51898 Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Rules and Regulations 

1See 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. 

2 7 U.S.C. 1 et seq. 

3 76 FR 12888, Mar. 9, 2011. 

4The comments the Commission received on the 

Proposal are currently available on the 

Commission’s Web site. 

5 7 U.S.C. 6(c). 

6The Commission determined that the issues 

raised in the global comment letter with respect to 

addressing the types of activities that would cause 

a market participant to be deemed an introducing 

broker engaged in swap-related activities were 

outside of the scope of the Proposal, and therefore 

is not addressing them in this final rule. Likewise, 

the petition submitted by the trade industry 

associations cited the Proposal as an example of 

amendments that would likely not be effective in 

time for a July 16, 2011 compliance deadline. Those 

concerns were addressed when the Commission 

granted related relief and extended the effective 

and/or compliance date applicable to many DoddFrank requirements. See the second amended 

version of the effective date order at 77 FR 41260, 

July 13, 2012. 

7NFA requested that the Commission specifically 

list the chief compliance officer of a registered 

foreign exchange dealer in the definition of 

principal. The Commission addressed this request 

in another rulemaking, wherein chief compliance 

officer is listed as an example of a principal of a 

registrant. See 77 FR 20200, Apr. 3, 2012. 

8 In comparison, broker-dealers regulated by the 

Securities and Exchange Commission are required 

to disclose on Form BD that is filed with the 

Financial Industry Regulatory Authority any person 

not otherwise named on Schedule A as a direct 

owner or Schedule B as an indirect owner who 

nonetheless controls the management or policies of 

the applicant through agreement or otherwise. See 

http://www.sec.gov/about/forms/formbd.pdf. 

[FR Doc. 2012–20875 Filed 8–27–12; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 3 

RIN 3038–AC96 

Registration of Intermediaries 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final rule. 

SUMMARY: The Commodity Futures 

Trading Commission (Commission) is 

adopting 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 is 

adopting 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 non-substantive, technical 

amendments to its regulations. 

DATES: Effective October 29, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Andrew Chapin, Associate Director, 

Division of Swap Dealer and 

Intermediary Oversight, (202) 418–5465, 

achapin@cftc.gov; or Claire Noakes, 

Attorney Advisor, Division of Swap 

Dealer 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.1 Title VII of 

the Dodd-Frank Act amended the 

Commodity Exchange Act (CEA) 2 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. 

As discussed below, the regulations 

the Commission is adopting today 

concern conforming and technical 

amendments to part 3 governing the 

registration of intermediaries. These 

final regulations are based in large part 

on the Commission’s proposed 

regulations regarding part 3 (Proposal).3

The conforming amendments largely 

consist of adding references, where 

appropriate, to SDs, MSPs and swap 

execution facilities (SEFs). In addition, 

the adopted regulations contain 

modernizing and technical amendments 

to part 3 in anticipation of an influx of 

new registrants. Further, the adopted 

regulations clarify or update definitions, 

outdated cross-references to other 

regulations, and othertypographical 

errors. 

II. Comments 4 and Responses 

A. In General 

In response to the Proposal, the 

Commission received four comments 

from the Futures Industry Association 

(FIA), the National Futures Association 

(NFA), and two individuals, Chris 

Barnard and Bill Nolan. In addition, the 

Commission also received comments 

relevant to the Proposal in a global 

comment letter submitted by a U.S. 

investor and a petition for exemption 

submitted pursuant to Section 4(c) of 

the CEA 5 by a group of trade industry 

associations.6 The commenters 

generally supported the Commission’s 

efforts to update and modernize part 3 

consistent with the regulatory 

developments set forth in the DoddFrank Act. In consideration of the 

comments received,7 and unless 

specifically addressed below in the 

section-by-section analysis, the 

Commission adopts the final regulations 

as proposed. 

B. Section 3.1—Definitions 

Section 3.1 proposed alterations to the 

scope of persons who, by reason of their 

ownership of securities of a registrant, 

must be listed as a principal. The 

Commission proposed to narrow the 

current category of persons in 

§ 3.1(a)(2)(i) to only those individuals 

who are the owners or are entitled to 

vote or have the power to sell or direct 

the sale of 10 percent or more of the 

outstanding shares of any class of equity 

securities, other than non-voting 

securities. The Commission intended to 

narrow the scope of the provision 

because the existing provision was overinclusive, in that it captured individuals 

without the ability to influence a 

company’s actions, such as owners of 

10% of a class of preferred stock. 

However, upon further reflection, the 

Commission is concerned that the 

Proposal might, in other ways, be underinclusive, in that it would fail to capture 

an owner who might indirectly have the 

power—such as through a membership 

agreement—to dictate upfront the 

entity’s activities that are subject to 

regulation by the Commission. 

Consequently, in order to strike the right 

balance between the over-inclusive 

existing provision and the underinclusive proposed language, the 

Commission is modifying § 3.1(a)(2)(i) 

to include individuals who have the 

power to exercise a controlling 

influence over the entity’s activities that 

are subject to regulation by the 

Commission.8


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9See 77 FR 30596, May 23, 2012. 

10 77 FR 30596, May 23, 2012. 

11 17 CFR 1.3(ggg)(6)(iv) (emphasis added). 

Section 1a(23) of the CEA restricts floor traders to 

the offer and sale of contracts ‘‘solely for such 

person’s own account.’’ 7 U.S.C. 1a(23). 

12 In § 3.40, the provision for temporary licenses 

is limited to individual floor traders because this 

provision is applicable only to natural persons 

(such as APs addressed in § 3.40(a)). 

13Section 17(o)(1) of the CEA, 7 U.S.C. 21(o)(1), 

provides that the Commission may require an RFA 

Continued 

C. Section 3.10—Registration of Futures 

Commission Merchants, Retail Foreign 

Exchange Dealers, Introducing Brokers, 

Commodity Trading Advisors, 

Commodity Pool Operators, Swap 

Dealers, Major Swap Participants, and 

Leverage Transaction Merchants. 

Section 3.11—Registration of Floor 

Brokers and Floor Traders. 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 

Section 3.10 generally sets forth the 

registration requirements for various 

Commission registrants. Section 3.11 

generally sets forth the registration 

requirements for floor brokers and floor 

traders. Section 3.12 generally sets forth 

the registration requirements for natural 

persons associated with a Commission 

registrant in certain capacities, referred 

to as associated persons (APs). 

With respect to APs, the Commission 

proposed to amend § 3.10 to add a new 

paragraph (c)(5) to clarify that a person 

employed by either an SD or a MSP and 

acting as its AP is not required to 

separately register as an SD or MSP, 

respectively, solely arising out of the 

person’s activities as an AP. The 

Commission sought public 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 an MSP, and in light 

of the definition requiring persons who 

engage in certain swap activities to 

register as an SD or an MSP.9 FIA and 

Chris Barnard were supportive of this 

clarification on the grounds that it 

provided regulatory certainty. The 

Commission is adopting the language in 

new paragraph (c)(5) with a change in 

the language to reflect that it is not 

appropriate to consider the AP’s 

activities as an AP of an SD for the 

purpose of determining whether the 

person is an SD. 

With respect to intermediaries, 

current § 3.10(c)(2) and (3) provides 

exemptions from registration as a 

futures commission merchant (FCM) for 

foreign brokers and other foreign 

intermediaries conducting activities in 

commodity interest transactions on 

designated contract markets (DCMs) 

solely on behalf of customers located 

outside the U.S. The Commission 

proposed to amend this section to 

expand these registration exemptions to 

foreign brokers and foreign 

intermediaries engaged in commodity 

interest transactions solely on behalf of 

non-U.S. customers executed on a SEF 

and cleared on a designated clearing 

organization through the customer 

omnibus account maintained with a 

registered FCM. FIA supported the 

Commission’s proposal to align 

registration exemptions for foreign 

intermediaries across DCMs and SEFs. 

The Commission also sought comment 

as to whether it should expand such 

exemption to swap transactions 

executed bilaterally, and FIA supported 

this suggestion as well. Finally, the 

Commission sought comment as to 

whether any expansion should 

distinguish between bilateral swap 

transactions that occur within the U.S. 

and those that occur abroad. The 

Commission did not receive any 

comments regarding such a distinction. 

Therefore, the Commission is amending 

§ 3.10(c)(2) and (3) to extend the 

registration exemption to commodity 

interest transactions executed 

bilaterally, on or subject to the rules of 

a DCM, or on or subject to the rules of 

a SEF, that are submitted for clearing on 

an omnibus basis through a registered 

FCM. 

As proposed, § 3.11 pertaining to 

registration of floor brokers and floor 

traders contained a series of technical 

changes, such as consolidating an 

exemption found in § 3.4 and removing 

references to DTEFs. Subsequently, the 

Commission has promulgated the 

further definition of the term ‘‘swap 

dealer’’ 10 which, among other things, 

excludes certain swaps entered into by 

registered floor traders from the SD 

determination. Specifically, 

§ 1.3(ggg)(6)(iv) states that ‘‘[i]n 

determining whether a person is a swap 

dealer, each swap that the person enters 

into in its capacity as a floor trader as 

defined by section 1a(23) of the Act or 

on or subject to the rules of a swap 

execution facility shall not be 

considered for the purpose of 

determining whether the person is a 

swap dealer,’’ provided that the person 

is registered as a floor trader pursuant 

to § 3.11 and otherwise satisfies other 

conditions with respect to its trading, 

including certain requirements as if it 

were an SD.11

Given that legal entities, in addition 

to natural persons, may seek to avail 

themselves of the exclusion set forth 

above, the Commission therefore is 

adding a reference to Form 7–R in 

§ 3.11. Form 7–R, as the application for 

registration as an intermediary, is the 

appropriate form for NFA to process an 

entity’s application for registration as a 

floor trader engaged in swaps activities. 

Additionally, references to SEFs are 

being added throughout § 3.11 as one of 

the two categories of facilities for which 

floor traders in swaps will be granted 

trading privileges. Although these 

additions were omitted in the Proposal, 

the Commission believes that insertion 

of the appropriate reference to the type 

of registration form, and the type of 

facility, that would allow the NFA to 

properly process applications for 

registration of floor traders engaged in 

swaps activities are conforming changes 

to the registration rule that are necessary 

to implement the SD definition. 

Consequently, the Commission is 

adopting additional technical 

modifications in § 3.21 to address the 

processing of fingerprints for principals 

of a floor trader that is a non-natural 

person, as well as in § 3.33 to reflect the 

use of Form 7–W for a request for 

withdrawal from a floor trader that is a 

non-natural person. The Commission is 

also adopting other technical 

modifications in §§ 3.30 and 3.40 to 

reflect the registration of legal entities as 

floor traders,12 and in §§ 3.2, 3.4, 3.42, 

3.56, 3.60 and 3.64 to add references to 

SEFs. 

The Commission proposed to amend 

§ 3.12(h)(1) to provide that a person is 

not required to register as an AP in any 

capacity if such person is registered in 

one of the other enumerated categories, 

including an SD or MSP. FIA agreed 

with the Commission that it is highly 

improbable that an individual, rather 

than an entity, would register as an SD 

and MSP, but supported the 

Commission’s proposal in light of the 

regulatory certainty that it provides. 

Accordingly, the Commission is 

adopting § 3.12(h)(1) as proposed. 

D. Section 3.31—Deficiencies, 

Inaccuracies, and Changes To Be 

Reported. Section 3.33—Withdrawal 

From Registration 

Section 3.31 sets forth procedural 

requirements for a registrant to update 

and/or correct information previously 

provided to the Commission and the 

NFA. The NFA is a registered futures 

association (RFA) to which the 

Commission has delegated certain 

registration functions.13 Currently, NFA 


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51900 Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Rules and Regulations 

to perform certain Commission registration 

functions, in accordance with the CEA and the rules 

of the RFA. 

14Form 7–R is the Commission’s application for 

registration as an intermediary or floor broker that 

is a non-natural person and application for NFA 

membership, while Form 8–R is the Commission’s 

application for registration as an AP, floor broker, 

or individual floor trader, as well as the application 

for listing as a principal of a registrant. 

15 In its comment letter, the NFA also suggested 

a few technical edits to the language in proposed 

§ 3.31(a)(2) and (4) to reflect the current filing 

requirements associated with the filing of Form 7– 

R. The Commission agrees with these comments 

and is adopting these technical edits in the final 

rule. Additionally, as a technical change, the 

Commission is deleting § 3.31(b)(2) because it 

duplicates some of the language in § 3.31(a)(1) with 

respect to the obligations of applicants for 

registration as SDs or MSPs, and is combining the 

reference to principals of SDs or MSPs found in 

current § 3.31(b)(2) with the reference to principals 

of other registrants in current § 3.31(b)(1). 

16 In comparison, consider that broker-dealers 

regulated by the Securities and Exchange 

Commission are required to provide on Form BD, 

which is filed with the Financial Industry 

Regulatory Authority, any information about 

business predecessors, including the date of 

succession, name of predecessor, and the 

registration number for any predecessor. 

17 77 FR 2613, Jan. 19, 2012. The Commission 

subsequently published a correction regarding 

certain language set forth in the January 19, 2012 

release. See 77 FR 3590, Jan. 25, 2012. 

18See, e.g., § 3.12. 

19 5 U.S.C. 601 et seq. 

20See 5 U.S.C. 601(2), 603, 604 and 605. 

21The Commission did not receive any comments 

regarding the Reg Flex Act and the Proposal. 

22See 47 FR 18618, 18619–20, Apr. 30, 1982 

(FCMs and commodity pool operators); 77 FR 

30596, 30701 (finding that MSPs are not small 

entities and that the number of SDs that are small 

entities, if any, is not significant). 

exercises discretion in determining 

whether changes to the information 

originally filed on the registrant’s Form 

7–R or 8–R,14 including its legal name, 

form of organization, and list of 

principals, would require a registrant to 

withdraw and re-register or, in the 

alternative, amend its Form 7–R or 8–R. 

The NFA’s discretion is subject only to 

the requirement to withdraw and reregister set forth in § 3.31(a)(1) where a 

registrant is reporting a change in the 

form of organization from or to a sole 

proprietorship, and the safe-harbor from 

re-registration set forth in § 3.31(a)(3). 

Among other changes set forth in the 

Proposal, the Commission proposed: (1) 

To adopt § 3.31(a)(5) to require reregistration in the event of a change in 

name or form of organization and a 

change in principal, while preserving 

the existing safe harbor in § 3.31(a)(3) in 

the event that there is no change in 

principal and the registrant will be 

liable for its predecessor organization. 

The Commission specifically requested 

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. In response to 

the Commission’s request, NFA and FIA 

opposed the proposed re-registration 

requirements as unnecessary, while Bill 

Nolan supported the proposed reregistration requirements as necessary to 

ensure that the existing process is not 

abused by registrants to the detriment of 

customers. 

In particular, the NFA challenged the 

proposed amendments to § 3.31 on the 

following grounds: (1) It will be more 

difficult for members of the public to 

uncover a ‘‘new’’ firm’s true 

disciplinary information; (2) the change 

in the legal name or form of a business 

organization and the addition of a 

principal does not necessarily trigger a 

regulatory need for re-registration; and 

(3) the proposed changes do not 

adequately address the timing of events 

sufficient to require re-registration. FIA 

similarly opposed the proposed changes 

on the grounds that re-registration 

should not be required for concurrent 

changes to the name or form of an 

organization, or the addition of a 

principal because re-registration is not 

required separately for each of these 

occurrences. FIA also stated that, upon 

implementation of the Dodd-Frank Act, 

the prospective mergers of affiliated 

companies will be negatively impacted 

by the proposed requirements. 

After carefully considering the 

foregoing comments, the Commission 

has determined not to adopt the 

amendment in § 3.31(a)(3) and (5) as 

proposed.15 The Commission intends to 

promptly consider alternatives to the 

Proposal’s re-registration 

requirements 16 in order to address 

customer protection issues raised by the 

current rules. In the meantime, a 

prospective customer will continue to 

be able to obtain disciplinary history of 

any associated organizations by 

reviewing the list of principals shared 

by both the currently and formerly 

registered organizations, which is 

already contained in a publicly 

available database maintained by the 

NFA. 

In its comment letter, the NFA also 

suggested a few technical edits to the 

language in proposed § 3.31 to clarify 

that: (1) It is not the electronic update 

reporting a change on a Form 7–R that 

creates any deficiency or inaccuracy; 

and (2) an applicant or registrant no 

longer lists its principals who are 

individuals on its application for 

registration, as only holding companies 

are listed. The Commission believes that 

these comments improve upon the 

proposed language and is adopting these 

suggested changes in the final 

regulation. Finally, as previously 

mentioned, the Commission is also 

adopting additional technical 

modifications in § 3.31 to reflect the use 

of Form 7–R for floor traders that are 

non-natural persons. 

E. Corrections 

In the Proposal, the Commission 

noted that it would be necessary to 

harmonize any distinctions between the 

Proposal and other rulemakings as they 

become final. On January 19, 2012, the 

Commission published in the Federal 

Register a final rulemaking regarding 

the registration of SDs and MSPs.17 In 

that final rulemaking, the Commission 

adopted new registration requirements 

for SDs and MSPs that were not 

contained in the rule language on which 

the Proposal was based. In order to 

integrate the new rule language from the 

above final rulemaking with the 

proposed language to be finalized in this 

release, the Commission is 

incorporating, where relevant, the 

amended rule language referencing SDs 

and MSPs into this release.18

III. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act (Reg 

Flex Act) requires that agencies consider 

whether the rules they propose will 

have a significant economic impact on 

a substantial number of small entities 

and, if so, provide a regulatory 

flexibility analysis respecting the 

impact.19 A regulatory flexibility 

analysis or certification is required for 

‘‘any rule for which the agency 

publishes a general notice of proposed 

rulemaking pursuant to’’ the notice-andcomment provisions of the 

Administrative Procedure Act, 5 U.S.C. 

553(b) or any other law.20 The final 

rules promulgated today amend existing 

rules in part 3 regarding the registration 

of intermediaries consistent with other 

Commission rulemakings issued 

pursuant to the Dodd-Frank Act, and 

also make other technical, nonsubstantive amendments to part 3. 

As set forth in the Proposal,21 the 

final rules shall affect registered FCMs, 

IBs, commodity trading advisors, 

commodity pool operators, SDs, and 

MSPs. The Commission has previously 

determined that FCMs, commodity pool 

operators, SDs, and MSPs are not small 

entities for purposes of the Reg Flex 

Act.22 The Commission has previously 

made a determination with respect to 

IBs and commodity trading advisors to 

evaluate within the context of a 


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23See, with respect to commodity trading 

advisors, 47 FR 18620, Apr. 30, 1982, and see, with 

respect to IBs, 48 FR 35276, Aug. 3, 1983. 

24 44 U.S.C. 3501 et seq. 

25See currently approved information collection, 

available at http://www.reginfo.gov/public/do/

PRAICList?ref_nbr=201203-3038-004. 

26The Commission has previously estimated that 

approximately 120 entities will register as SDs. See 

77 FR 2613, 2622 (January 19, 2012). The 

Commission believes it is reasonable to estimate 

that half as many entities will register as floor 

traders. 

27See id. at 2643. 28 7 U.S.C. 19(a). 

particular rule proposal whether all or 

some IBs or commodity trading advisors 

should be considered to be small 

entities and, if so, to analyze the 

economic impact on them of any such 

rule.23 The final rules will also affect 

floor traders. The Commission has not 

previously made a determination 

regarding floor traders, since currently 

all registered floor traders are 

individuals, and individuals are not 

included in the small entity analysis 

under the Reg Flex Act. 

Since there could be some small 

entities that register as IBs, commodity 

trading advisors, or floor traders, the 

Commission considered whether this 

rulemaking would have a significant 

economic impact on these registrants. 

The final rules would clarify the 

mechanics of registration by updating 

cross-references, consolidating 

exemptions, and deleting obsolete 

forms. The Commission does not expect 

registrants to incur additional expenses 

as a result of these clarifications. 

Consequently, the Commission finds 

that there is no significant economic 

impact on IBs or commodity trading 

advisors resulting from this rulemaking. 

The final rules also provide clarity to 

floor traders regarding existing 

registration requirements (for example, 

the revisions to § 3.11 clarify that an 

entity that wishes to register as a floor 

trader shall do so by filing Form 7–R), 

rather than imposing any new 

registration requirement. Consequently, 

the Commission finds that there is no 

significant economic impact on floor 

traders resulting from this rulemaking. 

Accordingly, for the reasons stated in 

the Proposal and the additional 

rationale provided above, the 

Commission believes that the 

conforming and other technical 

amendments in this rulemaking will not 

have a significant economic impact on 

a substantial number of small entities. 

Therefore, the Chairman, on behalf of 

the Commission, hereby certifies, 

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

regulations being published today by 

this Federal Register release will not 

have a significant economic 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.24 In the 

Proposal, the Commission indicated that 

the proposed rules would 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 invited 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. In 

response, the Commission received no 

comments. 

The currently approved rule 

collection covering the regulatory filings 

discussed in this final rule (3038–0023, 

which covers Forms 3–R, 7–R, 8–R and 

8–T) has a burden of 78,109 respondents 

and 7,030 annual hours.25 The 

Commission believes that the number of 

entities filing Form 7–R will increase 

slightly, since that form may now be 

used by an entity to register as a floor 

trader, and the number of persons filing 

Form 8–R and 8–T will also increase 

slightly, when individuals who are 

principals of entities that are registered 

as floor traders use those forms to list 

themselves. 

Therefore, the Commission has 

determined to revise the burden for this 

information collection as follows. The 

burden associated with the use of Form 

7–R for the registration of entities as 

floor traders is estimated to be 60 hours, 

assuming 60 respondents,26 which will 

result from: (1) Application for 

registration by entities as floor traders 

and submission of required information 

on behalf of their respective principals; 

(2) initially, no withdrawals from 

registration by floor traders and a 

relatively small decrease in the number 

of their respective principals; and (3) 

initially, no reported corrections. 

Burden means the total time, effort, or 

financial resources expended by persons 

to generate, maintain, retain, disclose or 

provide information to or for a federal 

agency. 

The respondent burden for this 

collection is estimated to average 1 hour 

per response for the Form 7–R; 0.8 

hours per response for the Form 8–R; 

and 0.2 hours per response for the Form 

8–T.27 These estimates include the time 

needed to review instructions; to 

prepare technology and systems for the 

purposes of collecting, validating, and 

verifying information, processing and 

maintaining information, and disclosing 

and providing information; to adjust the 

existing ways to comply with any 

previously applicable instructions and 

requirements; to train personnel to be 

able to respond to a collection of 

information; and to transmit or 

otherwise disclose the information. 

Form 7–R 

Respondents/Affected Entities: 60. 

Estimated number of responses: 60. 

Estimated total annual burden on 

respondents: 1 hour. 

Frequency of collection: On occasion 

and annually. 

Burden Statement: 60 respondents × 1 

hour = 60 Burden Hours. 

Form 8–R 

Respondents/Affected Entities: 5 

principals per each of 60 floor traders. 

Estimated number of responses: 300. 

Estimated total annual burden on 

respondents: 0.8 hours. 

Frequency of collection: On occasion. 

Burden Statement: 300 respondents × 

0.8 hours = 240 Burden Hours. 

Form 8–T 

Respondents/Affected Entities: 1 

principal per each of 10 floor traders. 

Estimated number of responses: 10. 

Estimated total annual burden on 

respondents: 0.2 hours. 

Frequency of collection: On occasion. 

Burden Statement: 10 respondents × 

0.2 hours = 2 Burden Hours. 

C. Cost-Benefit Considerations 

Section 15(a) of the CEA 28 requires 

the Commission to consider the costs 

and benefits of its actions before 

promulgating a regulation under the 

CEA or issuing an order. Section 15(a) 

further specifies that the costs and 

benefits shall be evaluated in light of the 

following five broad areas of market and 

public concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. The 

Commission considers the costs and 

benefits resulting from its discretionary 

determinations with respect to the 

Section 15(a) factors. 

The regulations being adopted today 

conform, modernize, and make 

technical amendments to part 3 

governing the regulation of 

intermediaries. Their purpose is to 


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51902 Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Rules and Regulations 

29 76 FR at 12891. 

30The Commission requested comments on 

whether the provision is warranted to ensure 

uniform listing of principals by domestic and 

foreign-domiciled 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. 

ensure that the Commission’s current 

rules are consistent with other 

Commission rulemakings issued 

pursuant to the Dodd-Frank Act. Before 

adopting these regulations, the 

Commission sought public comment on 

the Proposal, including comment on the 

costs and benefits of the Proposal. While 

inviting public comments on its costbenefit considerations, the Proposal 

clarified that the substantive proposed 

rulemakings with which this 

rulemaking is associated have addressed 

the costs and benefits of the proposals 

as required by section 15(a) of the 

CEA.29

The Commission received few 

specific comments concerning the 

Proposal’s consideration of costs and 

benefits beyond general comments that 

the costs associated with particular rule 

amendments would outweigh the 

benefits. Those it did receive are 

addressed in the discussion below. 

None of the comments received 

provided a basis to quantify estimated 

costs or benefits. 

The Commission’s baseline for 

consideration of the costs and benefits 

of this rulemaking are the costs and 

benefits that the public and market 

participants would experience in the 

absence of this proposed regulatory 

action. In other words, the proposed 

baseline is an alternative situation in 

which the Commission takes no action 

to conform, modernize, and make 

technical adjustments to its existing 

rules as described above in light of the 

Dodd-Frank Act amendments to the 

CEA. 

1. Costs and Benefits of the Conforming 

Amendments—In General 

As set forth in the Proposal, the 

regulations the Commission is adopting 

concern conforming and technical 

amendments to part 3 governing the 

registration of intermediaries. Although 

the conforming amendments do not 

involve substantive changes to existing 

regulations, and hence no significant 

changes to the costs or benefits of the 

same, the final rules do benefit market 

participants by adding specificity to the 

mechanics of registration, which also 

benefits customers in the form of 

increased transparency. For example, 

the conforming amendments will add 

references to SEFs in § 3.42 to clarify 

that a temporary license would 

immediately terminate upon failure to 

comply with an award in an arbitration 

proceeding conducted pursuant to the 

rules of a SEF. 

2. Costs and Benefits of the Definitions 

Current § 3.1(a) sets forth the 

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

carves out from that definition 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 adopting 

amendments to expand the carve-out to 

accommodate the likelihood that 

persons with capital contributions from 

foreign banks might register as SDs and 

thus be included within the definition 

of principal. This expanded definitional 

carve-out makes the foreign bank 

registration process consistent with that 

for domestic banks. This consistency 

promotes market efficiency by avoiding 

additional costs that foreign banks 

would otherwise incur to comply with 

listing and qualification requirements. 

No comments were received with 

respect to any cost or benefit 

implications of this definitional 

amendment, notwithstanding that the 

Commission specifically sought 

comments concerning it.30

3. Costs and Benefits of Section 3.10— 

Registration of Futures Commission 

Merchants, Retail Foreign Exchange 

Dealers, Introducing Brokers, 

Commodity Trading Advisors, 

Commodity Pool Operators, Swap 

Dealers, Major Swap Participants, and 

Leverage Transaction Merchants. 

Section 3.11—Registration of Floor 

Brokers and Floor Traders. 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 

Section 3.10 generally sets forth the 

registration requirements for various 

Commission registrants. The 

Commission has decided to implement 

the expansion of the existing exemption 

in § 3.10(c)(2) and (3), which will 

introduce parity between registration 

obligations of foreign brokers and 

foreign intermediaries conducting 

commodity interest transactions 

bilaterally, on DCMs, and on SEFs. The 

Commission expects such expansion of 

the exemption to reduce compliance 

costs without affecting customer 

protection. The Commission has also 

decided to implement the proposed new 

paragraph § 3.10(c)(5), which will 

provide regulatory certainty that the 

activities engaged in solely as an 

associated person of an SD would not 

require such person to register as an SD. 

The Commission believes that this 

amendment is beneficial by reducing 

the costs to market participants of 

approaching the Commission for 

clarifications. 

Section 3.11 is being amended to 

reflect the further definition of the term 

‘‘swap dealer’’ which, among, other 

things, excludes certain swaps entered 

into by registered floor traders from the 

SD determination. Traditionally, natural 

persons have registered as floor traders. 

However, following promulgation of 

rules further defining the term ‘‘swap 

dealer,’’ the Commission foresees that 

firms will register as floor traders, 

making the previous rule requiring 

fingerprinting for all floor traders 

impractical without clarification. The 

new rules clarify that principals of a 

firm registering as a floor trader, and 

each individual responsible for entry of 

orders from that floor trader’s own 

account, will be subject to the 

fingerprinting requirement. The 

Commission believes that this 

amendment is beneficial by obviating 

the need for potentially impacted 

market participants to incur costs to 

approach the Commission for 

clarifications. The other amendments 

extending the scope of § 3.11 to SEFs, 

while mainly technical in nature, will 

improve operational efficiency by 

allowing NFA to properly process 

applications for registration for floor 

traders engaged in swap activities. 

Section 3.12 generally sets forth the 

registration requirement for APs. The 

Commission is adopting an amendment 

to § 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. FIA agreed 

with the Commission that it is highly 

improbable that an individual, rather 

than an entity, would register as an SD 

and MSP, but supported the 

Commission’s proposal in light of the 

clarity it provides. As the change 

clarifies and extends the exemptions to 

activities of an SD or MSP, it will not 

create additional costs, and will benefit 

the markets by promoting efficiency by 

eliminating the need for multiple 

registrations by a single individual. 

4. Costs and benefits—DTEF 

The rules amendments adopted today 

delete the term DTEF from §§ 3.2(c), 

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


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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). 

This will implement the abolishment of 

DTEF as a market category by the DoddFrank Act. 

As this change is mandated by statute, 

it will not create costs and benefits 

relative to the baseline. No comments 

were received on the costs and benefits 

of this aspect of the Proposal. 

5. Cost and Benefits of Modernization 

and Technical Amendments to Part 3— 

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 adopting 

amendments to harmonize the 

references to outstanding classes of 

securities in § 3.1(a)(2)(i) and (ii) by 

referring throughout to ‘‘outstanding 

shares of any class of equity securities, 

other than non-voting securities.’’ The 

primary benefit from these amended 

regulations is that they provide 

specificity for calculations involving 

authorized but unissued securities, or 

debt securities. 

Also, the Commission is amending its 

regulations 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). The Commission received no 

comments with respect to the costs and 

benefits of this amendment. The 

Commission does not believe that this 

amendment will have a material impact 

on costs and benefits relative to the 

baseline. 

The rules incorporate revised 

language further defining the definition 

of principal to include any person who 

has the power to exercise a controlling 

influence over an entity’s activities that 

are subject to regulation by the 

Commission. As described earlier, the 

proposed amendments were designed to 

reduce the scope of persons who might 

potentially be covered by the definition. 

Under certain circumstances, the 

revised § 3.1(a)(2)(i) language 

referencing those with power to exercise 

a controlling influence could potentially 

increase the scope of persons covered by 

the definition. But, given that this 

amendment is similar to an existing 

requirement in Form BD covering 

broker-dealers, the Commission believes 

that any additional costs will be limited 

to the subset of firms that are not 

already registered with the SEC and 

within this subset, those firms which 

have individuals who are not subject to 

the existing equity ownership threshold, 

or the existing director or officer 

function threshold, but nonetheless who 

possess the power to exercise control. 

Given the nature of the control structure 

being addressed, while it is not feasible 

for the Commission to estimate the 

number of firms likely to be impacted 

by this rule, it believes that costs of 

complying with the rule are likely to be 

minimal because information on which 

owners of an entity exercise control is 

generally known to officers of that 

entity. Furthermore, the minimal costs 

are justified by the benefits to the 

market and market participants from 

ensuring that individuals cannot 

circumvent the fitness qualifications 

presently in place for principals by 

structuring their holdings into nonvoting securities, and then exercising 

control through a separate agreement. 

6. Costs and Benefits of Section 3.31— 

Deficiencies, Inaccuracies, and Changes 

To Be Reported, and 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 

NFA. Section 3.33 addresses the 

procedural requirements for the 

withdrawal of registration. The 

Commission is adopting amendments to 

§ 3.31(a) to reference the requirement in 

amended § 3.33 to withdraw registration 

upon certain events of dissolution, and 

in § 3.31(b), (c) and (d) to make 

technical corrections. 

The adopted amendments in § 3.31 

are technical and are not expected to 

involve costs, but will provide greater 

clarity by correcting references to 

outdated forms and by deleting 

duplicate instructions. The amendments 

to § 3.33 clarify the requirement to 

withdraw under certain circumstances 

involving dissolution of a company, and 

would improve the predictability of 

withdrawal requirements to the benefit 

of market participants. There were no 

comments on the costs and benefits of 

the proposed withdrawal requirements 

under § 3.33. 

7. Costs and Benefits of Registration 

Forms 

The Commission is adopting 

amendments to the regulations 

addressing the forms used during the 

registration process. These changes are 

technical in nature—for example, the 

changes would delete references to an 

obsolete form and obsolete crossreferences. The Commission does not 

believe that increased costs to market 

participants or the public will result 

from these changes. That said, the 

Commission believes they do provide a 

benefit by addressing gaps in the current 

information collected through the 

various forms, particularly those forms 

cross-referencing other data. 

There were no comments on the costs 

and benefits of the proposed technical 

amendments to the forms. 

8. Section 15(a) Factors 

• Protection of market participants 

and the public. 

The Commission believes that the 

amendments to § 3.33 will improve the 

protection of market participants and 

the public by requiring withdrawal of 

registration in the event of dissolution 

of a registrant, thus improving the 

protection of the public. 

• Efficiency, competitiveness, and 

financial integrity. 

The amendments to § 3.1 clarify the 

calculations used to determine who 

meets the definition of principal, 

reducing uncertainty surrounding 

compliance by intermediaries. The 

amendments to the regulations 

addressing the forms used during the 

registration process will update the 

description of information collection 

and make it more accurate, which 

improves the overall efficiency of our 

markets. 

• Price discovery. The Commission 

has not identified any impact to the 

price discovery process from these 

rules. 

• Sound risk management policies. 

The Commission has not identified any 

impact to sound risk management 

practices from these rules. 

• Other public interest 

considerations. The Commission has not 

identified any impact to other public 

interest considerations from these rules. 

List of Subjects in 17 CFR Part 3 

Administrative practice and 

procedure, Brokers, Commodity futures, 

Major swap participants, Reporting and 

recordkeeping requirements, Swap 

dealers. 

For the reasons stated in the 

preamble, the Commission amends 17 

CFR part 3 as follows: 

PART 3—REGISTRATION 

■ 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 paragraphs 

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

adding paragraph (a)(4), and removing 

and reserving paragraphs (d) and (e). 

The revisions and addition read as 

follows: 


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51904 Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Rules and Regulations 

§ 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 the regulations in this part: 

* * * * * 

(2)(i) Any individual who directly or 

indirectly, through agreement, holding 

company, nominee, trust or otherwise, 

is either 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, is entitled to receive ten 

percent or more of the profits of the 

entity, or has the power to exercise a 

controlling influence over the entity’s 

activities that are subject to regulation 

by the Commission; 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. 

* * * * * 

■ 3. Amend § 3.2 by revising the section 

heading and 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 and 

swap execution facility 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 or swap execution facility that 

has granted the applicant trading 

privileges that only a temporary license 

has been granted. 

* * * * * 

■ 4. Amend § 3.4 by revising paragraph 

(a) to read as follows: 

§ 3.4 Registration in one capacity not 

included in registration in any other 

capacity. 

(a) Except as may be otherwise 

provided in the Act or in any rule, 

regulation, or order of the Commission, 

each futures commission merchant, 

retail foreign exchange dealer, swap 

dealer, major swap participant, floor 

broker, floor trader of any commodity 

for future delivery, commodity trading 

advisor, commodity pool operator, 

introducing broker, leverage transaction 

merchant, and associated person (other 

than an associated person of a swap 

dealer or major swap participant) must 

register as such under the Act. Except as 

may be otherwise provided in the Act or 

in any rule, regulation, or order of the 

Commission, registration in one 

capacity under the Act shall not include 

registration in any other capacity. 

* * * * * 

■ 5. Amend § 3.10 by revising 

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

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

adding paragraph (c)(5) to read as 

follows: 

§ 3.10 Registration of futures commission 

merchants, introducing brokers, commodity 

trading advisors, commodity pool 

operators, swap dealers, major swap 

participants, 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 

bilaterally, on or subject to the rules of 

a designated contract market, or on or 

subject to the rules of a 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(nn) of this 

chapter, in connection with any 

commodity interest transaction 

executed bilaterally or 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 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 


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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 

the purpose of trading on any 

designated contract market. 

* * * * * 

(5) In determining whether a person is 

a swap dealer, the activities of a 

registered swap dealer with respect to 

which such person is an associated 

person shall not be considered. 

* * * * * 

■ 6. Revise § 3.11 to read as follows: 

§ 3.11 Registration of floor brokers and 

floor traders. 

(a) Application for registration. (1) 

Application for registration as a floor 

broker or floor trader must be on Form 

8–R, if as an individual, or Form 7–R, 

if as a non-natural person, and must be 

completed and filed with the National 

Futures Association in accordance with 

the instructions thereto. Each Form 7– 

R filed in accordance with this 

paragraph (a) must be accompanied by 

a Form 8–R, completed in accordance 

with the instructions thereto and 

executed by each individual who is a 

principal of the applicant, and each 

individual responsible for entry of 

orders from that applicant’s own 

account. Each Form 8–R filed in 

accordance with this paragraph (a) must 

be accompanied by the fingerprints of 

the applicant on a fingerprint card 

provided for that purpose by the 

National Futures Association, except 

that a fingerprint card need not be filed 

by any applicant who has a current 

Form 8–R on file with the Commission 

or the National Futures Association. 

(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 or registered as a 

swap execution facility 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 or 

swap execution facility 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 and 

swap execution facilities have ceased: 

provided, that if a floor broker or floor 

trader whose trading privileges on all 

contract markets and swap execution 

facilities have ceased for reasons 

unrelated to any Commission action or 

any contract market or swap execution 

facility 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 or swap execution 

facility where such person 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 

7–R, Form 8–R or Form 3–R record of 

a change to Form 7–R or 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 such person 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 and 

swap execution facility 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 or swap execution 

facility have ceased. 

(c) Exceptions. A registered floor 

broker need not also register as a floor 

trader in order to engage in activity as 

a floor trader. 

■ 7. Amend § 3.12 by revising 

paragraphs (b), (c) introductory text, (g), 

(h)(1) introductory text, and (h)(1)(i) and 

(ii) 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 the registrant’s 

sponsors. Such person will be 

prohibited from engaging in activities 

requiring registration under the Act or 

from representing himself or herself to 

be a registrant under the Act or the 

representative or agent of any registrant 

during the pendency of any suspension 

of his or her registration, or his or her 

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 


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51906 Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Rules and Regulations 

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; 

* * * * * 

■ 8. Amend § 3.21 by: 

■ a. Revising paragraphs (a)(1) and (2); 

■ b. Adding paragraph (a)(3); and 

■ c. Revising paragraphs (b)(1) through 

(3), (c) introductory text, and (c)(4)(i) 

and (iii). 

The revisions and addition 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 

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 this paragraph (a)(2) 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 individual floor trader: 

The applicant for registration; and with 

respect to fingerprints of each 

individual who is responsible for entry 

of orders from the account of a floor 

trader that is a non-natural person, 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, floor trader that is a 

non-natural person, 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) Outside directors. Any futures 

commission merchant, retail foreign 

exchange dealer, swap dealer, major 

swap participant, introducing broker, 

commodity pool operator, commodity 

trading advisor, floor trader that is a 

non-natural person, or leverage 

transaction merchant that has a 

principal who is a director but is not 

also an officer or employee of the firm 

may, in lieu of submitting a fingerprint 

card in accordance with the provisions 

of § 3.10(a)(2), file a ‘‘Notice Pursuant to 

Rule 3.21(c)’’ with the National Futures 

Association. Such notice shall state, if 

true, that such outside director: 

* * * * * 

(4) * * * 

(i) The name of the futures 

commission merchant, retail foreign 

exchange dealer, swap dealer, major 

swap participant, introducing broker, 

commodity trading advisor, commodity 

pool operator, floor trader that is a nonnatural person, leverage transaction 

merchant, or applicant for registration 

in any of these capacities of which the 

person is an outside director; 

* * * * * 

(iii) The internal controls used to 

ensure that the outside director for 

whom exemption under this paragraph 

(c) is sought does not have access to the 

keeping, handling or processing of the 

items described in paragraphs (c)(2)(i) 

and (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. Revise § 3.30 to read as follows: 

§ 3.30 Current address for purpose of 

delivery of communications from the 

Commission or the National Futures 

Association. 

(a) The address of each registrant, 

applicant for registration, and principal, 

as submitted on the application for 

registration (Form 7–R or Form 8–R) or 

as submitted on the biographical 

supplement (Form 8–R) shall be deemed 

to be the address for delivery to the 

registrant, applicant or principal for any 

communications from the Commission 

or the National Futures Association, 

including any summons, complaint, 

reparation claim, order, subpoena, 

special call, request for information, 

notice, and other written documents or 

correspondence, unless the registrant, 

applicant or principal specifies another 

address for this purpose: Provided that 

the Commission or the National Futures 

Association may address any 

correspondence relating to a 

biographical supplement submitted for 

or on behalf of a principal to the futures 

commission merchant, retail foreign 

exchange dealer, swap dealer, major 

swap participant, introducing broker, 

commodity pool operator, commodity 

trading advisor, floor trader that is a 

non-natural person, or leverage 

transaction merchant with which the 

principal is affiliated and may address 

any correspondence relating to an 

associated person to the futures 

commission merchant, retail foreign 

exchange dealer, swap dealer, major 

swap participant, introducing broker, 

commodity pool operator, commodity 

trading advisor, floor trader that is a 

non-natural person, or leverage 

transaction merchant with which the 

associated person or the applicant for 

registration is or will be associated as an 

associated person. 

(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 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Rules and Regulations 51907 

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, (c)(2), 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, swap dealer, 

major swap participant, commodity 

trading advisor, commodity pool 

operator, introducing broker, floor 

trader that is a non-natural person 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 a registrant has changed its 

form of organization to or from a sole 

proprietorship, the registrant must 

request withdrawal from registration in 

accordance with § 3.33. 

(3) Where any person becomes a 

principal of an applicant or registrant 

subsequent to the filing of the 

applicant’s or registrant’s current Form 

7–R: 

(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. 

(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, swap dealer, major 

swap participant, commodity trading 

advisor, commodity pool operator, 

introducing broker, floor trader that is a 

non-natural person, 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 

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: 

* * * * * 

(2) Each person registered as, or 

applying for registration as, a futures 

commission merchant, retail foreign 

exchange dealer, swap dealer, major 

swap participant, commodity trading 

advisor, commodity pool operator, 

introducing broker, floor trader that is a 

non-natural person, or leverage 

transaction merchant must, within 

thirty days after the termination of the 

affiliation of a principal with the 

registrant or applicant, file a notice 

thereof with the National Futures 

Association. 

* * * * * 

(d) Each contract market or swap 

execution facility 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 or swap execution 

facility. 

* * * * * 

■ 12. Amend § 3.33 by revising 

paragraphs (a) introductory text, (b) 

introductory text, and (e) to read as 

follows: 

§ 3.33 Withdrawal from registration. 

(a) A futures commission merchant, 

retail foreign exchange dealer, swap 

dealer, major swap participant, 

introducing broker, commodity trading 

advisor, commodity pool operator, floor 

trader that is a non-natural person, or 

leverage transaction merchant must 

request that its registration be 

withdrawn prior to any voluntary 

resolution to file 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, swap dealer, major swap 

participant, 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: 

* * * * * 

(b) A request for withdrawal from 

registration as a futures commission 

merchant, retail foreign exchange 

dealer, swap dealer, major swap 

participant, introducing broker, 

commodity trading advisor, commodity 

pool operator, floor trader that is a nonnatural person, or leverage transaction 

merchant must be made on Form 7–W, 

and a request for withdrawal from 

registration as a floor broker or 

individual floor trader must be made on 

Form 8–W, completed and filed with 

the National Futures Association in 

accordance with the instructions 

thereto. The request for withdrawal 

must be made by a person duly 

authorized by the registrant and must 

specify: 

* * * * * 

(e) A request for withdrawal from 

registration as a futures commission 

merchant, retail foreign exchange 

dealer, swap dealer, major swap 

participant, introducing broker, 

commodity pool operator, commodity 

trading advisor, floor trader that is a 

non-natural person, or leverage 

transaction merchant on Form 7–W, and 

a request for withdrawal from 

registration as a floor broker or 

individual floor trader on Form 8–W, 

must be filed with the National Futures 

Association and a copy of such request 

must be sent by the National Futures 

Association within three business days 

of the receipt of such withdrawal 

request to the Commodity Futures 

Trading Commission, Division of Swap 

Dealer and Intermediary Oversight, 

Three Lafayette Centre, 1155 21st Street 

NW., Washington, DC 20581. In 

addition, any floor broker or individual 

floor trader requesting withdrawal from 

registration must file a copy of his or her 

Form 8–W with each contract market or 

swap execution facility that has granted 

him or her trading privileges, and any 

floor trader that is a non-natural person 

requesting withdrawal from registration 

must file a copy of its Form 7–W with 

each contract market or swap execution 

facility that has granted it trading 

privileges. Within three business days of 

any determination by the National 

Futures Association under § 3.10(d) to 

treat the failure by a registrant to file an 

annual Form 7–R as a request for 

withdrawal, the National Futures 

Association shall send the Commission 

notice of that determination. 

* * * * * 


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51908 Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Rules and Regulations 

■ 13. Amend § 3.40 by revising 

paragraph (a)(2) introductory text and 

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

§ 3.40 Temporary licensing of applicants 

for associated person, floor broker or floor 

trader registration. 

(a) * * * 

(2) The National Futures Association 

may grant a temporary license to any 

applicant for registration as a floor 

broker or individual floor trader upon 

the contemporaneous filing with the 

National Futures Association of: 

* * * * * 

(iv) Evidence that the applicant has 

been granted trading privileges by a 

contract market or swap execution 

facility 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)(2), 

(a)(6), and (a)(8) to read as follows: 

§ 3.42 Termination. 

(a) A temporary license issued 

pursuant to § 3.40 shall terminate: 

* * * * * 

(2) Immediately upon termination of 

the association of the applicant for 

registration as an associated person with 

the registrant which filed the 

sponsorship certification, or 

immediately upon loss of trading 

privileges by an applicant for 

registration as a floor broker or floor 

trader on all contract markets and swap 

execution facilities which filed the 

certification described in § 3.40; 

* * * * * 

(6) 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 

contract market or other appropriate 

arbitration forum. 

* * * * * 

(8) Immediately upon notice to the 

applicant and the applicant’s sponsor or 

the contract market or swap execution 

facility 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 

paragraphs (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 

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 § 3.56 by revising 

paragraph (b)(1)(iv) to read as follows: 

§ 3.56 Suspension or modification of 

registration pursuant to section 8a(11) of 

the Act. 

* * * * * 

(b) * * * 

(1) * * * 

(iv) The statement accompanying the 

notice referred to in paragraph (a)(2) of 

this section and, in an effort to have his 

registration modified rather than 

suspended, the Supplemental Sponsor 

Certification Statement signed by a 

sponsor, supervising floor broker or, in 

the case of a floor trader, a supervising 

registrant, principal, contract market, or 

swap execution facility, as appropriate 

for the registrant in accordance with 

§ 3.60(b)(2)(i) and who meets the 

standards set forth in § 3.60(b)(2)(i)(A) 

and (C). 

* * * * * 

■ 18. Amend § 3.60 by revising 

paragraphs (b)(2)(i) introductory text, 

(f)(3), and (l) to read as follows: 

§ 3.60 Procedure to deny, condition, 

suspend, revoke or place restrictions upon 

registration pursuant to sections 8a(2), 

8a(3) and 8a(4) of the Act. 

* * * * * 

(b) * * * 

(2)(i) In the response, if the person is 

not an associated person, a floor broker 

or a floor trader or an applicant for 

registration in any of those capacities, 

the applicant or registrant shall also 

state whether he or she intends to show 

that registration would not pose a 

substantial risk to the public despite the 

existence of the disqualification set 

forth in the notice. If the person is an 

associated person, a floor broker or a 

floor trader or an applicant for 

registration in any of those capacities, 

the applicant or registrant shall also 

state whether he or she intends to show 

that full, conditioned or restricted 

registration would not pose a substantial 

risk to the public despite the existence 

of the disqualification set forth in the 

notice. If the person is an associated 

person or an applicant for registration as 

an associated person and intends to 

make such a showing, he or she must 

also submit a letter signed by an officer 

or general partner authorized to bind the 

sponsor whereby the sponsor agrees to 

sign a Supplemental Sponsor 

Certification Statement and supervise 

compliance with any conditions or 

restrictions that may be imposed on the 

applicant or registrant as a result of a 

statutory disqualification proceeding 

under this section; if the person is a 

floor broker or a floor trader or an 

applicant for registration in either 

capacity and intends to make such a 

showing, he or she must, in the case of 

a floor broker or applicant for 

registration as a floor broker, also 

submit a letter signed by his employer 

or if he or she has no employer by 

another floor broker or, in the case of a 

floor trader or applicant for registration 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Rules and Regulations 51909 

1See 17 CFR Part 3 (Registration). 

2For more information regarding BrokerCheck®, 

see http://www.finra.org/Investors/Tools

Calculators/BrokerCheck. 

as a floor trader, also submit a letter 

signed by an officer of the floor trader’s 

clearing member, if such officer is a 

registrant or a principal of a registrant, 

or the chief operating officer of each 

contract market or swap execution 

facility that has granted trading 

privileges, whereby the employer or 

floor broker, appropriate registrant, 

principal or chief operating officer (on 

behalf of the contract market or swap 

execution facility) agrees to sign a 

Supplemental Sponsor Certification 

Statement and supervise compliance 

with any conditions or restrictions that 

may be imposed on the applicant or 

registrant as a result of a statutory 

disqualification proceeding under this 

section; provided, that, with respect to 

such sponsor, supervising employer or 

floor broker, supervising registrant or 

principal: 

* * * * * 

(f) * * * 

(3) If the person is an associated 

person, a floor broker or a floor trader 

or an applicant for registration in any of 

those capacities, evidence that the 

applicant’s or registrant’s registration on 

a conditioned or restricted basis would 

be subject to supervisory controls likely 

both to detect future wrongdoing by the 

applicant or registrant and protect the 

public from any harm arising from 

future wrongdoing by the applicant or 

registrant. Any decision providing for a 

conditioned or restricted registration 

shall take into consideration the 

applicant’s or registrant’s statutory 

disqualification and the time period 

remaining on such statutory 

disqualification, and shall fix a time 

period after which the registrant and his 

or her sponsor, supervising employer or 

floor broker, or supervising registrant, 

principal, contract market, or swap 

execution facility may petition to lift or 

modify the conditions or restrictions in 

accordance with § 3.64. 

* * * * * 

(l) The failure of any sponsor, 

supervising employer or floor broker, or 

supervising registrant, principal, 

contract market, or swap execution 

facility to fulfill its obligations with 

respect to supervision or monitoring of 

a conditioned or restricted registrant as 

agreed to in the Supplemental Sponsor 

Certification Statement shall be deemed 

a violation of this rule under the Act. 

■ 19. Amend § 3.64 by revising 

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

§ 3.64 Procedure to lift or modify 

conditions or restrictions. 

(a) * * * 

(2) In the petition, the registrant and 

his or her sponsor, supervising 

employer or floor broker, or supervising 

registrant, principal, contract market, or 

swap execution facility shall be limited 

to a showing, by affidavit, that the 

conditions or restrictions have been 

satisfied pursuant to the order which 

imposed them. The affidavit must be 

sworn to by a person with actual 

knowledge of the registrant’s activities 

on behalf of the sponsor, supervising 

employer or floor broker, or supervising 

registrant, principal, contract market or 

swap execution facility. 

* * * * * 

■ 20. 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 Swap 

Dealer and Intermediary Oversight or 

his or her designee the authority to grant 

or deny requests filed pursuant to 

§ 3.12(g). The Director of the Division of 

Swap Dealer 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 of this part to the 

persons authorized to perform them 

thereunder. 

* * * * * 

Issued in Washington, DC, on August 15, 

2012, by the Commission. 

Sauntia S. Warfield, 

Assistant Secretary of the Commission. 

Appendices to Registration of 

Intermediaries—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 Sommers, Chilton and 

Wetjen voted in the affirmative; 

Commissioner O’Malia voted in the negative. 

Appendix 2—Statement of Chairman Gary 

Gensler 

I support the final rule to amend certain 

provisions of Part 3 of the Commission’s 

regulations regarding the registration of 

intermediaries. The final amendments are 

necessary to conform existing regulations to 

the new requirements in the Dodd-Frank 

Wall Street Reform and Consumer Protection 

Act. 

The final rule would amend Part 3 to 

facilitate the extension of the existing 

registration process to apply to new 

categories of registrants, such as swap dealers 

and major swap participants. Customers will 

benefit from the increased transparency of 

the registration process. The final 

amendments also modernize existing 

provisions that will apply to all Commission 

registrants. 

In addition, the Commission has made 

technical changes to permit legal entities (in 

addition to natural persons) to register as 

floor traders. This change was required to 

implement the exception from the definition 

of a swap dealer for floor traders that trade 

cleared swaps on swap execution facilities. 

Appendix 3—Statement of Commissioner 

Scott O’Malia 

I respectfully dissent with the Commodity 

Futures Trading Commission’s 

(‘‘Commission’’) final rule to adopt certain 

conforming amendments to part 3 of the 

Commission’s regulations regarding the 

registration of intermediaries.1 I find it 

disturbing that coming off of two widely 

publicized incidents of intermediary fraud 

and misappropriation of customer funds (i.e., 

MF Global Holdings and Peregrine Financial 

Group), the Commission is not adopting a 

rule that will provide customers with greater 

transparency of the professional and 

disciplinary background of Commission 

registrants. While I support most of what is 

included in this rule, I am unable to vote in 

the affirmative because of what has been 

excluded. The Commission indicates in the 

final rule that it will work with the National 

Futures Association (‘‘NFA’’) to increase 

transparency, but does not set forth any 

details describing how the Commission and 

NFA will accomplish that goal. 

The Commission and NFA should follow 

the lead of the Securities and Exchange 

Commission (‘‘SEC’’) and the Financial 

Industry Regulatory Authority (‘‘FINRA’’) in 

terms of how professional and disciplinary 

background information is disclosed to the 

potential customers of SEC-registered brokerdealers. FINRA’s BrokerCheck® is a tool that 

provides potential customers with detailed 

information regarding the professional 

backgrounds of current and former FINRAregistered brokerage firms and brokers, as 

well as investment adviser firms and 

representatives.2 Through BrokerCheck®, 

these customers can research certain criminal 

matters, regulatory actions, civil judicial 

proceedings, and financial matters in which 

the broker-dealer, one of its control affiliates, 

or representatives has been involved. 

Today’s futures markets need better 

technology solutions that will help futures 

customers make informed choices about the 

Commission-registered intermediaries with 

which they may wish to do business. Instead 

of promising to take action in the future, the 

Commission’s final rule should do everything 

it can right now to protect customer funds. 

I believe the final rule should enable the 

public to receive access to information about 

current and formerly registered 

intermediaries who may seek to attain 


sroberts on DSK5SPTVN1PROD with RULES
51910 Federal Register / Vol. 77, No. 167 / Tuesday, August 28, 2012 / Rules and Regulations 

positions of trust with potential futures 

customers. 

[FR Doc. 2012–20962 Filed 8–27–12; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Food and Drug Administration 

21 CFR Part 21 

[Docket No. FDA–2011–N–0252] 

Office of the Secretary 

45 CFR Part 5b 

Privacy Act, Exempt Record System 

AGENCY: Office of the Secretary, Food 

and Drug Administration, HHS. 

ACTION: Direct final rule. 

SUMMARY: The Food and Drug 

Administration (FDA) of the Department 

of Health and Human Services (HHS) 

will be implementing a new system of 

records, 09–10–0020, ‘‘FDA Records 

Related to Research Misconduct 

Proceedings, HHS/FDA/OC.’’ HHS/FDA 

is exempting this system of records from 

certain requirements of the Privacy Act 

to protect the integrity of FDA’s 

scientific misconduct inquiries and 

investigations and to protect the identity 

of confidential sources in such 

investigations. HHS/FDA is issuing a 

direct final rule for this action because 

the Agency expects that there will be no 

significant adverse comment on this 

rule. 

DATES: This rule is effective January 10, 

2013. Submit either electronic or 

written comments by November 13, 

2012. If HHS/FDA receives no 

significant adverse comments within the 

specified comment period, the Agency 

will publish a document confirming the 

effective date of the final rule in the 

Federal Register within 30 days after 

the comment period on this direct final 

rule ends. If timely significant adverse 

comments are received, the Agency will 

publish a document in the Federal 

Register withdrawing this direct final 

rule before its effective date. 

ADDRESSES: You may submit comments, 

identified by Docket No. FDA–2011–N– 

0252, by any of the following methods: 

Electronic Submissions 

Submit electronic comments in the 

following way: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Written Submissions 

Submit written submissions in the 

following ways: 

• FAX: 301–827–6870. 

• Mail/Hand delivery/Courier (For 

paper or CD–ROM submissions): 

Division of Dockets Management (HFA– 

305), Food and Drug Administration, 

5630 Fishers Lane, Rm. 1061, Rockville, 

MD 20852. 

Instructions: All submissions received 

must include the Agency name and 

docket number for this rulemaking. All 

comments received may be posted 

without change to http:// 

www.regulations.gov, including any 

personal information provided. For 

additional information on submitting 

comments, see the ‘‘Request for 

Comments’’ heading of the 

SUPPLEMENTARY INFORMATION section of 

this document. 

Docket: For access to the docket to 

read background documents or 

comments received, go to http:// 

www.regulations.gov and insert the 

docket number found in brackets in the 

heading of this document, into the 

‘‘Search’’ box and follow the prompts 

and/or go to the Division of Dockets 

Management, 5630 Fishers Lane, Rm. 

1061, Rockville, MD 20852. 

FOR FURTHER INFORMATION CONTACT: 

Frederick Sadler, Division of Freedom 

of Information, Office of Public 

Information and Library Services, Food 

and Drug Administration, 12420 

Parklawn Dr., Rockville, MD 20857, 

301–796–8975, 

Frederick.Sadler@fda.hhs.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

FDA is implementing a new system of 

records called the ‘‘FDA Records 

Related to Research Misconduct 

Proceedings.’’ The purpose of this 

system of records is to implement FDA’s 

responsibilities for addressing research 

integrity and misconduct, in accordance 

with the Public Health Service (PHS) 

Policies on Research Misconduct (42 

CFR part 93), for research performed by 

persons who are FDA employees, agents 

of the Agency, or who are affiliated with 

the Agency by contract or agreement. 

The term ‘‘research misconduct’’ is 

defined at 42 CFR 93.103 to mean 

‘‘fabrication, falsification, or plagiarism 

in proposing, performing, or reviewing 

research, or in reporting research 

results.’’ The general policy of the PHS 

Policies on Research Misconduct is that 

‘‘Research misconduct involving PHS 

support is contrary to the interests of the 

PHS and the Federal government and to 

the health and safety of the public, to 

the integrity of research, and to the 

conservation of public funds.’’ (42 CFR 

93.100(a)). The PHS Policies on 

Research Misconduct provide for a 

number of HHS administrative actions 

that can be taken in response to a 

research misconduct proceeding, such 

as the suspension of a contract, 

debarment, or an adverse personnel 

action against a Federal employee (42 

CFR 93.407). In addition, under 42 CFR 

93.401, FDA shall at any time during a 

research misconduct proceeding notify 

HHS’ Office of Research Integrity (ORI) 

immediately to ensure that FDA’s Office 

of Criminal Investigations, HHS Office 

of Inspector General, the Department of 

Justice, or other appropriate law 

enforcement agencies, are notified if 

there is a reasonable indication of 

possible violations of civil or criminal 

law. 

FDA’s new system of records will be 

modeled after the system of records 

maintained by ORI, entitled ‘‘HHS 

Records Related to Research Misconduct 

Proceedings, HHS/OPHS/ORI’’ System 

No. 09–37–0021 (59 FR 36717, July 19, 

1994; revised most recently at 75 FR 

44847, August 31, 2009). 

FDA’s scientific misconduct inquiry 

and investigation records are located in 

the Office of the Chief Scientist in 

FDA’s Office of the Commissioner. FDA 

is preparing to organize and operate 

these records as a ‘‘system of records’’ 

as that term is defined by the Privacy 

Act. FDA is publishing a System of 

Records Notice (SORN) for this system 

in the Federal Register 

contemporaneous with publication of 

this direct final rule. 

Under the Privacy Act (5 U.S.C. 552a), 

individuals have a right of access to 

information pertaining to them which is 

contained in a system of records. At the 

same time, the Privacy Act permits 

certain types of systems to be exempt 

from some of the Privacy Act 

requirements. For example, section 

552a(k)(2) of the Privacy Act allows 

Agency heads to exempt from certain 

Privacy Act provisions a system of 

records containing investigatory 

material compiled for law enforcement 

purposes. This exemption’s effect on the 

record access provision is qualified in 

that if the maintenance of the material 

results in the denial of any right, 

privilege, or benefit that the individual 

would otherwise be entitled to by 

Federal law, the individual must be 

granted access to the material except to 

the extent that the access would reveal 

the identity of a source who furnished 

information to the Government under an 

express promise that the identity of the 

source would be held in confidence. In 

addition, section 552a(k)(5) of the 

Privacy Act permits an Agency to 


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