODE P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 3 

RIN 3038–AD50 

Registration of Intermediaries 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Proposed rules. 

SUMMARY: The Commodity Futures 

Trading Commission (Commission) 

hereby proposes regulations to further 

implement new statutory provisions 

enacted by Title VII of the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act (Dodd-Frank Act) 

regarding registration of intermediaries. 

Specifically, the Commission proposes 

certain conforming amendments to the 

Commission’s regulations regarding the 

registration of intermediaries, consistent 

with other Commission rulemakings 

issued pursuant to the Dodd-Frank Act; 

and other modernizing and technical 

amendments to the regulations. 

DATES: Comments must be received on 

or before May 9, 2011. 

ADDRESSES: You may submit comments, 

identified by RIN 3038–AD50 and Part 

3, by any of the following methods: 

• Agency Web site, http:// 

www.cftc.gov, via its Comments Online 

process at http://comments.cftc.gov. 

Follow the instructions for submitting 

comments through the Web site. 

• Mail: David A. Stawick, Secretary of 

the Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street, NW., 

Washington, DC 20581. 

• Hand Delivery/Courier: same as 

mail above. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Please submit your comments using 

only one method. 

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 you believe is exempt from 

disclosure under the Freedom of 

Information Act, a petition for 

confidential treatment of the exempt 

information may be submitted according 

to the procedures established in 

§ 145.9.1

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: 

Andrew Chapin, Associate Director, 

Division of Clearing and Intermediary 

Oversight, (202) 418–5465, 

achapin@cftc.gov; or Claire Noakes, 

Attorney Advisor, Division of Clearing 

and Intermediary Oversight, (202) 418– 

5444, cnoakes@cftc.gov; Commodity 

Futures Trading Commission, Three 

Lafayette Centre, 1155 21st Street, NW., 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

On July 21, 2010, President Obama 

signed the Dodd-Frank Act.2 Title VII of 

the Dodd-Frank Act amended the 

Commodity Exchange Act (CEA) 3 to 

establish a comprehensive new 

regulatory framework 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 swap 

dealers (SDs) and major swap 

participants (MSPs); (2) imposing 

clearing and trade execution 

requirements on standardized derivative 

products; (3) creating rigorous 

recordkeeping and real-time reporting 

regimes; and (4) enhancing the 

Commission’s rulemaking and 

enforcement authorities with respect to 

all registered entities and intermediaries 

subject to the Commission’s oversight. 

The regulations in this proposal concern 

conforming, modernizing and technical 


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Federal Register / Vol. 76, No. 46 / Wednesday, March 9, 2011 / Proposed Rules 12889 

4Section 1(a)(50) of the CEA generally provides 

that a SEF is a trading system or platform in which 

multiple participants have the ability to execute or 

trade swaps by accepting bids and offers made by 

multiple participants in the facility or system. 

5 75 FR 70881, Nov. 19, 2010; 75 FR 71379, Nov. 

23, 2010. 

6See 75 FR at 71380, Nov. 23, 2010. 

7See generally 12 CFR 211. 

8 In the Commission’s initial proposal of this 

exemption, the Commission was concerned with 

whether the bank was ‘‘otherwise regulated,’’ but 

did not attempt to determine whether any foreign 

bank qualified as such. See 56 FR 37026, 37031, 

Aug. 2, 1991. 9See 75 FR 80173, Dec. 21, 2010. 

amendments to part 3 governing the 

registration of intermediaries. 

II. Proposed Regulations 

The Commission’s existing 

registration process for futures, 

commodity options and retail foreign 

exchange intermediaries, their 

associated persons (APs), and floor 

traders and floor brokers is set forth in 

part 3. Currently, part 3 does not 

address SDs and MSPs, nor does it 

reference a swap execution facility 

(SEF).4 The Commission recently 

published two other notices of proposed 

rulemaking that would apply certain 

provisions of part 3 to SDs and MSPs.5

This proposal would amend further part 

3 to conform the regulations regarding 

registration by incorporating references 

to SDs, MSPs and SEFs where 

appropriate. The Commission expects to 

harmonize any distinctions between this 

proposal and the other rulemakings in 

the order that they become final. 

Therefore, this proposal does not 

contain the changes to part 3 proposed 

elsewhere; it is intended to work in 

conjunction with these other proposed 

rulemakings. 

A. Conforming Amendments 

Some of the proposed amendments 

involve substantive changes to existing 

regulations because of the particular 

attributes or characteristics of SDs, 

MSPs and SEFs. Other proposed 

amendments to part 3 consist entirely of 

adding references, where appropriate, to 

SDs, MSPs and SEFs in existing 

regulations, based on the fact that the 

Commission has not decided to issue 

regulations that impose a registration 

requirement on floor brokers and floor 

traders that solely engage in swaps 

activity. As a result, SEFs were not 

added alongside the term designated 

contract market if the provision was 

only addressing registration activities of 

floor brokers and floor traders. SDs and 

MSPs were not added if the provision 

was only addressing registration 

activities of APs, because at this time 

the Commission has not decided to 

issue regulations requiring registration 

of APs of SDs and MSPs.6

Specific section-by-section proposed 

revisions follow. 

1. Section 3.1—Definitions 

Current § 3.1(a) sets forth the 

definition of a principal, and § 3.1(a)(3) 

carves out from the definition of 

principal certain persons that have 

made capital contributions in the form 

of subordinated debt to a registrant, 

including unaffiliated banks operating 

in the U.S. and U.S. branches of foreign 

banks. The Commission is proposing to 

clarify the carve-out by referencing 

terms defined elsewhere in federal 

regulations. More specifically, the 

proposal would tie the carve-out to the 

definitions of ‘‘foreign bank’’ and ‘‘office 

of a foreign bank’’ currently used by the 

Board of Governors of the Federal 

Reserve System under regulation K7 for 

foreign banking organizations. 

Currently, any foreign bank that had 

made capital contributions in the form 

of subordinated debt would be included 

within the definition of principal.8 In 

response to the likelihood that foreigndomiciled persons with capital 

contributions from foreign banks might 

register as SDs, the Commission is 

proposing to expand the carve-out. The 

proposed expansion would cover any 

foreign bank itself that currently 

operates an office licensed in the U.S. In 

so doing, the Commission would be 

relying on the approval process of the 

office by the Board of Governors of the 

Federal Reserve System as a proxy for 

discerning whether the foreign bank 

itself is otherwise regulated. The 

Commission specifically seeks 

comments on whether this provision is 

warranted to ensure uniform listing of 

principals by domestic and foreigndomiciled registrants, and whether the 

expansion would ensure that the list of 

principals remains a meaningful 

reflection of the persons who actually 

exercise control over the registrant’s 

regulated activities. 

2. Section 3.10—Registration of Futures 

Commission Merchants, Retail Foreign 

Exchange Dealers, Introducing Brokers, 

Commodity Trading Advisors, 

Commodity Pool Operators and 

Leverage Transaction Merchants. 

Section 3.12—Registration of Associated 

Persons of Futures Commission 

Merchants, Retail Foreign Exchange 

Dealers, Introducing Brokers, 

Commodity Trading Advisors, 

Commodity Pool Operators and 

Leverage Transaction Merchants 

Current § 3.10(c) generally sets forth 

exemptions from registration for certain 

persons. The Commission is proposing 

to add an exemption from registration in 

new paragraph (c)(5) to clarify that an 

individual employed by either an SD or 

a MSP and acting as its AP is not 

required separately to register as an SD 

or MSP, respectively, solely arising out 

of their activities as an AP. The 

Commission specifically seeks comment 

as to whether this exemption is 

necessary to clarify the registration 

responsibilities of employees, in light of 

the current absence of a registration 

requirement as an AP of an SD or a 

MSP, and in light of the proposed 

definition requiring persons who engage 

in certain activities to register as an SD 

or MSP.9

The Commission also is proposing to 

amend § 3.12(h)(1)(i) to provide that a 

person is not required to register as an 

AP in any capacity if he or she is 

registered in one of the other 

enumerated categories, including an SD 

or MSP. The Commission specifically 

seeks comment as to whether this 

exemption is necessary, in light of the 

improbability that an individual, rather 

than an entity, would register as an SD 

or MSP. 

Section 3.10(c)(2) and (3) also 

currently provide exemptions from 

registration as a futures commission 

merchant for foreign brokers and other 

foreign intermediaries conducting 

activities in commodity interest 

transactions on designated contract 

markets solely on behalf of customers 

located outside the U.S. The 

Commission is proposing to expand the 

exemption to commodity interest 

transactions made on or subject to the 

rules of an SEF. The Commission is 

proposing this expansion to create 

uniformity in treatment of commodity 

interest transactions that do not involve 

a U.S. customer, regardless of whether 

the transaction is made on a designated 

contract market or an SEF. Additionally, 

the Commission seeks comment as to 

whether it should expand the existing 


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12890 Federal Register / Vol. 76, No. 46 / Wednesday, March 9, 2011 / Proposed Rules 

10 In 1979, § 1.15 stated, ‘‘a new registration shall 

be required in the event of a change: (a) In the name 

of the registrant; (b) In the form of organization of 

the registrant * * *.’’ 

11See, e.g., 57 FR 23136, 23142, Jun. 2, 1992, 

requiring written certifications that control remains 

the same after a reorganization in order to avoid reregistration, or requiring a corporate resolution 

prohibiting a new director from exercising control 

until NFA could complete its background check in 

order to avoid re-registration. 

exemption from registration to foreign 

brokers and other foreign intermediaries 

that execute a bilateral swap transaction 

and voluntarily clear it on a derivatives 

clearing organization on an omnibus 

basis. Further, the Commission seeks 

comment as to whether such an 

exemption should distinguish between 

bilateral swap transactions that occur 

within the U.S., or those that occur 

abroad. 

3. Derivatives Transaction Execution 

Facilities 

The Dodd-Frank Act abolished 

derivatives transaction execution 

facilities as a market category. 

Additionally, no derivatives transaction 

execution facility has ever registered 

with the Commission. Therefore, that 

term is proposed to be deleted from 

§§ 3.2(c), 3.2(c)(2), 3.10(a)(3)(i)(A), 

3.10(c)(2)(i), 3.10(c)(3)(i), 3.10(c)(4)(ii) 

and (iv), 3.11(a)(2) and (3), 3.11(b), 

3.31(d), 3.40(a)(2)(iv), 3.42(a)(6), and 

3.46(a)(8). 

B. Modernization and Technical 

Amendments 

The Commission proposes to make 

certain modernization and technical 

amendments to part 3. These are 

discussed below. 

1. Section 3.1—Definitions 

Section 3.1(a)(2) defines a principal to 

include persons who exceed a threshold 

for equity ownership. As a technical 

matter, the Commission is proposing to 

harmonize the references to outstanding 

classes of securities in § 3.1(a)(2)(i) and 

(ii) to refer to ‘‘outstanding shares of any 

class of equity securities, other than 

non-voting securities’’ throughout. This 

term should address any existing 

ambiguity related to calculations 

involving authorized but unissued 

securities, or debt securities. Also, the 

Commission is proposing to move the 

concept of indirect owners found in the 

definition of beneficial ownership in 

§ 3.1(d) to § 3.1(a)(4) to serve as a 

backstop to the requirement to list 

indirect owners in § 3.1(a)(2). 

2. Section 3.31—Deficiencies, 

Inaccuracies, and Changes To Be 

Reported. Section 3.33—Withdrawal 

from Registration 

Current § 3.31 sets forth procedural 

requirements for a registrant to update 

and/or correct information previously 

provided to the Commission and the 

National Futures Association (NFA). 

Among other goals, the purpose of the 

registration process is to ensure that 

principals are subject to proper fitness 

checks prior to the registrant engaging 

in regulated activities. Historically, the 

Commission required re-registration 

upon a change in a registrant’s name, a 

change in its form of organization,10 or 

a change in its control, with limited 

exemptions.11 In practice, however, reregistering creates a new NFA 

identification number, which 

disassociates past disciplinary 

information connected to the previous 

NFA identification number with the reregistered entity’s new NFA 

identification number. A member of the 

public would need to take additional 

steps to uncover the disciplinary 

information associated with the 

previous entity’s NFA identification 

number by researching whether any 

principals of the new entity were also 

principals of the old entity. Also, reregistration could disrupt the continuity 

of business of a registrant if a 

background check is not completed 

before a principal is added. 

The Commission recognizes that the 

rules no longer explicitly require reregistration in response to changes in a 

registrant’s name, its form of 

organization, or its control. Instead, 

NFA determines whether a firm must reregister, subject to certain safe-harbors 

from re-registration in § 3.31(a)(2) and 

(3). For example, current § 3.31(a)(2) 

permits firms to avoid re-registration 

after a change to the form of the 

organization if the successor 

organization consents to be liable for all 

obligations of the predecessor 

organization, and (a)(3) permits firms to 

avoid re-registration, despite the 

addition of a new principal. Otherwise, 

these exemptions do not address what 

happens when a firm changes both its 

form of organization and some of its 

principals, such as during a merger. 

The Commission seeks to improve the 

transparency and predictability of the 

re-registration requirements in 

expectation of an influx of new 

registrants. Therefore, the Commission 

is proposing to amend § 3.31(a) to 

explicitly address additional scenarios. 

Proposed § 3.31(a)(2) restates an existing 

requirement to re-register if a sole 

proprietorship is involved, in 

recognition of the unique attributes of 

the sole proprietor name type under 

NFA’s online registration system. 

Proposed § 3.31(a)(3) requires reregistration in the event of a change in 

name or form of organization, but 

preserves the existing safe harbor if 

there is no change in principal and the 

registrant wishes to consent to liability 

for its predecessor organization. 

Proposed § 3.31(a)(4) preserves the 

existing safe harbor from re-registration 

for additions of a new principal. 

Proposed § 3.31(a)(5), however, requires 

re-registration if a registrant changes its 

legal name or its form of the 

organization and adds a principal. 

Currently, a registration is tied to an 

entity’s legal name that is registered 

with a state, and that denotes 

information about its form of 

organization. The Commission believes 

it is appropriate to connect the NFA 

identification number to that name and 

form of organization. It is unavoidable 

that members of the public will need to 

take an additional step to acquire 

information about a previous registrant 

by researching shared principals, 

because an entity that is a bad actor 

could still voluntarily withdraw its 

registration to obtain a new NFA 

identification number and disassociate 

itself from past disciplinary actions. The 

Commission specifically requests 

comment on whether the additional 

transparency under the new provisions 

of § 3.31 is beneficial and necessary to 

fulfill the Commission’s mandate to 

protect customers, and whether the 

existing safe harbors from re-registration 

should be maintained. 

Also, the Commission is proposing to 

amend § 3.33(a) to compel a registrant to 

request a withdrawal of its registration 

at the same time it files articles of 

dissolution or a certificate of 

cancellation. For example, if a 

partnership decides to wind-up its 

affairs and cancel its partnership 

statement with the state, it must request 

withdrawal from registration at least 

contemporaneously with, or on a 

voluntary basis prior to, it canceling its 

partnership statement. 

3. Consolidation of Existing Regulations 

The Commission is also proposing 

that several provisions of part 3 should 

be consolidated to streamline the 

regulations. None of these proposals 

create new regulatory requirements. 

First, the Commission proposes to move 

the delegation provision found in 

§ 3.12(g) into § 3.75, ‘‘Delegation and 

reservation of authority.’’ Second, the 

Commission is proposing to amend 

§ 3.11 to add a new paragraph (c) to 

replace the existing exemption from 

registration as a floor trader for 

registered floor brokers that was 

previously found in § 3.4(a). Similarly, 

proposed § 3.21, ‘‘Exemption from 

fingerprinting requirement in certain 


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Federal Register / Vol. 76, No. 46 / Wednesday, March 9, 2011 / Proposed Rules 12891 

12 5 U.S.C. 601 et seq. 

13 5 U.S.C. 603, 604. 

14 44 U.S.C. 3501 et seq. 15 7 U.S.C. 19(a). 

cases,’’ contains an exemption from 

submitting fingerprint cards for persons 

who have a current form 8–R on file, 

which would replace the same 

exemption found in §§ 3.31(a)(3) and 

3.44(a)(5). In both cases, the regulations 

permitted a principal that was moving 

between registrants to dispense with the 

fingerprint card filing requirement. The 

proposed rules consolidate this 

exemption with the other exemptions in 

§ 3.21. 

4. Registration Forms 

The Commission also is proposing to 

amend certain provisions to update 

several references to the forms used 

during the registration process. For 

example, certain provisions in part 3 

refer to a registrant’s use of the form 

3–R. However, under NFA’s online 

registration system, a registrant cannot 

presently fill out a form 3–R, either 

electronically or on paper. Instead, a 

registrant can update its existing form 

7–R or form 8–R, and a record of those 

changes will be automatically created by 

NFA and designated as the registrant’s 

completed form 3–R. For clarity, the 

Commission is proposing to reference 

the distinction between actually filing 

out a form and creating a record of 

changes to another form in proposed 

§§ 3.11(b), 3.31(a)(1), 3.31(b), and 

3.31(c)(1). Elsewhere, §§ 3.42(a)(8) and 

3.46(a)(10) refer to a numerical list of 

items on forms 7–R and 8–R, but these 

forms no longer contain numbers 

associated with the particular questions. 

The Commission therefore is proposing 

to amend these regulations to instead 

reference the failure to disclose relevant 

disciplinary history information, or the 

failure to disclose an event leading to a 

required disclosure. These proposals do 

not create any new regulatory 

requirement, but merely clarify existing 

obligations. 

C. Corrections 

As published, the regulations contain 

vestigial definitions, outdated crossreferences to other regulations, and 

typographical errors that are in need of 

clarification or updating. The 

Commission is proposing to amend the 

following: §§ 3.1(e), 3.11(b), 

3.10(c)(4)(iii), 3.12(b), 3.12(c), 

3.12(h)(1)(ii), 3.13(d)(2), 3.21(a)(1–2), 

3.21(b)(1)–(2), 3.21(c)(4)(iii), 3.22(b), 

3.30(b), 3.42(a), 3.44(a)(5), 3.46(a), and 

3.46(a)(6) to address such errors. 

III. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) was adopted to address the 

concerns that government regulations 

may have a significant and/or 

disproportionate effect on small 

businesses. To mitigate this risk, the 

RFA requires agencies to conduct an 

initial and final regulatory flexibility 

analysis for each rule of general 

applicability for which the agency 

issues a general notice of proposed 

rulemaking.12 These analyses must 

describe the impact of the proposed rule 

on small entities, including a statement 

of the objectives and the legal bases for 

the rulemaking; an estimate of the 

number of small entities to be affected; 

identification of Federal rules that may 

duplicate, overlap, or conflict with the 

proposed rules; and a description of any 

significant alternatives to the proposed 

rule that would minimize any 

significant impacts on small entities.13

The proposed rules will amend 

existing rules in part 3 regarding the 

registration of intermediaries consistent 

with other Commission rulemakings 

issued pursuant to the Dodd-Frank Act. 

The proposed rules also will make other 

technical and modernizing amendments 

to part 3. 

The rules proposed by the 

Commission shall affect only FCMs, 

introducing brokers, commodity trading 

advisors, commodity pool operators, 

SDs and MSPs, and the rules will 

impose no new significant obligations 

on any of these entities. Therefore, the 

Commission has determined that the 

proposed rules will not create a 

significant economic impact on a 

substantial number of small entities. 

Accordingly, the Chairman, on behalf of 

the Commission, hereby certifies 

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

proposed rules will not have a 

significant impact on a substantial 

number of small entities. 

B. Paperwork Reduction Act 

Under the Paperwork Reduction Act 

of 1995 (PRA), 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.14 The 

proposed rules will not impose any new 

recordkeeping or information collection 

requirements, or other collections of 

information that require approval of the 

Office of Management and Budget under 

the PRA. The Commission invites 

public comment on the accuracy of its 

estimate that no additional information 

collection requirements or changes to 

existing collection requirements would 

result from the rules proposed herein. 

C. Cost-Benefit Analysis 

Section 15(a) of the CEA 15 requires 

the Commission to consider the costs 

and benefits of its actions before issuing 

new rules under the Act. By its terms, 

it does not require the Commission to 

quantify the costs and benefits of new 

rules or to determine whether the 

benefits of the proposed rules outweigh 

their costs; it requires the Commission 

to ‘‘consider’’ the cost and benefits of its 

actions. Section 15(a) of the CEA further 

specifies that the costs and benefits of 

the proposed rules 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 the 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 of concern and may, 

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 to 

accomplish any of the purposes of the 

CEA. 

The proposed rules would amend 

existing rules in part 3 regarding the 

registration of intermediaries to ensure 

that the Commission’s current rules are 

consistent with other Commission 

rulemakings issued pursuant to the 

Dodd-Frank Act. The proposed rules 

also would make other technical and 

modernizing amendments to part 3. As 

these rules impose no new significant 

obligations, the Commission does not 

anticipate that they will result in either 

costs or benefits in light of the five areas 

of concern enumerated in § 15(a) of the 

CEA. The substantive proposed 

rulemakings with which this 

rulemaking is associated have addressed 

the costs and benefits of the proposals, 

as required by § 15(a) of the CEA. 

The Commission invites public 

comment on its cost-benefit 

considerations. Commenters also are 

invited to submit any data or other 

information that they may have 

quantifying or qualifying the costs. 

List of Subjects in 17 CFR Part 3 

Administrative practice and 

procedure, Brokers, Commodity futures, 

Major swap participants, Reporting and 

recordkeeping requirements, Swap 

dealers. 


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12892 Federal Register / Vol. 76, No. 46 / Wednesday, March 9, 2011 / Proposed Rules 

For the reasons stated in the 

preamble, the Commission proposes to 

amend 17 CFR part 3 as follows: 

PART 3—REGISTRATION 

Authority and Issuance 

1. The authority citation for part 3 is 

revised to read as follows: 

Authority: 5 U.S.C. 552, 552b; 7 U.S.C. 1a, 

2, 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. 

2. Amend § 3.1 by revising paragraph 

(a) introductory text, (a)(2), and (a)(3), 

adding paragraph (a)(4), and removing 

and reserving paragraphs (d) and (e) to 

read as follows: 

§ 3.1 Definitions. 

(a) Principal. Principal means, with 

respect to an entity that is an applicant 

for registration, a registrant or a person 

required to be registered under the Act 

or these regulations: 

* * * * * 

(2)(i) Any individual who directly or 

indirectly, through agreement, holding 

company, nominee, trust or otherwise, 

is the owner of ten percent or more of 

the outstanding shares of any class of 

equity securities, other than non-voting 

securities, is entitled to vote or has the 

power to sell or direct the sale of ten 

percent or more of the outstanding 

shares of any class of equity securities, 

other than non-voting securities, or is 

entitled to receive ten percent or more 

of the profits of the entity; or 

(ii) Any person other than an 

individual that is the direct owner of ten 

percent or more of the outstanding 

shares of any class of equity securities, 

other than non-voting securities; or 

(3) Any person that has contributed 

ten percent or more of the capital of the 

entity, provided, however, that if such 

capital contribution consists of 

subordinated debt contributed by either 

(i) An unaffiliated bank insured by the 

Federal Deposit Insurance Corporation, 

(ii) An unaffiliated ‘‘foreign bank,’’ as 

defined in 12 CFR 211.21(n) that 

currently operates an ‘‘office of a foreign 

bank,’’ as defined in 12 CFR 211.21(t), 

which is licensed under 12 CFR 

211.24(a), 

(iii) Such unaffiliated office of a 

foreign bank that is licensed, or 

(iv) An insurance company subject to 

regulation by any State, such bank, 

foreign bank, office of a foreign bank, or 

insurance company will not be deemed 

to be a principal for purposes of this 

section, provided such debt is not 

guaranteed by another party not listed 

as a principal. 

(4) Any individual who, directly or 

indirectly, creates or uses a trust, proxy, 

power of attorney, pooling arrangement 

or any other contract, arrangement, or 

device with the purpose or effect of 

divesting such person of direct or 

indirect ownership of an equity security 

of the entity, other than a non-voting 

security, or preventing the vesting of 

such ownership, or of avoiding making 

a contribution of ten percent or more of 

the capital of the entity, as part of a plan 

or scheme to evade being deemed a 

principal of the entity, shall be deemed 

to be a principal of the entity. 

* * * * * 

(d) [Reserved.] 

(e) [Reserved.] 

* * * * * 

3. Amend § 3.2 by revising paragraphs 

(c) introductory text and (c)(2) to read as 

follows: 

§ 3.2 Registration processing by the 

National Futures Association; notification 

and duration of registration. 

* * * * * 

(c) The National Futures Association 

shall notify the registrant, or the sponsor 

in the case of an applicant for 

registration as an associated person, and 

each designated contract market that has 

granted the applicant trading privileges 

in the case of an applicant for 

registration as a floor broker or floor 

trader, if registration has been granted 

under the Act. 

* * * * * 

(2) If an applicant for registration as 

a floor broker or floor trader receives a 

temporary license in accordance with 

§ 3.40, the National Futures Association 

shall notify the designated contract 

market that has granted the applicant 

trading privileges that only a temporary 

license has been granted. 

* * * * * 

4. Amend § 3.10 by revising 

paragraphs (a)(3)(i)(A), (c)(2)(i), (c)(3)(i), 

(c)(4)(ii), (c)(4)(iii), and (c)(3)(iv) and 

add paragraph (c)(5) to read as follows: 

§ 3.10 Registration of futures commission 

merchants, introducing brokers, commodity 

trading advisors, commodity pool operators 

and leverage transaction merchants. 

(a) * * * 

(3) * * * 

(i) * * * 

(A) The broker or dealer limits its 

solicitation of orders, acceptance of 

orders, or execution of orders, or placing 

of orders on behalf of others involving 

any contracts of sale of any commodity 

for future delivery, on or subject to the 

rules of any contract market, to security 

futures products as defined in section 

1a(44) of the Act; 

* * * * * 

(c) * * * 

(2)(i) A foreign broker, as defined in 

§ 1.3(xx) of this chapter, is not required 

to register as a futures commission 

merchant if it submits any commodity 

interest transactions executed on or 

subject to the rules of designated 

contract market or swap execution 

facility for clearing on an omnibus basis 

through a futures commission merchant 

registered in accordance with section 4d 

of the Act. 

* * * * * 

(3)(i) A person located outside the 

United States, its territories or 

possessions engaged in the activity of: 

An introducing broker, as defined in 

§ 1.3(mm) of this chapter; a commodity 

trading advisor, as defined in § 1.3(bb) 

of this chapter; or a commodity pool 

operator, as defined in § 1.3(cc) of this 

chapter, in connection with any 

commodity interest transaction made on 

or subject to the rules of any designated 

contract market or swap execution 

facility only on behalf of persons 

located outside the United States, its 

territories or possessions, is not required 

to register in such capacity provided 

that any such commodity interest 

transaction executed on or subject to the 

rules of designated contract market or 

swap execution facility is submitted for 

clearing through a futures commission 

merchant registered in accordance with 

section 4d of the Act. 

* * * * * 

(4) * * * 

(ii) Such a person introduces, on a 

fully-disclosed basis in accordance with 

§ 1.57 of this chapter, any institutional 

customer, as defined in § 1.3(g) of this 

chapter, to a registered futures 

commission merchant for the purpose of 

trading on a designated contract market; 

(iii) Such person’s affiliated futures 

commission merchant has filed with the 

National Futures Association (Attn: Vice 

President, Compliance) an 

acknowledgement that the affiliated 

futures commission merchant will be 

jointly and severally liable for any 

violations of the Act or the 

Commission’s regulations committed by 

such person in connection with those 

introducing activities, whether or not 

the affiliated futures commission 

merchant submits for clearing any 

trades resulting from those introducing 

activities; and 

(iv) Such person does not solicit any 

person located in the United States, its 

territories or possessions for trading on 

a designated contract market, nor does 

such person handle the customer funds 

of any person located in the United 

States, its territories or possessions for 


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the purpose of trading on any 

designated contract market. 

* * * * * 

(5) An associated person of a swap 

dealer or an associated person of a major 

swap participant, as defined in 1a(4) of 

the Act, is not required to register as a 

swap dealer or major swap participant, 

respectively, solely as a consequence of 

being an associated person of a swap 

dealer, or an associated person of a 

major swap participant. 

* * * * * 

5. Amend § 3.11 by revising 

paragraphs (a)(2), (a)(3) and (b) and 

adding paragraph (c) to read as follows: 

§ 3.11 Registration of floor brokers and 

floor traders. 

(a) * * * 

(2) An applicant for registration as a 

floor broker or floor trader will not be 

registered or issued a temporary license 

as a floor broker or floor trader unless 

the applicant has been granted trading 

privileges by a board of trade designated 

as a contract market by the Commission. 

(3) When the Commission or the 

National Futures Association 

determines that an applicant for 

registration as a floor broker or floor 

trader is not disqualified from such 

registration or temporary license, the 

National Futures Association will notify 

the applicant and any contract market 

that has granted the applicant trading 

privileges that the applicant’s 

registration or temporary license as a 

floor broker or floor trader is granted. 

(b) Duration of registration. A person 

registered as a floor broker or floor 

trader in accordance with paragraph (a) 

of this section, and whose registration 

has neither been revoked nor 

withdrawn, will continue to be so 

registered unless such person’s trading 

privileges on all contract markets have 

ceased: Provided, that if a floor broker 

or floor trader whose trading privileges 

on all contract markets have ceased for 

reasons unrelated to any Commission 

action or any contract market 

disciplinary proceeding and whose 

registration is not revoked, suspended 

or withdrawn is granted trading 

privileges as a floor broker or floor 

trader, respectively, by any contract 

market where he held such privileges 

within the preceding sixty days, such 

registration as a floor broker or floor 

trader, respectively, shall be deemed to 

continue and no new Form 8–R or Form 

3–R record of a change to Form 8–R 

need be filed solely on the basis of the 

resumption of trading privileges. A floor 

broker or floor trader is prohibited from 

engaging in activities requiring 

registration under the Act or from 

representing himself to be a registrant 

under the Act or the representative or 

agent of any registrant during the 

pendency of any suspension of such 

registration or of all such trading 

privileges. Each contract market that has 

granted trading privileges to a person 

who is registered, or has applied for 

registration, as a floor broker or floor 

trader, must provide notice in 

accordance with § 3.31(d) after such 

person’s trading privileges on such 

contract market have ceased. 

(c) Exceptions. (1) A registered floor 

broker need not also register as a floor 

trader in order to engage in activity as 

a floor trader. 

(2) [Reserved] 

6. Amend § 3.12 by revising 

paragraphs (b), (c), (g) and (h) to read as 

follows: 

§ 3.12 Registration of associated persons 

of futures commission merchants, retail 

foreign exchange dealers, introducing 

brokers, commodity trading advisors, 

commodity pool operators and leverage 

transaction merchants. 

* * * * * 

(b) Duration of registration. A person 

registered in accordance with 

paragraphs (c), (d), (f), or (i) of this 

section and whose registration has not 

been revoked will continue to be so 

registered until the revocation or 

withdrawal of the registration of each of 

the registrant’s sponsors, or until the 

cessation of the association of the 

registrant with each of his sponsors. 

Such person will be prohibited from 

engaging in activities requiring 

registration under the Act or from 

representing himself to be a registrant 

under the Act or the representative or 

agent of any registrant during the 

pendency of any suspension of his or 

his sponsor’s registration. Each of the 

registrant’s sponsors must file a notice 

in accordance with § 3.31(c) reporting 

the termination of the association of the 

associated person. 

(c) Application for registration. Except 

as otherwise provided in paragraphs (d), 

(f), and (i) of this section, application for 

registration as an associated person in 

any capacity must be on Form 8–R, 

completed and filed in accordance with 

the instructions thereto. 

* * * * * 

(g) Petitions for exemption. Any 

person adversely affected by the 

operation of this section may file a 

petition with the Secretary of the 

Commission, which petition must set 

forth with particularity, the reasons why 

that person believes that an applicant 

should be exempted from the 

requirements of this section and why 

such an exemption would not be 

contrary to the public interest and the 

purposes of the provision from which 

exemption is sought. The petition will 

be granted or denied by the Commission 

on the basis of the papers filed. The 

Commission may grant such a petition 

if it finds that the exemption is not 

contrary to the public interest and the 

purposes of the provision from which 

exemption is sought. The petition may 

be granted subject to such terms and 

conditions as the Commission may find 

appropriate. 

(h) Exemption from registration. (1) A 

person is not required to register as an 

associated person in any capacity if that 

person is: 

(i) Registered under the Act as a 

futures commission merchant, retail 

foreign exchange dealer, swap dealer, 

major swap participant, floor broker, or 

as an introducing broker; 

(ii) Engaged in the solicitation of 

funds, securities, or property for a 

participation in a commodity pool, or 

the supervision of any person or persons 

so engaged, pursuant to registration 

with the Financial Industry Regulatory 

Authority as a registered representative, 

registered principal, limited 

representative or limited principal, and 

that person does not engage in any other 

activity subject to regulation by the 

Commission; 

* * * * * 

7. Amend § 3.13 by revising paragraph 

(d)(2) to read as follows: 

§ 3.13 Registration of agricultural trade 

option merchants and their associated 

persons. 

* * * * * 

(d) * * * 

(2) Applicants for registration as an 

associated person of an agricultural 

trade option merchant must meet the 

following conditions. Such persons 

must: 

* * * * * 

8. Amend § 3.21 by revising 

paragraphs (a)(1), (a)(2), (b)(1), (b)(2), 

(b)(3), and (c)(4)(iii), and add paragraph 

(a)(3) to read as follows: 

§ 3.21 Exemption from fingerprinting 

requirement in certain cases. 

(a) * * * 

(1) A legible, accurate and complete 

photocopy of a fingerprint card that has 

been submitted to the Federal Bureau of 

Investigation for identification and 

appropriate processing and of each 

report, record, and notation made 

available by the Federal Bureau of 

Investigation with respect to that 

fingerprint card if such identification 

and processing has been completed 

satisfactorily by the Federal Bureau of 

Investigation not more than ninety days 


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prior to the filing with the National 

Futures Association of the photocopy; 

(2) A statement that such person’s 

application for initial registration in any 

capacity was granted within the 

preceding ninety days, provided that the 

provisions of paragraph (a)(2) of this 

section shall not be applicable to any 

person who, by Commission rule, 

regulation, or order, was not required to 

file a fingerprint card in connection 

with such application for initial 

registration; or 

(3) A statement that such person has 

a current Form 8–R on file with the 

Commission or the National Futures 

Association. 

(b) * * * 

(1) With respect to the fingerprints of 

an associated person: An officer, if the 

sponsor is a corporation; a general 

partner, if a partnership; or the sole 

proprietor, if a sole proprietorship; 

(2) With respect to fingerprints of a 

floor broker or floor trader: The 

applicant for registration; or 

(3) With respect to the fingerprints of 

a principal: An officer, if the futures 

commission merchant, retail foreign 

exchange dealer, swap dealer, major 

swap participant, commodity trading 

advisor, commodity pool operator, 

introducing broker, or leverage 

transaction merchant with which the 

principal will be affiliated is a 

corporation; a general partner, if a 

partnership; or the sole proprietor, if a 

sole proprietorship. 

(c) * * * 

(4) * * * 

(iii) The internal controls used to 

ensure that the outside director for 

whom exemption under paragraph (c) of 

this section is sought does not have 

access to the keeping, handling or 

processing of the items described in 

paragraphs (c)(2)(i) and (c)(2)(ii) of this 

section; and 

* * * * * 

9. Amend § 3.22 by revising paragraph 

(b) to read as follows: 

§ 3.22 Supplemental filings. 

* * * * * 

(b) That the person, or any individual 

who, based upon his or her relationship 

with that person is required to file a 

Form 8–R in accordance with the 

requirements of this part, as applicable, 

must, within such period of time as the 

Commission or the National Futures 

Association may specify, complete and 

file with the Commission or the 

National Futures Association a current 

Form 7–R, or if appropriate, a Form 

8–R, in accordance with the instructions 

thereto. 

* * * * * 

10. Amend § 3.30 by revising 

paragraph (b) to read as follows: 

§ 3.30 Current address for purpose of 

delivery of communications from the 

Commission or the National Futures 

Association. 

* * * * * 

(b) Each registrant, while registered 

and for two years after termination of 

registration, and each principal, while 

affiliated and for two years after 

termination of affiliation, must notify in 

writing the National Futures 

Association of any change of the address 

on the application for registration, 

biographical supplement, or other 

address filed with the National Futures 

Association for the purpose of receiving 

communications from the Commission 

or the National Futures Association. 

Failure to file a required response to any 

communication sent to the latest such 

address filed with the National Futures 

Association that is caused by a failure 

to notify in writing the National Futures 

Association of an address change may 

result in an order of default and award 

of claimed monetary damages or other 

appropriate order in any National 

Futures Association or Commission 

proceeding, including a reparation 

proceeding brought under part 12 of this 

chapter. 

11. Amend § 3.31 by revising 

paragraphs (a), (b), (c)(1) introductory 

text and (d) to read as follows: 

§ 3.31 Deficiencies, inaccuracies, and 

changes to be reported. 

(a)(1) Each applicant or registrant as a 

futures commission merchant, retail 

foreign exchange dealer, commodity 

trading advisor, commodity pool 

operator, introducing broker, or leverage 

transaction merchant shall, in 

accordance with the instructions 

thereto, promptly correct any deficiency 

or inaccuracy in Form 7–R or Form 

8–R that no longer renders accurate and 

current the information contained 

therein, with the exception of any 

change that requires withdrawal from 

registration under § 3.33. Each such 

correction shall be prepared and filed in 

accordance with the instructions thereto 

to create a Form 3–R record of such 

change. 

(2) Where the deficiency or 

inaccuracy is created by a change in the 

‘‘form of organization’’ field on Form 

7–R from or to a sole proprietorship, the 

registrant must request withdrawal from 

registration in accordance with § 3.33. 

(3) Where the deficiency or 

inaccuracy is created by a change in the 

‘‘firm name’’ field, if a non-natural 

person, or the ‘‘form of organization’’ 

field on Form 7–R, the registrant must 

request withdrawal from registration in 

accordance with § 3.33; provided, 

however, that if there is no addition of 

a new principal, the registrant may 

instead update its Form 7–R to create a 

Form 3–R record of change, which is 

deemed in such circumstance to include 

a consent that the new legal entity shall 

be liable for all obligations of the preexisting organization under the Act, and 

the rules, regulations, or orders that 

have been promulgated thereunder. 

(4) Where the deficiency or 

inaccuracy is created by the addition of 

a new principal not listed on the 

registrant’s application for registration 

(or amendment of such application prior 

to the granting of registration), and there 

is no change in firm name or form of 

organization: 

(i) If the new principal is not a natural 

person, the registrant shall update such 

Form 7–R to create a Form 3–R record 

of change. 

(ii) If the new principal is a natural 

person, the registrant shall file a Form 

8–R, completed in accordance with the 

instructions thereto and executed by 

such person who is a principal of the 

registrant and who was not listed on the 

registrant’s initial application for 

registration or any amendment thereto. 

(5) Where the deficiency or 

inaccuracy is created by the addition of 

a new principal not listed on the 

registrant’s application for registration 

(or amendment of such application prior 

to the granting of registration), and there 

is a change in the ‘‘firm name’’ field, if 

a non-natural person, or the ‘‘form of 

organization’’ field on the registrant’s 

Form 7–R, the registrant must request 

withdrawal from registration in 

accordance with § 3.33. 

(b) Each applicant or registrant as a 

floor broker, floor trader or associated 

person, and each principal of a futures 

commission merchant, retail foreign 

exchange dealer, commodity trading 

advisor, commodity pool operator, 

introducing broker, or leverage 

transaction merchant must, in 

accordance with the instructions 

thereto, promptly correct any deficiency 

or inaccuracy in the Form 8–R or 

supplemental statement thereto to create 

a Form 3–R record of change. 

(c)(1) After the filing of a Form 8–R 

or updating a Form 8–R to create a Form 

3–R record of change by or on behalf of 

any person for the purpose of permitting 

that person to be an associated person 

of a futures commission merchant, retail 

foreign exchange dealer, commodity 

trading advisor, commodity pool 

operator, introducing broker, or a 

leverage transaction merchant, that 

futures commission merchant, retail 

foreign exchange dealer, commodity 


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trading advisor, commodity pool 

operator, introducing broker or leverage 

transaction merchant must, within 

thirty days after the occurrence of either 

of the following, file a notice thereof 

with the National Futures Association 

indicating: 

* * * * * 

(d) Each contract market that has 

granted trading privileges to a person 

who is registered, has received a 

temporary license, or has applied for 

registration as a floor broker or floor 

trader, must notify the National Futures 

Association within sixty days after such 

person has ceased having trading 

privileges on such contract market. 

* * * * * 

12. Amend § 3.33 by revising 

paragraph (a) introductory text to read 

as follows: 

§ 3.33 Withdrawal from registration. 

(a) A futures commission merchant, 

retail foreign exchange dealer, 

introducing broker, commodity trading 

advisor, commodity pool operator, or 

leverage transaction merchant must 

request that its registration be 

withdrawn upon filing articles (or a 

certificate) of dissolution (or 

cancellation), and upon notice of any 

involuntary dissolution initiated by a 

third-party. A futures commission 

merchant, retail foreign exchange 

dealer, introducing broker, commodity 

trading advisor, commodity pool 

operator, leverage transaction merchant, 

floor broker or floor trader may request 

that its registration be withdrawn in 

accordance with the requirements of 

this section if: 

* * * * * 

13. Amend § 3.40 by revising 

paragraph (a)(2)(iv) to read as follows: 

§ 3.40 Temporary licensing of applicants 

for associated person, floor broker or floor 

trader registration. 

(a) * * * 

(2) * * * 

(iv) Evidence that the applicant has 

been granted trading privileges by a 

contract market that has filed with the 

National Futures Association a 

certification signed by its chief 

operating officer with respect to the 

review of an applicant’s employment, 

credit and other history in connection 

with the granting of trading privileges. 

* * * * * 

14. Amend § 3.42 by revising 

paragraphs (a) introductory text, (a)(6), 

and (a)(8) to read as follows: 

§ 3.42 Termination. 

(a) A temporary license issued 

pursuant to § 3.40 shall terminate: 

* * * * * 

(6) Immediately upon failure to 

comply with an award in an arbitration 

proceeding conducted pursuant to the 

rules of a designated contract market or 

registered futures association within the 

time specified in section 10(g) of the 

National Futures Association’s Code of 

Arbitration or the comparable time 

period specified in the rules of a 

contract market or other appropriate 

arbitration forum. 

* * * * * 

(8) Immediately upon notice to the 

applicant and the applicant’s sponsor or 

the contract market that has granted the 

applicant trading privileges that: 

(i) The applicant failed to disclose 

relevant disciplinary history 

information on the applicant’s Form 

8–R; or 

(ii) An event has occurred leading to 

a required disclosure on the applicant’s 

Form 8–R. 

* * * * * 

15. Amend § 3.44 by revising 

paragraph (a)(5) to read as follows: 

§ 3.44 Temporary licensing of applicants 

for guaranteed introducing broker 

registration. 

(a) * * * 

(5) The fingerprints of the applicant, 

if a sole proprietor, and of each 

principal (including each branch office 

manager) thereof on fingerprint cards 

provided by the National Futures 

Association for that purpose. 

* * * * * 

16. Amend § 3.46 by revising 

paragraph (a) introductory text, (a)(6), 

(a)(8), and (a)(10) to read as follows: 

§ 3.46 Termination. 

(a) A temporary license issued 

pursuant to § 3.44 shall terminate: 

* * * * * 

(6) Immediately upon failure to 

comply with an order to pay a civil 

monetary penalty, restitution, or 

disgorgement within the time permitted 

under section 6(e), 6b, or 6c(d) of the 

Act; 

* * * * * 

(8) Immediately upon failure to 

comply with an award in an arbitration 

proceeding conducted pursuant to the 

rules of a designated contract market, 

swap execution facility, or registered 

futures association within the time 

specified in section 10(g) of the National 

Futures Association’s Code of 

Arbitration or the comparable time 

period specified in the rules of a 

designated contract market, swap 

execution facility, or other appropriate 

arbitration forum. 

* * * * * 

(10) Immediately upon notice to the 

applicant and the guarantor futures 

commission merchant that: 

(i) The applicant or any principal 

(including any branch officer manager) 

failed to disclose relevant disciplinary 

history information on the applicant’s 

Form 7–R or on a principal’s Form 

8–R; or 

(ii) An event has occurred leading to 

a required disclosure on the applicant’s 

Form 7–R or on a principal’s Form 

8–R. 

* * * * * 

17. Amend § 3.75 by revising 

paragraph (a) to read as follows: 

§ 3.75 Delegation and reservation of 

authority. 

(a) The Commission hereby delegates, 

until such time as it orders otherwise, 

to the Director of the Division of 

Clearing and Intermediary Oversight or 

his designee the authority to grant or 

deny requests filed pursuant to § 3.12(g). 

The Director of the Division of Clearing 

and Intermediary Oversight may submit 

to the Commission for its consideration 

any matter which has been delegated to 

him pursuant to § 3.12(g). The 

Commission hereby delegates, until 

such time as it orders otherwise, the 

authority to perform all functions 

specified in subparts B through D to the 

persons authorized to perform them 

thereunder. 

* * * * * 

Issued in Washington, DC, on February 24, 

2011, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendices to Registration of 

Intermediaries—Commission Voting 

Summary and Statements of 

Commissioners 

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 rulemaking that 

will amend certain provisions of Part 3 of the 

Commission’s regulations regarding the 

registration of intermediaries. The proposed 

amendments are necessary to conform 

existing regulations to the new requirements 

in the Dodd-Frank Act. The proposed 

rulemaking would amend Part 3 to ensure 

that the registration process applies to new 

categories of registrants, such as swap dealers 

and major swap participants. The proposed 


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12896 Federal Register / Vol. 76, No. 46 / Wednesday, March 9, 2011 / Proposed Rules 

1 15 U.S.C. 80a–1. Unless otherwise noted, all 

references to statutory sections are to the 

Investment Company Act, and all references to 

rules under the Investment Company Act are to 

Title 17, Part 270 of the Code of Federal Regulations 

[17 CFR 270]. 

2 15 U.S.C. 77a. 

3Public Law 111–203, 124 Stat. 1376 (2010). 

4Section 939A(a)–(b) of the Dodd-Frank Act. 

5Section 939(c) of the Dodd-Frank Act (amending 

section 6(a)(5)(A)(iv)(I) of the Investment Company 

Act). The Dodd-Frank Act also requires the 

Commission to adopt a number of rules concerning 

the integrity and transparency of the credit rating 

process and the accountability of credit rating 

agencies. See sections 931 to 939H of the DoddFrank Act. 

6See References to Ratings of Nationally 

Recognized Statistical Rating Organizations, 

Investment Company Act Release No. 28327 (July 

1, 2008) [73 FR 40124 (July 11, 2008)] (‘‘2008 

Ratings Removal Proposing Release’’). The 

Commission also proposed to eliminate references 

to credit ratings in rules under the Securities Act 

and the Securities Exchange Act of 1934 (15 U.S.C. 

78a) (‘‘Exchange Act’’). See Security Ratings, 

Securities Act Release No. 8940 (July 1, 2008) [73 

amendments also will modernize existing 

provisions that will apply to all Commission 

registrants. 

[FR Doc. 2011–4799 Filed 3–8–11; 8:45 am] 

BILLING CODE 6351–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 239, 270, and 274 

[Release Nos. 33–9193; IC–29592; File No. 

S7–07–11] 

RIN 3235–AL02 

References to Credit Ratings in Certain 

Investment Company Act Rules and 

Forms 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rule. 

SUMMARY: This is one of several releases 

that the Securities and Exchange 

Commission (‘‘Commission’’) will be 

considering relating to the use of credit 

ratings in our rules and forms. In this 

release, we are proposing a new rule as 

well as rule and form amendments 

under the Securities Act of 1933 and the 

Investment Company Act of 1940 to 

implement provisions of the DoddFrank Wall Street Reform and Consumer 

Protection Act (‘‘Dodd-Frank Act’’). The 

Commission is proposing amendments 

to two rules and four forms under the 

Investment Company Act and the 

Securities Act that contain references to 

credit ratings. The proposed 

amendments would give effect to 

provisions of the Dodd-Frank Act that 

call for the amendment of Commission 

regulations that contain credit rating 

references. In addition, the Commission 

is proposing a new rule under the 

Investment Company Act to establish a 

standard of credit-worthiness in place of 

a statutory reference to credit ratings in 

that Act that the Dodd-Frank Act 

removes. 

DATES: Comments should be received on 

or before April 25, 2011. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/proposed.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7–07–11 on the subject line; 

or 

• Use the Federal eRulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7–07–11. This file number 

should be included on the subject line 

if e-mail is used. To help us process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Web site (http:// 

www.sec.gov/rules/proposed.shtml). 

Comments are also available for Web 

site viewing and printing in the 

Commission’s Public Reference Room, 

100 F Street, NE., Washington, DC 

20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

All comments received will be posted 

without change; we do not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

publicly available. 

FOR FURTHER INFORMATION CONTACT: 

With respect to the proposed rule, rule 

amendments or Form N–MFP, Anu 

Dubey, Attorney, or Penelope Saltzman, 

Assistant Director (202) 551–6792, 

Office of Regulatory Policy, or with 

respect to Forms N–1A, N–2 and N–3, 

Jane H. Kim, Attorney, or Mark T. 

Uyeda, Assistant Director, (202) 551– 

6784, Office of Disclosure Regulation, 

Division of Investment Management, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–8549. 

SUPPLEMENTARY INFORMATION: The 

Commission is proposing for public 

comment amendments to rules 2a–7 [17 

CFR 270.2a–7] and 5b–3 [17 CFR 

270.5b–3] and new rule 6a–5 [17 CFR 

270.6a–5] under the Investment 

Company Act of 1940 (‘‘Investment 

Company Act’’).1 The Commission is 

also proposing for comment 

amendments to Forms N–1A [17 CFR 

239.15A and 17 CFR 274.11A], N–2 [17 

CFR 239.14 and 17 CFR 274.11a–1] and 

N–3 [17 CFR 239.17a and 17 CFR 

274.11b] under the Investment 

Company Act and the Securities Act of 

1933 (‘‘Securities Act’’)2 and Form 

N–MFP [17 CFR 274.201] under the 

Investment Company Act. 

Table of Contents 

I. Background 

II. Discussion 

A. Rule 2a–7 

1. Eligible Securities 

2. Securities With a Conditional Demand 

Feature 

3. Monitoring Minimal Credit Risks 

4. Stress Testing 

B. Form N–MFP 

C. Rule 5b–3 

D. Proposed Rule 6a–5 

E. Forms N–1A, N–2 and N–3 

III. Request for Comment 

IV. Paperwork Reduction Act 

V. Cost-Benefit Analysis 

VI. Consideration of Promotion of Efficiency, 

Competition and Capital Formation 

VII. Regulatory Flexibility Act Certification 

VIII. Initial Regulatory Flexibility Analysis 

Statutory Authority 

Text of Proposed Rule and Form 

Amendments 

I. Background 

The Dodd-Frank Act was enacted on 

July 21, 2010.3 Section 939A of the Act 

requires the Commission to review its 

regulations for any references to or 

requirements regarding credit ratings 

that require the use of an assessment of 

the credit-worthiness of a security or 

money market instrument, remove these 

references or requirements and 

substitute in those regulations other 

standards of credit-worthiness in place 

of the credit ratings that we determine 

to be appropriate.4 Section 939 of the 

Dodd-Frank Act removes a reference to 

credit ratings from section 6(a)(5) of the 

Investment Company Act and replaces it 

with a reference to ‘‘such standards of 

credit-worthiness as the Commission 

shall adopt.’’5

In 2008, we undertook a review 

similar to that required under section 

939A for references to credit ratings in 

our rules. As a result of that review, we 

proposed to eliminate references to 

ratings issued by nationally recognized 

statistical rating organizations 

(‘‘NRSROs’’) in four rules under the 

Investment Company Act.6 Specifically, 


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