This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

62226

Vol. 69, No. 205

Monday, October 25, 2004

1August 31, 1990 NFA Letter (‘‘NFA Letter’’).

FARM CREDIT ADMINISTRATION 

12 CFR Part 615 

RIN 3052–AC23 

Funding and Fiscal Affairs, Loan 

Policies and Operations, and Funding 

Operations; Investments in Farmers’ 

Notes

AGENCY: Farm Credit Administration.

ACTION: Proposed rule; reopening of 

comment period. 

SUMMARY: The Farm Credit 

Administration (FCA, Agency, or we) is 

reopening the comment period on the 

proposed rule to amend the Agency’s 

regulations governing investments in 

Farmers’ notes so all interested parties 

will have more time to respond.

DATES: Please send your comments to 

the FCA by November 24, 2004.

ADDRESSES: Send us your comments by 

electronic mail to reg-comm@fca.gov,

through the Pending Regulations section 

of our Web site at http://www.fca.gov, or 

through the government-wide Web site 

http://www.regulations.gov. You may 

also submit your comments in writing to 

S. Robert Coleman, Director, Regulation 

and Policy Division, Office of Policy 

and Analysis, Farm Credit 

Administration, 1501 Farm Credit Drive, 

McLean, VA 22102–5090, or by 

facsimile transmission to (703) 734–

5784. You may review copies of all 

comments we receive in the Office of 

Policy and Analysis, Farm Credit 

Administration.

FOR FURTHER INFORMATION CONTACT:

Dennis K. Carpenter, Senior Policy 

Analyst, Office of Policy and Analysis, 

Farm Credit Administration, McLean, 

VA 22102–5090, (703) 883–4498, TTY 

(703) 883–4434; or Richard A. Katz, 

Senior Attorney, Office of General 

Counsel, Farm Credit Administration, 

McLean, VA 22102–5090, (703) 883–

4020, TTY (703) 883–2020.

SUPPLEMENTARY INFORMATION: On 

September 14, 2004, we published a 

proposed rule in the Federal Register

seeking public comment on 

amendments to regulations governing 

investments in Farmers’ notes. The 

comment period expired on October 14, 

2004. See 69 FR 55362, September 14, 

2004. One member of the public has 

requested that the FCA provide 

interested parties an additional 30 days 

to comment. In response to this request, 

we are reopening the comment period 

until November 24, 2004, so all 

interested parties have more time to 

respond. Separately, the proposed rule 

contained an incorrect facsimile 

number. The correct number is (703) 

734–5784. The FCA supports public 

involvement and participation in its 

regulatory and policy process and 

invites all interested parties to review 

and provide comments on the proposed 

rule.

Dated: October 20, 2004. 

Jeanette C. Brinkley, 

Secretary, Farm Credit Administration Board.

[FR Doc. 04–23833 Filed 10–22–04; 8:45 am] 

BILLING CODE 6705–01–P

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 171 

RIN 3038–AC12 

Rules Relating To Review of National 

Futures Association Decisions in 

Disciplinary, Membership Denial, 

Registration and Member 

Responsibility Actions

AGENCY: Commodity Futures Trading 

Commission.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 

‘‘CFTC’’) proposes to amend its rules 

relating to the scope of Commission 

review of National Futures Association 

(‘‘NFA’’) decisions in disciplinary, 

membership denial, registration and 

member responsibility actions. First, the 

Commission proposes to make a 

technical amendment to add the NFA’s 

Hearing Committee to the list of 

committees covered by that section. 

This will conform Rule 171.1(b)(4) to 

changes in NFA’s committee structure 

since part 171 was first adopted in 

October 1990. Secondly, the 

Commission proposes to add a new 

provision to exclude from Commission 

review any appeal concerning NFA 

suspension of a member for failing to 

pay a settlement or arbitration award 

(‘‘award suspension cases’’), unless 

there are extraordinary circumstances 

that would otherwise warrant 

Commission review.

DATES: Submit comments on or before 

November 24, 2004.

ADDRESSES: Comments should be sent to 

the Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581, attention: Office of the 

Secretariat. Comments may be sent by 

facsimile to (202) 418–5521, or by email to secretary@cftc.gov. Reference 

should be made to ‘‘NFA Decisions 

Review.’’ Comments may also be 

submitted to the Federal eRulemaking 

Portal: http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:

Thuy Dinh or Gail Scott, Office of the 

General Counsel, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street, NW., 

Washington, DC 20581. Telephone: 

(202) 418–5120.

SUPPLEMENTARY INFORMATION: 

I. Scope of Commission Review 

On June 15, 1990, the Commission 

published proposed rules establishing 

standards and procedures for its review 

of decisions of registered futures 

associations such as NFA in 

disciplinary actions, membership denial 

actions, registration actions and member 

responsibility actions. 55 FR 24254. 

Under the proposed rules, two 

categories of decisions were excluded 

from Commission review: (a) 

Disciplinary decisions in which the 

aggrieved party failed to pursue his or 

her appeal rights to the NFA Appeals 

Committee and no extraordinary 

circumstances warranted Commission 

review; and (b) decisions in arbitration 

actions. See 171.1(b)(1) and 171.1(b)(2), 

respectively. Two comment letters were 

received in response to the request for 

public comment. Of particular interest 

to the Commission was a letter it 

received from the NFA.1

In its letter, the NFA proposed that 

the Commission exclude any appeal 

arising from NFA suspension of an 

association member based solely on that 

member’s failure to pay NFA dues or 

Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Proposed Rules 62227

2The NFA presumed that ‘‘actions in these areas 

would not be deemed disciplinary actions’’ within 

Commission review under part 171. NFA Letter at 

7. Section 10(g) of NFA’s Code of Arbitration (Code) 

and Section 10(g) of NFA’s Member Arbitration 

Rules (Member Rules) authorize NFA to summarily 

suspend an NFA member or associate if such 

member or associate fails to pay an NFA award or 

settlement reached in an NFA arbitration or 

mediation proceeding within 30 days. Members and 

associates receive a 30-day written notice before the 

suspension becomes effective, giving them a 

minimum of 60 days to satisfy the award or the 

settlement. Once the suspension becomes effective, 

a member or associate can get it lifted at any time 

by paying the amount due. A member or associate 

can also file a motion to vacate the award. A timely 

motion to vacate an award stays the suspension 

while the motion is pending in a court of competent 

jurisdiction.

arbitration awards.2 In its final rules 

published on October 9, 1990, the 

Commission agreed that the suspension 

for non-payment of dues should not 

generally be considered a disciplinary 

action subject to Commission review 

and accordingly amended the proposed 

rules by adding 171.1(b)(3) under 

‘‘Matters excluded’’ in the publication 

of its final rules. See 55 FR 41061. 

However, the Commission specifically 

rejected NFA’s request to exclude from 

Commission review the suspension of a 

member for failing to pay arbitration 

awards, stating:

The Commission is reluctant at this time 

* * * to exclude suspension of a member for 

failing to pay arbitration awards. When the 

Commission has excluded NFA arbitration 

decisions themselves from its review, one of 

the reasons it has done so is that these 

decisions can be reversed in the court 

system. In contrast, membership suspension 

raises somewhat different issues which 

generally go to the core of the Commission’s 

role in reviewing NFA actions affecting 

membership status. Pending additional 

experience on the issue the Commission has 

determined not to exclude such NFA action 

from its appellate jurisdiction.

Id. at 41064. 

From 1990 to the present, the 

Commission has received a total of five 

appeals related to the suspension of a 

member for failing to pay an arbitration 

award. The Commission first considered 

this issue in 1991, shortly after part 171 

was adopted. In the initial case, the 

respondent asked the Commission to 

stay the suspension while he worked 

out a payment schedule. In rejecting the 

petition, the Commission stated, ‘‘NFA’s 

ministerial imposition of a predetermined sanction for a member’s 

failure to perform an undisputed duty of 

membership [to pay an arbitration 

award] is not, without more, a proper 

subject for Commission review.’’

Machin v. NFA, [1990–1992 Transfer 

Binder] Comm. Fut. L. Rep. (CCH) 

¶ 25,041 at 37,893 (CFTC Apr. 25, 1991).

There were no other appeals of this 

nature until 1997, when the 

Commission dismissed an appeal from 

an award suspension where the appeal 

was predicated on alleged procedural 

and substantive errors in the underlying 

arbitration. The Commission stated, ‘‘it 

would be inappropriate to consider 

either procedural or substantive errors 

in NFA’s resolution of the issues raised 

in the arbitration.’’ Indelicato v. NFA

[1996–1998 Transfer Binder] Comm. 

Fut. L. Rep. (CCH) ¶ 27,130 at 45,287 

(CFTC Aug. 7, 1997). Citing Machin, the 

Commission further noted, ‘‘the 

imposition of a suspension for failing to 

pay an arbitration award might be 

reviewable upon a showing that NFA 

acted arbitrarily in imposing the 

suspension. Here, however, as in 

Machin, petitioners have failed to 

establish such arbitrariness.’’ Id.

The Commission’s denials of review 

in three recent cases, from March 2003 

to February 2004, have followed Machin

and Indelicato, i.e., declining to accept 

any appeal from this type of suspension 

unless it ‘‘involves something more than 

the ministerial application of a predetermined sanction.’’ See Howell v. 

NFA, [Current Transfer Binder] Comm. 

Fut. L. Rep. (CCH) ¶ 29,702 at 55,993 

(CFTC Feb. 27, 2004); Mawhorr v. NFA, 

[Current Transfer Binder] Comm. Fut. L. 

Rep. (CCH) ¶ 29,633 at 55,717 (CFTC 

Nov. 28, 2003); Bunyard v. NFA, CRAA 

03–01 (CFTC Mar. 5, 2003). In Bunyard, 

the Commission stated, ‘‘[only] an 

appeal raising a colorable claim that the 

NFA acted arbitrarily—or a similar 

claim that goes to the core of the 

Commission’s role in ensuring the 

reliability of NFA’s membership 

process—would fall within our 

jurisdiction.’’ Id. at 2. 

Against this backdrop, the NFA this 

year again proposed that the 

Commission exclude from its 

jurisdiction membership suspension 

cases based solely on the members’

failure to pay arbitration awards. See

April 15, 2004, NFA Letter at 5. The 

NFA discussed the Commission’s 

disposition of these types of appeals 

during the last 14 years. Noting that the 

Commission has routinely rejected such 

appeals, the NFA proposes that the part 

171 Rules be amended to reflect the 

Commission’s actual practice, which is 

to limit review to cases presenting 

‘‘extraordinary circumstances.’’ Id. at 4. 

The Commission has reviewed its 

case history in this area and reached the 

following conclusions: (a) Such appeals 

are very infrequent; and (b) and the few 

cases that have reached the Commission 

did not raise a colorable challenge to the 

fundamental fairness of the proceeding, 

and fell squarely into the ‘‘ministerial’’

category that would not warrant 

Commission review. Based on this 

experience, the Commission proposes to 

exclude these routine matters from 

appellate review. The Commission 

would exercise its appellate jurisdiction 

in the extraordinary case where an 

appeal based on an award suspension 

involves ‘‘something more than a 

ministerial application of a 

predetermined sanction.’’ The 

amendment would be effected by 

adding a new section (5) to Rule 

171.1(b) (‘‘Matters excluded’’). The 

proposed rule incorporates the 

Commission’s language used in Machin

and Indelicato. 

II. Technical Amendment 

Commission Rule 1.63 bars persons 

with certain disciplinary histories from 

serving on ‘‘a disciplinary committee’’

or in other leadership positions of any 

self-regulatory organization. Rule 

171.1(b)(4) provides that NFA decisions 

made pursuant to Rule 1.63 are 

excluded from Commission review. As 

currently written, it forecloses appeals 

by an NFA member who is disqualified 

from service on NFA’s ‘‘Board of 

Directors, Business Conduct Committees 

or arbitration panels.’’ Since Rule 

171.1(b)(4) was promulgated, NFA has 

established a Hearing Committee as part 

of its disciplinary function. The 

Commission proposes a technical 

amendment to Rule 171.1(b)(4) to add 

the Hearing Committee to the list of 

committees covered by the rule. 

III. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’), 5 U.S.C. 601 et seq., requires 

agencies that propose rules to consider 

the impact those rules will have on 

small businesses. With respect to 

persons seeking Commission reviews of 

NFA adjudicatory decisions, the 

proposed amendments would impose 

no additional regulatory burden. 

Commission review of NFA disciplinary 

and membership denial actions has 

been carried out pursuant to 17 CFR 

part 171 since 1990. These proposed 

amendments do not present any 

significant changes and would in fact 

ease the regulatory burden to some 

extent by providing greater certainty 

and predictability concerning the 

standards and procedures governing 

such review. Accordingly, the Acting 

Chairman, on behalf of the Commission, 

hereby certifies, pursuant to 5 U.S.C. 

605(b), that the proposed amendments 

will not have a significant economic 

impact on a substantial number of small 

businesses. 

62228 Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Proposed Rules 

B. Paperwork Reduction Act 

The proposed amendments to part 

171 rules do not impose a burden 

within the meaning and intent of the 

Paperwork Reduction Act of 1980, 44 

U.S.C. 3501, et seq.

C. Cost-Benefit Analysis 

Section 15(a) of the Commodity 

Exchange Act, 7 U.S.C. 19(a), requires 

the Commission to consider the costs 

and benefits of its action before issuing 

a new regulation. The Commission 

understands that, by its terms, section 

15(a) does not require the Commission 

to quantify the costs and benefits of a 

new regulation or to determine whether 

the benefits of the proposed regulation 

outweigh its costs. Nor does it require 

that each proposed rule be analyzed in 

isolation when that rule is a component 

of a larger package of rules or rule 

revisions. Rather, section 15(a) simply 

requires the Commission to ‘‘consider 

the costs and benefits’’ of its action. 

Section 15(a) further specifies that 

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. 

Accordingly, the Commission can, in its 

discretion, give greater weight to any 

one of the five enumerated areas of 

concern and can, 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 

Commodity Exchange Act. 

The proposed amendments to part 

171 will not create any significant 

change in the Commission’s appellate 

process. In fact, the proposed 

amendments should enhance the 

protection of market participants and 

the public by excluding from the 

Commission’s review matters that 

represent routine enforcement of an 

NFA pre-determined sanction, freeing 

both the Commission’s and NFA’s 

resources. In addition, since the 

proposed amendments retain the 

Commission’s ability to consider 

appeals that present ‘‘extraordinary 

circumstances,’’ public interest 

considerations for fundamental fairness 

and the Commission’s supervisory 

authority regarding self-regulated 

organizations will not be compromised. 

After considering these factors, the 

Commission has determined to propose 

the amendments to part 171, as set forth 

below.

List of Subjects in 17 CFR Part 171 

Administrative practice and 

procedure, Commodity exchanges, 

Commodity futures.

In consideration of the following, the 

Commission proposes to amend chapter 

I of title 17 of the Code of Federal 

Regulations as follows:

PART 171—RULES RELATING TO 

REVIEW OF NATIONAL FUTURES 

ASSOCIATION DECISIONS IN 

DISCIPLINARY, MEMBERSHIP DENIAL, 

REGISTRATION AND MEMBER 

RESPONSIBILITY ACTIONS 

1. The authority citation for part 171 

continues to read as follows:

Authority: 7 U.S.C. 4a, 12a, and 21.

2. Section 171.1 is amended in 

paragraph (b)(4) to add ‘‘, Hearing 

Committee’’ between ‘‘Business 

Conduct Committees’’ and ‘‘or 

arbitration panels’’; and replacing ‘‘.’’

with ‘‘;’’ at the end of (b)(4); and by 

adding new paragraph (b)(5):

§ 171.1 Scope of rules.

* * * * *

(b) * * * 

(5) Suspension of a member or a 

person associated with a member based 

solely on that person’s failure to pay an 

arbitration award or a settlement 

agreement resulting from an arbitration 

action brought pursuant to Section 

17(b)(10) of the Act or rules and 

regulations of the National Futures 

Association, or a settlement agreement 

resulting from a mediation proceeding 

sponsored by the National Futures 

Association, unless there are 

extraordinary circumstances that 

involve something more than the 

ministerial application of a 

predetermined sanction, or raise a 

colorable claim that the NFA has acted 

arbitrarily.

* * * * *

Issued in Washington, DC on the 19th of 

October 2004, by the Commission. 

Jean A. Webb, 

Secretary of the Commission.

[FR Doc. 04–23828 Filed 10–22–04; 8:45 am] 

BILLING CODE 6351–01–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service 

26 CFR Part 25 

[REG–163679–02] 

RIN 1545–BB72 

Qualified Interests

AGENCY: Internal Revenue Service (IRS), 

Treasury.

ACTION: Correction to notice of proposed 

rulemaking and notice of public 

hearing. 

SUMMARY: This document contains a 

correction to a notice of proposed 

rulemaking that was published in the 

Federal Register on Monday, July 26, 

2004 (69 FR 44476), relating to the gift 

tax special valuation rules and qualified 

interests.

FOR FURTHER INFORMATION CONTACT: Juli 

Ro Kim (202) 622–3090 (not a toll-free 

number).

SUPPLEMENTARY INFORMATION: 

Background 

The notice of proposed rulemaking 

(REG–163679–02), that is the subject of 

this correction is under section 2702 of 

the Internal Revenue Code. 

Need for Correction 

As published, the notice of proposed 

rulemaking (REG–163679–02), contains 

an error that may prove to be misleading 

and is in need of clarification. 

Correction of Publication 

Accordingly, the publication of the 

notice of proposed rulemaking and 

notice of public hearing (REG–163679–

02), which was the subject of FR Doc. 

04–16593, is corrected as follows: 

On page 44476, column 2, in the 

preamble, under the caption DATES, line 

2, the language ‘‘must be received by 

October 21, 2004.’’ is corrected to read 

‘‘must be received by October 25, 2004.’’

Guy R. Traynor, 

Federal Register Liaison, Publication and 

Regulations Branch, Legal Processing 

Division, Associate Chief Counsel, 

(Procedures & Administration).

[FR Doc. 04–23748 Filed 10–22–04; 8:45 am] 

BILLING CODE 4830–01–P