Federal Register / Vol. 72, No. 62 / Monday, April 2, 2007 / Proposed Rules 15637 

1Commission regulations referred to herein are 

found at 17 CFR Ch. I (2006). References to trading 

on U.S. DCMs or DTEFs shall include trading that 

is subject to the rules of such entities as well. 

2See discussion of proposed new Regulation 

1.3(yy) defining the term ‘‘commodity interest,’’

infra. 

3 7 U.S.C. 1a(20) (2000). See also Regulation 

1.3(p). The definitions of CPO, CTA and IB 

similarly are applicable to transactions entered into 

on U.S. markets without regard to the location of 

the intermediary. See 7 U.S.C. 1a(5), (6) and (23), 

respectively. 

FAA AD Differences 

Note: This AD differs from the MCAI and/ 

or service information as follows: The MCAI 

and service bulletin require inspection A 

before the next flight and inspection B every 

25 flight hours. We consider before the next 

flight as an urgent safety of flight compliance 

time, and we do not consider this unsafe 

condition to be an urgent safety of flight 

condition. Because we do not consider this 

unsafe condition to be an urgent safety of 

flight condition, we issued this action 

through the normal notice of proposed 

rulemaking (NPRM) AD process. The time of 

50 hours TIS is an adequate compliance for 

this AD action and meets the FAA 

requirements of an NPRM. 

Other FAA AD Provisions 

(g) The following provisions also apply to 

this AD: 

(1) Alternative Methods of Compliance 

(AMOCs): The Manager, Standards Staff, 

FAA, ATTN: Sarjapur Nagarajan, Aerospace 

Engineer, FAA, Small Airplane Directorate, 

901 Locust, Room 301, Kansas City, Missouri 

64106; telephone: (816) 329–4145; fax: (816) 

329–4090, has the authority to approve 

AMOCs for this AD, if requested using the 

procedures found in 14 CFR 39.19. Before 

using any approved AMOC on any airplane 

to which the AMOC applies, notify your 

appropriate principal inspector (PI) in the 

FAA Flight Standards District Office (FSDO), 

or lacking a PI, your local FSDO. 

(2) Airworthy Product: For any requirement 

in this AD to obtain corrective actions from 

a manufacturer or other source, use these 

actions if they are FAA-approved. Corrective 

actions are considered FAA-approved if they 

are approved by the State of Design Authority 

(or their delegated agent). You are required 

to assure the product is airworthy before it 

is returned to service. 

(3) Reporting Requirements: For any 

reporting requirement in this AD, under the 

provisions of the Paperwork Reduction Act 

(44 U.S.C. 3501 et seq.), the Office of 

Management and Budget (OMB) has 

approved the information collection 

requirements and has assigned OMB Control 

Number 2120–0056. 

Related Information 

(h) Refer to MCAI EASA AD No. F–2004–

143, dated August 18, 2004; and Apex 

Aircraft Service Bulletin No. 040707, dated 

July 29, 2004, for related information. 

Issued in Kansas City, Missouri, on March 

27, 2007. 

Kim Smith, 

Manager, Small Airplane Directorate, Aircraft 

Certification Service. 

[FR Doc. E7–6015 Filed 3–30–07; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Parts 1, 3, 4, 15 and 166 

RIN 3038–AC26 

Exemption From Registration for 

Certain Foreign Persons 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Proposed rules. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’) is 

proposing to amend Commission 

Regulation 3.10 regarding the 

registration of firms located outside the 

U.S. that are engaged in commodity 

interest activities with respect to trading 

on U.S. designated contract markets 

(‘‘DCMs’’) and U.S. derivative 

transaction execution facilities 

(‘‘DTEFs’’).1 The amended regulation 

would codify past actions of the 

Commission or its staff permitting 

certain foreign firms that limit their 

customers to foreign customers to 

submit U.S. DCM and DTEF business on 

behalf of those customers for clearing on 

an omnibus basis through a registered 

futures commission merchant (‘‘FCM’’), 

without the foreign firm having to 

register as an FCM pursuant to section 

4d of the Commodity Exchange Act 

(‘‘Act’’). 

DATES: Comments must be received on 

or before May 2, 2007. 

ADDRESSES: Comments may be 

submitted, identified by RIN 3038–

AC26, by any of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: secretary@cftc.gov. Include 

‘‘Exemption from Registration for 

Certain Foreign Persons’’ in the subject 

line of the message. 

• Fax: 202/418–5521. 

• Mail or Courier: Send to Eileen A. 

Donovan, Acting Secretary, Commodity 

Futures Trading Commission, Three 

Lafayette Centre, 1155 21st St., NW., 

Washington, DC 20581. 

All comments received will be posted 

without change to http://www.cftc.gov, 

including any personal information 

provided. 

FOR FURTHER INFORMATION CONTACT: 

Lawrence B. Patent, Deputy Director, or 

Andrew V. Chapin, Special Counsel, at 

(202) 418–5430, Division of Clearing 

and Intermediary Oversight, Commodity 

Futures Trading Commission, Three 

Lafayette Centre, 1155 21st Street, NW., 

Washington, DC 20581. Electronic mail: 

1patent@cftc.gov or achapin@cftc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background Information 

A. Registration Requirements for 

Commodity Interest Activities on U.S. 

Markets 

Part 3 of the Commission’s regulations 

governs the registration of 

intermediaries engaged in the offer and 

sale of, and providing advice 

concerning, futures and commodity 

options traded on U.S. markets, 

including both DCMs and DTEFs. In 

particular, Regulation 3.10 sets forth the 

manner in which FCMs, introducing 

brokers (‘‘IBs’’), commodity trading 

advisors (‘‘CTAs’’), commodity pool 

operators (‘‘CPOs’’) and leverage 

transaction merchants must apply for 

registration with the Commission. 

Regulation 3.10(c) also provides an 

exemption from registration for certain 

persons. Currently, the only exemption 

from registration as an FCM is for any 

person trading solely for proprietary 

accounts, as defined in Regulation 

1.3(y). 

With respect to registration, the Act 

does not distinguish between an 

intermediary located within or outside 

the U.S., nor does that Act distinguish 

between a firm conducting commodity 

interest 2 activities on behalf of U.S. 

persons and those conducting such 

activities solely on behalf of persons 

located outside the U.S. For example, 

Section 1a(20) of the Act defines an 

FCM as a person that is 

(A) Engaged in soliciting or accepting 

orders for the purchase or sale of any 

commodity for future delivery on or subject 

to the rules of any contract market or 

derivatives transaction execution facility; and 

(B) in or in connection with such solicitation 

or acceptance of orders, accepts any money, 

securities or property (or extends credit in 

lieu thereof) to margin, guarantee, or secure 

any trades or contracts that result or may 

result therefrom.3

Section 4d(a) of the Act states that: 

[I]t shall be unlawful for any person to 

engage as [an FCM] * * * in soliciting or 

accepting orders for the purchase or sale of 

any commodity for future delivery, or 

involving any contracts of sale of any 

commodity for future delivery, on or subject 

to the rules of any contract market or 


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15638 Federal Register / Vol. 72, No. 62 / Monday, April 2, 2007 / Proposed Rules 

4 7 U.S.C. 6d(a)(1) (2000). 

5Administrative Determination No. 51 (March 17, 

1938). 

6 45 FR 30426 (May 8, 1980). The 1980 Federal 

Register release cited the Commission’s decision in 

In the Matter of AWiscope, S.A. CFTC Docket No. 

79–114 [1977–1990 Transfer Binder] Comm. Fut. L. 

Rep. (CCH) ¶ 20,785 at p. 23192, n. 12 (March 19, 

1979), vacated on other grounds, 604 F.2d 764 (2d 

Cir. 1979). In the Wiscope division, the Commission 

stated that: 

[A] foreign broker, like any other person or entity, 

is required to place all orders to buy or sell futures 

contracts through a registered futures commission 

merchant. Historically, futures commission 

merchants have often carried foreign brokers’

accounts as ‘omnibus accounts’ in which 

transactions for a broker’s customers are combined 

and carried in the name of the broker, rather than 

being accounted for and separately identified by the 

customer. 

7See, e.g., Regulations 15.05 and 17.04. 

8 48 FR 35247, 35261 (August 3, 1983). The 

Commission cited to prior iterations of this policy 

concept dating back to 1980, as well as to a staff 

letter on the topic issued in 1975. 45 FR 18356, 

18360 (March 20, 1980); 45 FR 80490 (December 5, 

1980); CFTC Staff Letter 75–12 [1975–1977 Transfer 

Binder] Comm. Fut. L. Rep. (CCH) ¶ 20,099 (October 

6, 1975). 

9 Id. An introducing broker is defined as a person 

engaged in soliciting or in accepting orders for 

futures and options contracts listed on any contract 

market or derivatives transaction execution facility 

that does not accept any money, securities, or 

property to margin any trades that result from such 

orders. See Section 1a(23) of the Act; see also 

Regulation 1.3(mm). 

10CFTC Staff Letter 89–07, [1987–1990 Transfer 

Binder] Comm. Fut. L. Rep. (CCH) ¶ 24,479 at 

36,096–97 (June 22, 1989); see also, CFTC Staff 

Letter 98–80, [1998–1999 Transfer Binder] Comm. 

Fut. L. Rep. (CCH) ¶ 27,503 (November 25, 1998); 

CFTC Staff Letter 93–113, [1992–1994 Transfer 

Binder] Comm. Fut. L. Rep. (CCH) ¶ 25,930 (October 

29, 1993); CFTC Staff Letter 92–19, [1992–1994 

Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 25,516 

(October 9, 1992). 

11A non-customer account would include 

accounts carried for persons closely related to the 

foreign broker such as a parent or subsidiary 

company, a director or a major shareholder. See 17 

CFR 1.17(b)(4). 

12CFTC Staff Letter 76–21, [1975–1977 Transfer 

Binder] Comm. Fut. L. Rep. (CCH) ¶ 20,222 (August 

15, 1976). OGC further noted that ‘‘[t]he pools trade 

through the London office of your company, which 

is a futures commission merchant registered with 

the Commission.’’ Id. 

derivatives transaction execution facility 

unless 

(1) Such person shall have registered, 

under this Act, with the Commission as such 

[FCM] * * * and such registration shall not 

have expired nor been suspended nor 

revoked; * * * 4

Accordingly a person located outside 

the U.S. engaged in FCM-type activity 

with respect to transactions entered into 

on a DCM or DTEF would be required 

to register as an FCM even though such 

person restricts its customer base to 

persons located outside of the U.S. 

B. Foreign Broker Exemption 

The term ‘‘foreign broker’’ never has 

been defined in the context of the Part 

3 registration requirements. Rather, the 

term ‘‘foreign broker’’ has been defined 

solely in the context of the financial 

surveillance reporting requirements set 

forth in Parts 15 to 21 of the 

Commission’s regulations. Specifically, 

Regulation 15.00(a)(1) defines ‘‘foreign 

broker’’ to mean ‘‘any person located 

outside the U.S. or its territories who 

carries an account in commodity futures 

or commodity options on any contract 

market for any other person.’’ In various 

contexts, the Commission has indicated 

that it would not require registration of 

a foreign broker that (1) limits its 

customers to foreign customers, (2) 

submits the trades of such foreign 

customers that are entered into on U.S. 

markets for clearing on an omnibus 

basis through a registered FCM, and (3) 

does not solicit or accept orders from 

U.S. customers for trading on U.S. 

markets. In contrast, the Commission 

always has maintained that any 

commodity interest activities 

undertaken by a foreign broker on behalf 

of any U.S. person for trading on or 

subject to the rules of a U.S. market 

would have required registration on the 

part of the foreign broker. 

The genesis of the ‘‘foreign broker 

exemption’’ occurred in 1938 when the 

Commodity Exchange Authority 

(‘‘CEA’’), the Commission’s predecessor, 

issued an Administrative Determination 

stating that the segregation requirements 

in Section 4d of the Act did not apply 

to foreign, non-clearing member firms 

because that provision, despite 

containing no express territorial 

limitation, was considered to be 

‘‘confined to the geographical area over 

which the law-making power has 

jurisdiction.’’ 5 The Commission notes 

that the scope of the CEA’s 

determination was restricted to nonclearing activities. 

In 1980, the Commission further 

addressed the participation of foreign 

persons on U.S. markets in a Federal 

Register release amending Part 15 of the 

Commission’s regulations. The 

Commission stated that: 

[F]oreign entities presently comprise a 

significant portion of the traders in various 

commodities on domestic exchanges. 

Nevertheless by engaging in futures trading 

in the United States, foreign persons, like 

domestic market participants, become subject 

to the regulatory scheme of the Commodity 

Exchange Act * * *.’’ 6

As a consequence, the Commission 

promulgated market surveillance 

reporting rules that contemplate that a 

foreign broker submits its trades for 

clearing on an omnibus basis through an 

FCM.7

In 1983, the Commission 

unambiguously set forth its policy 

regarding the registration of foreign 

brokers in a final rulemaking 

establishing the registration 

requirements and procedures for 

introducing brokers and other futures 

industry professionals. The Commission 

stated that 

Given this agency’s limited resources, it is 

appropriate at this time to focus [the 

Commission’s] customer protection activities 

upon domestic firms and upon firms 

soliciting or accepting orders from domestic 

users of the futures markets and that the 

protection of foreign customers of firms 

confining their activities to areas outside this 

country, its territories, and possessions may 

best be for local authorities in such areas.8

Accordingly, the Commission 

concluded that ‘‘a foreign broker would 

generally not need to register as an 

introducing broker.’’ 9

The Commission’s staff has taken 

action consistent with the Commission’s 

policy regarding the participation of 

foreign persons on U.S. markets. For 

example, in CFTC Staff Letter 89–07, 

Commission staff state that 

The Commission has not required a person 

located outside the United States which 

engages in the conduct described in section 

2(a)(1)(A) of [the Act] for or on behalf of 

foreign customers through a U.S. FCM to 

register as an FCM. Specifically, the 

Commission has not required a foreign broker 

as that term is defined in rule 15.00(a)(1) to 

register as an FCM.10

The Commission notes that, by 

limiting the exemptive relief to 

activities conducted ‘‘through a U.S. 

FCM,’’ staff did not extend the 

exemptive relief available to a foreign 

broker to include the submission of 

trades executed for its customer and 

non-customer accounts directly to a 

clearing organization for a U.S. 

market.11

In addition, the Commission’s Office 

of General Counsel (‘‘OGC’’) issued an 

interpretative letter in 1976 addressing 

the participation of foreign-based CPOs 

and CTAs on U.S. markets. In its letter, 

OGC stated that a person who operates 

commodity pools outside of the 

territorial U.S. is not required to register 

as a CPO when such a person confines 

the pool activities to areas outside the 

territorial U.S., none of the participation 

in the pool is a resident or citizen of the 

U.S., and none of the funds or capital 

contributed to the pools are from U.S. 

sources.12 The OGC interpretative letter 

also stated that a trading advisor located 

outside the territorial U.S. who provides 

advice as to the advisability of trading 

futures contracts on domestic and 

foreign exchanges is not required to 

register when such a person confines its 

advisory services to areas outside of the 


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Federal Register / Vol. 72, No. 62 / Monday, April 2, 2007 / Proposed Rules 15639 

13 Id. 14The limitation applies to solicitation as well as 

acceptance of orders. Accordingly, if a person 

located outside of the U.S. were to solicit 

prospective customers located in the U.S. as well 

as outside the U.S., this exemption would not be 

available, even if the only customers resulting from 

the efforts were located outside of the U.S. 

15Consistent with existing Commission 

regulations, the proposed regulations refer to the 

United States, its territories and possessions. 

16See Quill Corp. v. North Dakota, 504 U.S. 298, 

307–308 (1992) (holding that if a foreign 

corporation purposefully avails itself of the benefits 

of an economic market in the forum State, it may 

subject itself to the in personam jurisdictiion even 

if it has no physical presence in the State); Burger 

King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985) 

(‘‘it is an inescapable fact of modern commercial 

life that a substantial amount of business is 

transacted solely by mail and wire communications 

across state lines, thus obviating the need for 

physical presence within a State in which business 

is conducted.’’). 

17The Commission is not aware that this type of 

arrangement has caused hardship for registered 

FCMs located in the U.S., such as any requirement 

imposed upon them by foreign regulators because 

they submit for clearing by a DCO transactions for 

persons located outside of the U.S. The Commission 

similarly permits a firm located outside of the U.S. 

whose only contact with U.S. customers consists of 

acting as the clearing firm for transactions executed 

on or subject to the rules of a foreign board of trade 

on an omnibus basis to do so without being 

registered as an FCM. 17 CFR 30.4(a). 

territorial U.S., and none of its clients is 

a citizen or resident of the U.S.13

The Commission believes that it is 

appropriate at this time to codify the 

‘‘foreign broker exemption’’ as a means 

to provide greater legal certainty with 

respect to the commodity interest 

activities undertaken by those persons 

located outside the U.S. on U.S. 

markets. Accordingly, the Commission 

is proposing to amend Regulation 

3.10(c) to exempt from registration as an 

FCM any person that (1) limits its 

customers to customers located outside 

the U.S.14 (2) confines its commodity 

interest activities to areas outside the 

U.S. and (3) submits its trades for 

clearing on an omnibus basis through a 

registered FCM. 

II. Proposed Regulations 

The Commission proposes to amend 

Regulation 3.10(c) to provide a limited 

exemption from registration to certain 

persons located outside the U.S. that 

engage in brokerage activities on 

domestic markets on behalf of 

customers located outside the U.S. 

Specifically, the Commission proposes 

to codify the ‘‘foreign broker 

exemption’’ previously articulated by 

the Commission and its staff by 

amending Regulation 1.3 to include a 

new definition of ‘‘foreign broker.’’ The 

existing definition of ‘‘foreign broker’’ in 

Regulation 15.00(g) is limited in context 

to the market surveillance reporting 

requirements set forth in Parts 15 to 21 

of the Commission’s regulations. 

Proposed Regulation 1.3(xx) would 

define ‘‘foreign broker’’ as a person 

located outside the U.S.15 who acts in 

the capacity of an FCM, as described in 

Regulation 1.3(p), and who solicits or 

accepts orders for execution on or 

subject to the rules of U.S. markets from 

persons outside the U.S. Unlike the 

Regulation 15.00(g) definition, the 

application of Proposed Regulation 

1.3(xx) would not be restricted to a 

particular part of the Commission’s 

regulations. In conjunction with the 

provisions to Regulation 3.10(c) 

described below, the new definition of 

‘‘foreign broker’’ would clarify that the 

commodity interest activities 

undertaken on U.S. markets by a person 

located outside the U.S. are subject to 

general Commission oversight, and not 

limited to the market surveillance 

activities described in Parts 15 to 21 of 

the Commission’s regulations. 

The Commission also is proposing to 

amend Regulation 1.3 to add new 

paragraph (yy) to provide a definition of 

the term ‘‘commodity interest.’’

Regulation 4.10(a)(1) currently defines 

‘‘commodity interest’’ to mean: (1) any 

contract for the purchase or sale of a 

commodity for future delivery; and (2) 

any contract, agreement or transaction 

subject to Commission regulation under 

Section 4c or 19 of the Act. This 

definition of ‘‘commodity interest.’’

includes not only futures contracts, but 

options on futures and cash 

commodities traded on U.S. markets. 

Regulation 4.10(a)(1), however, applies 

only to Part 4 of the Commission’s 

regulations governing CPOs and CTAs. 

Rather than address the commodity 

interest activities of foreign brokers and 

other persons located outside the U.S. 

by reference to Regulation 4.10(a)(1), the 

Commission is proposing to promulgate 

new Regulation 1.3(yy) to clarify that 

these activities are subject to the 

Commission’s general oversight, 

including the registration requirements 

set forth in Part 3 of the Commission’s 

regulations. In order to eliminate any 

confusion resulting from duplicate 

regulations, the Commission proposes 

further to remove the existing definition 

of ‘‘foreign broker’’ from Regulation 

15.00(g), and the existing definitions of 

‘‘commodity interest’’ from 1.56(a), 

3.1(f), 4.10(a), and 166.1(a), respectively. 

In addition to the proposed changes to 

Part 1 of the Commission’s regulations, 

the Commission proposes to amend 

Regulation 3.10(c) to exempt from FCM 

registration any foreign broker, as 

defined in new Regulation 1.3(xx), that 

submits customer or proprietary trades 

executed on or subject to the rules of 

U.S. markets for clearing on an omnibus 

basis through a fully registered FCM. 

Any foreign broker eligible for such 

relief would be required to continue to 

comply with all other provisions of the 

Act and of the rules, regulations and 

orders thereunder, including the 

reporting requirements set forth in Parts 

15 to 21 of the Commission’s 

regulations. 

The Commission has not proposed to 

extend the exemption from FCM 

registration to permit a foreign broker to 

become a remote clearing member of a 

derivatives clearing organization 

(‘‘DCO’’) without having to register as an 

FCM. A firm routinely submitting 

customer positions for clearing by a 

DCO is not confining its activities to 

areas located outside this country.16 As 

a result, the proposal would require the 

foreign broker to submit all of its trades, 

both customer and proprietary, for 

clearing through a registered FCM. In 

addition, the Commission notes that it 

always has been concerned about 

oversight of clearing member firms 

because of the potential for systemic 

risk. 

The Commission also believes that 

remote clearing raises material policy 

issues with respect to both the financial 

integrity of the markets and customer 

protection. For example, FCM 

registrants are subject to requirements 

concerning fitness, capital, treatment of 

funds, recordkeeping, and ongoing 

reporting, and FCM compliance and 

these standards are monitored by the 

Commission, and the relevant selfregulatory organization. Exemption from 

registration would relinquish those 

safeguards.17

Comments regarding the proposed 

amendment to Regulation 3.10(c) and 

the corresponding amendments to 

related regulations should not be 

limited to the areas cited above, but 

rather should address all aspects of the 

Commission’s regulatory program, 

including its goals to protect investors 

and the public interest; to promote fair 

competition, market efficiency, 

innovation and the expansion of 

investment opportunities; and to 

maintain fair and orderly markets. 

III. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’), 5 U.S.C. 601–611, requires that 

agencies, in proposing regulations, 

consider the impact of those regulations 

on small businesses. The Commission 

has previously established certain 

definition of ‘‘small entities’’ to be used 


rmajette on PROD1PC67 with PROPOSALS
15640 Federal Register / Vol. 72, No. 62 / Monday, April 2, 2007 / Proposed Rules 

18 47 FR 18618–18621 (April 30, 1982). 

19 47 FR 18619–18620. 

by the Commission in evaluating the 

impact of its regulations on such entities 

in accordance with the RFA.18 The 

Commission previously has determined 

that registered FCMs are not small 

entities for the purpose of the RFA 

because each FCM has an underlying 

fiduciary relationship with its 

customers, regardless of the size of the 

FCM.19 The Commission notes that the 

foreign persons affected by the proposed 

changes to the Commission’s regulations 

would be registered as FCMs if not for 

the exemption provided therein and, as 

such, would maintain a fiduciary 

relationship with customers similar to 

the relationship maintained by each 

registered FCM. Therefore, the 

Chairman, on behalf of the Commission, 

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

605(b), that these proposed regulations 

will not have a significant economic 

impact on a substantial number of small 

entities. Nonetheless, the Commission 

specifically requests comment on the 

impact these proposed rules may have 

on small entities. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(‘‘PRA’’) (44 U.S.C. 3501 et seq. (Supp. 

I 1995)) imposes certain requirements 

on federal agencies (including the 

Commission) in connection with their 

conducting or sponsoring any collection 

of information as defined by the PRA. 

While the proposed rule discussed 

herein has no burden, the group of rules 

(3038–0023, Rules, Regulations and 

Forms for Domestic and Foreign Futures 

and Options Related to Registration 

with the Commission) of which it is a 

part has the following burden: 

Average Burden Hours Per Response: 18.11 

Number of Respondents: 76,750. 

Frequency of Response: Annually and On 

Occasion. 

The Office of Management and Budget 

(‘‘OMB’’) approved the collection of 

information associated with the group of 

rules on August 17, 2004. Copies of the 

OMB-approved information collection 

submission are available from the CFTC 

Clearance Officer, 1155 21st Street, 

NW., Washington, DC, 20581 (202) 418–

5160. 

C. Costs and Benefits of the Proposed 

Rules 

Section 15(a) of the Act requires the 

Commission to consider the costs and 

benefits of its actions before issuing new 

regulations under the Act. By its terms, 

Section 15(a) does not require the 

Commission to quantify the costs and 

benefits of new regulations or to 

determine whether the benefits of the 

proposed regulations outweigh their 

costs. Rather, Section 15(a) requires the 

Commission to ‘‘consider the cost and 

benefits’’ of the subject regulations. 

Section 15(a) further specifies that the 

costs and benefits of the proposed 

regulations shall be evaluated in light of 

five broad areas of market and public 

concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. The 

Commission may, in its discretion, give 

greater weight to any one of the five 

enumerated areas of concern and may, 

in its discretion, determine that, 

notwithstanding its costs, a particular 

regulation is necessary or appropriate to 

protect the public interest or to 

effectuate any of the provisions or to 

accomplish any of the purposes of the 

Act. 

The proposed regulations should 

foster the protection of market 

participants and the public by providing 

greater legal certainty to the commodity 

interest activities of persons located 

outside the U.S. As the activity set forth 

in the proposed regulations presently is 

permitted under staff interpretation and 

no-action, the proposed regulations 

should have no material impact from 

the standpoint of imposing costs or 

creating benefits, on efficiency, 

competitiveness and financial integrity 

of financial markets, price discovery, 

sound risk management practices, or 

any other public interest considerations. 

List of Subjects 

17 CFR Part 1 

Definitions, Registration, Minimum 

financial and reported requirements, 

Prohibited transactions in commodity 

options, Customers’ money, securities 

and property, Miscellaneous. 

17 CFR Part 3 

Definitions, Foreign futures, 

Consumer protection, Foreign options, 

Registration requirements. 

17 CFR Part 4 

Advertising, Commodity futures, 

Consumer Protection, Recordkeeping 

and reporting requirements. 

17 CFR Part 5 

Brokers, Reporting and recordkeeping 

requirements. 

17 CFR Part 166 

Authorization to trade, Customer 

protection. 

In consideration of the foregoing, and 

pursuant to the authority contained in 

the Commodity Exchange Act and, in 

particular, Sections 2(a)(1), 4(b), 4c and 

8a thereof, 7 U.S.C. 2, 6(b), 6c and 12a 

(1982), and pursuant to the authority 

contained in 5 U.S.C. 552 and 552b 

(1982), the Commission hereby proposes 

to amend Chapter I of Title 17 of the 

Code of Federal Regulations as follows: 

PART 1—DEFINITIONS 

1. The authority citation for part 1 

continues to read as follows: 

Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 

6d, 6e, 6f, 6g, 6h, 6i, 6j, 6k, 6l, 6m, 6n, 6o, 

6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c, 13a, 13a–1, 

16, 16a, 19, 21, 23, and 24, unless otherwise 

noted. 

2. Section 1.3 is amended by adding 

paragraphs (xx) and (yy) to read as 

follows: 

§ 1.3 Definitions. 

* * * * * 

(xx) Foreign Broker. This term means 

any person located outside the United 

States, its territories or possessions who 

is engaged in soliciting or in accepting 

orders only from persons located 

outside the United States, its territories 

or possessions for the purchase or sale 

of any commodity interest transaction 

on or subject to the rules of any 

designated contract market or 

derivatives transaction execution 

facility and that, in or in connection 

with such solicitation or acceptance of 

orders, accepts any money, securities or 

property (or extends credit in lieu 

thereof) to margin, guarantee, or secure 

any trades or contracts that result or 

may result therefrom. 

(yy) Commodity Interest. This term 

means: (1) Any contract for the purchase 

or sale of a commodity for future 

delivery; and (2) any contract, 

agreement or transaction subject to 

Commission regulation under section 4c 

or 19 of the Act. 

§ 1.56 [Amended] 

Section 1.56 is amended by removing 

and reserving paragraph (a). 

PART 3—REGISTRATION 

4. The authority citation for part 3 

continues to read as follows: 

Authority: 5 U.S.C. 522, 522b; 7 U.S.C. 1a, 

2, 4, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 6h, 6i, 6k, 

6m, 6n, 6o, 6p, 8, 9, 9a, 12, 12a, 13b, 13c, 

16a, 18, 19, 21, 23, unless otherwise noted. 

§ 3.1 [Amended] 

5. Section 3.1 is amended by 

removing and reserving paragraph (f). 

6. Section 3.10 is amended by revising 

paragraph (c) to read as follows: 


rmajette on PROD1PC67 with PROPOSALS
Federal Register / Vol. 72, No. 62 / Monday, April 2, 2007 / Proposed Rules 15641 

§ 3.10 Registration of futures commission 

merchants, introducing brokers, commodity 

trading advisors, commodity pool operators 

and leverage transaction merchants. 

* * * * * 

(c) Exemption from registration for 

certain persons. (1) A person trading 

solely for proprietary accounts, as 

defined in § 1.3(y) of this chapter, is not 

required to register as a futures 

commission merchant: Provided, that 

such a person remains subject to all 

other provisions of the Act and of the 

rules, regulations and orders 

thereunder. 

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

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

to register as a futures commission 

merchant if it submits any commodity 

interest transactions executed on or 

subject to the rules of designated 

contract market or derivatives 

transaction execution facility for 

clearing on an omnibus basis through a 

futures commission merchant registered 

in accordance with section 4d of the 

Act. 

(ii) A foreign broker acting in 

accordance with paragraph (c)(2)(i) of 

this section remains subject to all other 

provisions of the Act and of the rules, 

regulations and orders thereunder. 

PART 4—COMMODITY POOL 

OPERATORS AND COMMODITY 

TRADING ADVISORS 

7. The authority citation for part 4 

continues to read as follows: 

Authority: 7 U.S.C. 1a, 2, 4, 6(c), 6b, 6c, 6l, 

6m, 6n, 6o, 12a and 23. 

§ 4.10 [Amended] 

8. Section 4.10 is amended by 

removing and reserving paragraph (a). 

PART 15—REPORTS—GENERAL 

PROVISIONS 

9. The authority citation for part 15 

continues to read as follows: 

Authority: 7 U.S.C. 2, 5, 6(c), 6a, 6c(a)–(d), 

6f, 6g, 6i, 6k, 6m, 6n, 7, 9, 12a, 19 and 21, 

as amended by the Commodity Futures 

Modernization Act of 2000, Appendix E of 

Pub. L. 106–554, 114 Stat. 2763 (2000). 

§ 15.00 [Amended] 

10. Section 15.00 is amended by 

removing and reserving paragraph (g). 

PART 166—CUSTOMER PROTECTION 

RULES 

11. The authority citation for part 166 

continues to read as follows: 

Authority: 7 U.S.C. 1a, 2, 6b, 6c, 6d, 6g, 6h, 

6k, 6l, 6o, 7, 12a, 21, and 23, as amended by 

the Commodity Futures Modernization Act of 

2000, Appendix E of Pub. L. 106–554, 114 

Stat. 2763 (2000). 

§ 166.1 [Amended] 

12. Section 166.1 is amended by 

removing and reserving paragraph (b). 

Dated: March 23, 2007. 

By the Commission. 

Eileen A. Donovan, 

Acting Secretary of the Commission. 

[FR Doc. 07–1522 Filed 3–30–07; 8:45 am] 

BILLING CODE 6351–01–M 

DEPARTMENT OF AGRICULTURE 

Forest Service 

36 CFR Part 261 

RIN 0596–AC30 

Clarifying Prohibitions for Failure To 

Maintain Control of Fires That Damage 

National Forest System Lands 

AGENCY: Forest Service, USDA. 

ACTION: Proposed rule; request for 

comment. 

SUMMARY: The Forest Service is 

proposing to revise 36 CFR part 261, 

Prohibitions, to establish a new 

prohibition for starting and negligently 

failing to maintain control of a 

prescribed fire. Proof of criminal 

negligence is required of this offense. 

The Forest Service also is proposing to 

clarify that the prohibition for causing 

and failing to maintain control of all 

other fires is a strict liability offense, not 

requiring proof of criminal intent. In 

implementing the National Fire Plan, 

the Forest Service has encouraged 

adjacent landowners to develop 

integrated fire management plans for the 

use of prescribed fire for the restoration 

and protection of private lands adjacent 

to National Forest System lands. 

Without the proposed changes, adjacent 

landowners might be discouraged from 

using prescribed fire. 

DATES: Comments must be received in 

writing by June 1, 2007. 

ADDRESSES: Written comments 

concerning this notice should be 

addressed to USDA Forest Service, State 

and Private Forestry, Stop 1109, 1400 

Independence Avenue, SW., 

Washington, DC 20250–1109. 

Comments may also be sent via e-mail 

to spf@fs.fed.us or via facsimile to 202–

205–1174. All comments, including 

names and addresses when provided, 

are placed in the record and are 

available for public inspection and 

copying. The public may inspect 

comments received at USDA Forest 

Service, State and Private Forestry, 1400 

Independence Avenue, SW., 

Washington, DC 20250–1109. Visitors 

are encouraged to call ahead to 202–

205–1331 to facilitate entry into the 

building. 

FOR FURTHER INFORMATION CONTACT: 

Denny Truesdale, State and Private 

Forestry, 202–205–1588. Individuals 

who use telecommunication devices for 

the deaf (TDD) may call the Federal 

Information Relay Service (FIRS) at 1–

800–877–8339 between 8 a.m. and 8 

p.m., Eastern Standard Time, Monday 

through Friday. 

SUPPLEMENTARY INFORMATION: The 

following outline contains the contents 

of the SUPPLEMENTARY INFORMATION

section of this proposed rule: 

Background 

Regulatory Certifications 

Regulatory Impact 

Environmental Impact 

Federalism 

Consultation With Tribal governments 

No takings Implications 

Controlling Paperwork Burdens on the 

Public 

Energy Effects 

Civil Justice Reform 

Unfunded Mandates 

List of Subjects in Part 261 

Background 

A new paragraph (c) would be added 

to section 261.1, Scope, to clarify that 

unless criminal intent (‘‘mens rea’’) is 

expressly required in the provision 

setting forth the offense, strict liability 

would apply. Whether criminal intent is 

a required element of an offense is a 

question of statutory construction. 

Where a statute or regulation does not 

expressly require criminal intent, 

‘‘silence on this point by itself does not 

necessarily suggest that Congress 

intended to dispense with the 

conventional mens rea element * * *’’

Staples v. United States, 511 U.S. 600, 

605 (1994). As a general rule, absent a 

clear indication of legislative intent, 

courts require proof of intent for 

criminal offenses. See Id. at 605, for a 

discussion of cases that support this 

well-established principle. 

However, the general presumption 

that some guilty intent or purpose is 

required does not apply to ‘‘public 

welfare offenses.’’ These are offenses 

that typically impose penalties to serve 

as an effective means of regulation. Id. 

At 606 (‘‘[i]n construing such statutes, 

we have inferred from silence that 

Congress did not intend to require proof 

of mens rea to establish an offense’’). 

Public welfare offenses are those that 

‘‘are not of the nature of positive 

aggressions or invasions, with which the 

common law so often dealt, but are in 

the nature of neglect where the law 

requires care, or inaction where it 

imposes duty.’’ Morissette v. United 

States, 342 U.S. 246, 255 (1952). Public 


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