43930 Federal Register / Vol. 62, No. 159 / Monday, August 18, 1997 / Rules and Regulations

1 7 U.S.C. § 1 et seq. (1994).

2The second sentence of Section 4m(1) provides

that:

The [registration] provisions of this section shall

not apply to any [CTA] who is a (1) dealer,

processor, broker, or seller in cash market

transactions of any commodity specifically set forth

in [S]ection 2(a) of this Act prior to the enactment

of the Commodity Futures Trading Commission Act

of 1974 (or products thereof) or (2) nonprofit,

voluntary membership, general farm organization,

who provides advice on the sale or purchase of any

commodity specifically set forth in [S]ection 2(a) of

this Act prior to the enactment of the Commodity

Futures Trading Commission Act of 1974; if the

advice by the person described in clause (1) or (2)

of this sentence as a [CTA] is solely incidental to

the conduct of that person’s business: Provided,

That such person shall be subject to proceedings

under [S]ection 14 of this Act.

7 U.S.C. § 6m(1) (1994) (emphasis added).

Commission Rules 4.14(a) (1) and (2) also provide

that Cash Dealers are exempt from CTA registration

but make no mention of reparations jurisdiction.

Commission rules referred to herein are found at 17

CFR Ch. I (1997).

This Advisory does not address the scope of the

exemption from CTA registration under Section

4m(1) of the Act or under Rules 4.14(a) (1) and (2).

3Section 14(a)(1) provides, in relevant part, that:

Any person complaining of any violation of any

provision of this Act or any rule, regulation, or

order issued pursuant to this Act by any person

who is registered under this Act may, at any time

within two years after the cause of action accrues,

apply to the Commission for an order awarding—

(A) actual damages proximately caused by such

violation. * * * and (B) in the case of any action

arising from a willful and intentional violation in

the execution of an order on the floor of a contract

market, punitive or exemplary damages equal to no

more than two times the amount of such actual

damages * * *.

7 U.S.C. § 18(a)(1) (1994) (emphasis added). As

amended by the Futures Trading Act of 1978,

Section 14(a) provided that a reparations complaint

could be filed with the Commission by ‘‘[a]ny

person complaining of any violation of any

provision of this Act or any rule, regulation, or

order thereunder by any person who is registered

or required to be registered under [S]ection 4d, 4e,

4k, or 4m of this Act * * *.’’ Pub. L. No. 95–405,

§ 21, 92 Stat. 865, 876–76 (1978) (emphasis added).

The Futures Trading Act of 1982 (‘‘1982 Act’’)

subsequently amended Section 14(a) to eliminate

reparations jurisdiction over persons ‘‘required to

be registered’’ under the Act. Pub. L. No. 97–444,

§ 231, 96 Stat. 2294, 2319 (1983).

4 In 1983, the Commission amended its

reparations rules by promulgating interim

reparations rules to implement the 1982 Act’s

amendment of Section 14(a), which eliminated

reparations jurisdiction over persons ‘‘required to

be registered’’ under the Act. 48 FR 21923 (May 16,

1983). In Rule 12.21 of the interim rules, the

Commission retained reparations jurisdiction over

registrants but eliminated those persons who were

‘‘required to be registered’’ under the Act as

potential reparations respondents. The Commission

also modified Rule 12.21 by adding, for the first

time, persons ‘‘exempt from registration as [CTAs]

by virtue of the second sentence of Section 4m’’ as

a class of potential reparations respondents. Id. at

21924. The Commission explained that under

Section 4m:

Certain dealers, processors, brokers, or sellers in

cash market transactions in agricultural

commodities and non-profit general farm

organizations who provide advice on agricultural

commodities are exempt from having to register as

[CTAs]. Nevertheless Section 4m provides that such

persons are subject to proceedings in reparations.

Nothing in the 1982 amendments has affected this

provision of the Act. Thus, * * * the Commission

will continue to hear reparations claims filed

against persons who, at the time of the violation,

were exempt from registration pursuant to Section

4m of the Act.

Id. (emphasis added).

5The Commission replaced interim Rule 12.21

with Rule 12.13(a) and moved its list of Part 12

definitions to Rule 12.2. 49 FR 6602, 6622–23, 6626

(February 22, 1984).

6 50 FR 15868, 15881 n. 77 (April 23, 1985); see

also 49 FR 4778, 4783 (February 8, 1984) (proposing

the Part 4 amendments).

Issued in Kansas City, Missouri, on August

11, 1997.

Michael Gallagher,

Manager, Small Airplane Directorate, Aircraft

Certification Service.

[FR Doc. 97–21788 Filed 8–15–97; 8:45 am]

BILLING CODE 4910–13–P

COMMODITY FUTURES TRADING

COMMISSION

17 CFR Part 12

Commission’s Reparations

Jurisdiction Over Commodity Trading

Advisors Exempt From Registration

Under Section 4m(1) of the Commodity

Exchange Act

AGENCY: Commodity Futures Trading

Commission.

ACTION: Advisory.

SUMMARY: The Commodity Futures

Trading Commission (‘‘Commission’’) is

clarifying its reparations jurisdiction

over certain commercial agricultural

cash market participations and

nonprofit general farm organizations

referred to in Section 4m(1) of the

Commodity Exchange Act (‘‘Act’’).1

Provided that these persons furnish

commodity trading advice that is solely

incidental to the conduct of their

business, these persons are exempt from

registration as commodity trading

advisors (‘‘CTAs’’) pursuant to Section

4m(1) of the Act, but are subject to

reparations proceedings under Section

14 of the Act.

EFFECTIVE DATE: August 18, 1997.

FOR FURTHER INFORMATION CONTACT:

Natalie A. Markman, Attorney-Advisor,

Division of Trading and Markets,

Commodity Futures Trading

Commission, Three Lafayette Centre,

1155 21st Street, N.W., Washington, DC

20581. Telephone: (202) 418–5450.

SUPPLEMENTARY INFORMATION: Section

4m(1) of the Act provides, among other

things, that dealers, processors, brokers

or sellers in cash market transactions in

the agricultural commodities

enumerated in Section 2 of the Act or

the products thereof as well as certain

nonprofit voluntary membership farm

organizations (collectively, ‘‘Cash

Dealers’’) are exempt from registration

as CTAs but are subject to reparations

proceedings under Section 14 of the

Act.2 Section 14(a)(1) of the Act, which

generally addresses the Commission’s

reparations jurisdiction, provides that

reparations claims may be filed by

persons complaining of any violation of

the Act or Commission rules against

‘‘any person who is registered’’ under

the Act.3 No cross-reference or other

acknowledgment of the Section 4m(1)

reparations provision is made in Section

14. However, the Commission’s

reparations rules, which implement

Section 14 of the Act, expressly include

the Section 4m(1) Cash Dealers as a

category of permissible respondents in

reparations proceedings.4

The Part 12 rules, as promulgated in

1984 and continuing to the present,

provide in Rule 12.13(a) that reparations

complaints may be filed against any

registrant, as defined in Rule 12.2.5 Rule

12.2 defines registrant as any person

who: (1) Was registered at the time of

the alleged violation; (2) is subject to

reparations proceedings by virtue of

Section 4m; or (3) is otherwise subject

to reparations proceedings.

In a 1985 Federal Register release

addressing revisions of Part 4 of the

Commission’s rules, the Commission

stated that it did ‘‘not intend hereafter

to exercise jurisdiction in its reparations

program over persons exempt from CTA

registration under [S]ection 4m(1).’’ 6

The Commission wishes to eliminate

any ambiguity that may have been

created by the 1985 release by clarifying

that, as provided in Section 4m(1),

dealers, processors, brokers or sellers in

cash market transactions in the

agricultural commodities enumerated in

Section 2 of the Act or the products

thereof and certain nonprofit voluntary

membership farm organizations who

provide commodity trading advice in a

manner incidental to their business are

exempt from CTA registration but

subject to reparations proceedings

pursuant to Section 4m(1) and as

provided in Part 12 of the Commission’s

rules.

Issued in Washington, D.C. on August 12,

1997 by the Commission.

Jean A. Webb,

Secretary of the Commission.

[FR Doc. 97–21829 Filed 8–15–97; 8:45 am]

BILLING CODE 6351–-01–M