47612 Federal Register / Vol. 62, No. 175 / Wednesday, September 10, 1997 / Proposed Rules

1See Rule 1.55(a) (risk disclosure requirement

concerning trading domestic commodity futures);

rule 30.6(a) (risk disclosure requirement concerning

non-United States commodity futures or options

contracts); and rule 33.7(a) (risk disclosure

requirement concerning domestic, exchange-traded

commodity options).

2Commission rule 190.10 does not require an

FCM to obtain a customer’s written

acknowledgment of receipt of this statement.

3See 58 FR 17495 (April 5, 1993) (amending rules

to consolidate foreign futures and foreign

commodity options risk disclosure statement

required by Rule 30.6(a) with the domestic futures

risk disclosure statement required by Rule 1.55(a)).

4See 59 FR 34376 (July 5, 1994) (amending rules

so that single risk disclosure statement set forth in

Appendix A of Rule 1.55 would satisfy risk

disclosure obligations under Rules 1.55(a), 30.6(a)

and 33.7(a) as well as disclosure required pursuant

to Rule 190.10(c)). The risk disclosure statement set

forth at Appendix A to Rule 1.55 also fulfills risk

disclosure requirements in the United Kingdom and

Ireland for certain specified instruments. The rules

proposed herein would not alter an FCM’s or IB’s

disclosure obligations under the laws or regulations

of any foreign jurisdiction. Further, as the

Commission has previously emphasized,

compliance with the risk disclosure obligations

specified in CFTC Rules 1.55, 30.6 and 33.7 does

not relieve FCMs and IBs of obligations under the

Commodity Exchange Act (‘‘Act’’), state and

common law, or Commission rule 1.55(f) to disclose

to customers all material information concerning a

transaction. See, e.g., it. at 34378. Nor does

compliance with these Commission rules fulfill

individual exchange particularized risk disclosure

requirements related to linkage arrangement and

other special products.

5 Id. at 34378.

6Rule 4.7 became effective September 8, 1992. 57

FR 34853 (August 7, 1992) (adopting release for

Rule 4.7). Among other things, Rule 4.7 relieves

commodity pool operators (‘‘CPOs’’) and CTAs from

most specified reporting and disclosure obligations,

including risk disclosure obligations, with respect

to certain qualified eligible participants (‘‘QEPs) in

rule 4.7 pools or qualified eligible clients (‘‘QECs’’)

of a CTA, as defined in the rule.

Dated: September 4, 1997.

Nancy Foster,

Assistant Administrator for Ocean Services

and Coastal Zone Management.

[FR Doc. 97–23982 Filed 9–9–97; 8:45 am]

BILLING CODE 3510–08–M

COMMODITY FUTURES TRADING

COMMISSION

17 CFR Parts 1, 30, 33 and 190

Distribution of Risk Disclosure

Statements by Futures Commission

Merchants and Introducing Brokers

AGENCY: Commodity Futures Trading

Commission.

ACTION: Proposed rules.

SUMMARY: The Commodity Futures

Trading Commission (‘‘CFTC’’ or

‘‘Commission’’) is proposing to amend

its Rule 1.55 in order that futures

commission merchants (‘‘FCMs’’) or

introducing brokers (’’IBs’’) would no

longer be required to furnish the

specified written risk disclosure

statement to certain categories of

financially accredited customers or to

obtain from these customers written

acknowledgments of receipt of the risk

disclosure statement before opening a

commodity futures account for such

customers. In addition, the Commission

is proposing amendments to relieve

FCMs and IBs from requirements to

furnish disclosure statements to these

customers pursuant to Rule 30.6(a) (risk

disclosure pertaining to foreign futures

or foreign options), Rule 33.7(a) (risk

disclosure pertaining to domestic

exchange-traded commodity options),

Rule 1.65(a)(3) (risk disclosure for

customers whose accounts are

transferred other than at the customer’s

request to another FCM or IB) and Rule

190.10(c) (disclosure pertaining to

treatment in bankruptcy of non-cash

margin held by an FCM).

DATES: Comments must be received on

or before November 10, 1997.

ADDRESSES: Comments on the proposed

amendments should be sent to Jean A.

Webb, Secretary of the Commission,

Commodity Futures Trading

Commission, 1155 21st Street, NW.,

Washington DC 20581. In addition,

comments may be sent by facsimile

transmission to facsimile number (202)

418–5221, or by electronic mail to

secretary@cftc.gov. Reference should be

made to ‘‘FCM/IB Risk Disclosure

Amendments.’’

FOR FURTHER INFORMATION CONTACT:

Thomas E. Joseph, Attorney-Adviser,

Division of Trading and Markets,

Commodity Futures Trading

Commission, 1155 21st Street, NW.,

Washington DC 20581. Telephone (202)

418–5450.

SUPPLEMENTARY INFORMATION:

I. Background

CFTC rules require FCMs and IBs to

provide customers with Commissionapproved disclosure statements

describing the risks of trading in

domestic (and, as applicable, foreign)

commodity futures and options and to

receive written acknowledgment of

receipt of such statements prior to

opening an account for the customer.1

In addition, Commission Rule 190.10(c)

requires an FCM to provide a customer

with a disclosure statement concerning

the treatment in bankruptcy of any noncash property deposited as margin at the

FCM by a customer before the FCM may

accept non-cash property from the

customer to margin, guarantee or secure

any commodity contract.2

In 1993 and 1994, the Commission

amended its rules to simplify these

disclosure requirements, reduce the

potential for duplicative disclosure

requirements and ease administrative

burdens on FCMs and IBs without

sacrificing the important customer

protection purposes served by these

regulations. In this regard, the

Commission adopted amendments to

consolidate the risk disclosures required

by Rules 1.55(a) and 30.6(a) into a

single, generic statement set forth in

CFTC Rule 1.55(b) satisfying risk

disclosure obligations with respect to

domestic futures transactions and

foreign futures and options

transactions.3 In addition, the

Commission amended its rules to

include the generic risk disclosure

statement set forth in Appendix A to

CFTC Rule 1.55, which may be used to

satisfy the risk disclosure obligations

under Commission Rules 1.55(a), 30.6(a)

and 33.7(a) for domestic futures and

commodity options transactions, foreign

futures and commodity options

transactions and the CFTC Rule 190.10

disclosure concerning non-cash

property used to margin futures

transactions, as well as to satisfy the risk

disclosure requirements of certain

foreign jurisdictions.4

When adopting the generic risk

disclosure statement set forth in

Appendix A to Rule 1.55 and the related

rule amendments, the Commission

noted that one commenter on the

proposed rule amendments had

suggested that the Commission

eliminate the requirement of receipt of

a written acknowledgment of disclosure

with respect to sophisticated investors.5

The Commission determined not to

address the issues raised by that

comment at that time. However, since

adopting the Rule 1.55 Appendix A risk

disclosure statement, the Commission

has assessed the results of efforts in

other contexts to reduce disclosure

requirements and other regulatory

burdens on Commission registrants

without undermining consumer

protection safeguards. For example, the

Commission has acquired substantial

experience with the simplified

disclosure regime for sophisticated

commodity pool investors and clients of

commodity trading advisors (‘‘CTAs’’)

established in 1992 in Rule 4.7.6 Under

Rule 4.7, CPOs offering pool

participations to qualified participants

and CTAs offering managed account

programs to qualifying clients may be

exempted from the requirement to

deliver a disclosure document

containing the disclosures specified in

Rules 4.24 and 4.25 for CPOs and 4.34

and 4.35 for CTAs. However, they

remain subject to statutory and

regulatory antifraud prohibitions and
Federal Register / Vol. 62, No. 175 / Wednesday, September 10, 1997 / Proposed Rules 47613

7See CFTC Rule 35.1(b)(2). Part 35 of the

Commission rules exempts certain swap agreements

from most provisions of the Act and Commission

rules.

8See CFTC Rule 36.1(c)(2). Part 36 of the

Commission rules exempts certain contract market

transactions from specified provisions of the Act

and Commission regulations thereunder. Parts 35

and 36 of the Commission rules were adopted

pursuant to authority set forth in Section 4(c) of the

Act, 7 U.S.C. 6(c). See 58 FR 5587 (January 22,

1993) (adopting part 35) and 60 FR 51323 (October

2, 1995) (adopting part 36). Section 4(c)(2) of the

Act, 7 U.S.C. 6(c)(2), requires that, among other

conditions, any agreement, contract or transaction

exempted from any provision of the Act pursuant

to Section 4(c) of the Act must ‘‘be entered into

solely between appropriate persons,’’ who are

defined in Section 4(c)(3) (A) through (J) of the Act,

7 U.S.C. 6(c)(3) (A)–(J). Thus, the lists of eligible

swap participants and eligible participants were, in

turn modeled closely on the list of appropriate

persons provided in Section 4(c) of the Act.

9Part 35 exempts any eligible swap transaction

from all provisions of the Act, except Sections

2(a)(1)(B), 4b, and 4o of the Act, 7 U.S.C. 2a, 6b,

and 6o, Rule 32.9 and Sections 6(c) and 9(a)(2) of

the Act, 7 U.S.C. 9 and 13(a)(2), to the extent these

provisions prohibit manipulation of the market

price of any commodity in interstate commerce or

for future delivery on or subject to the rules of any

contract market. Rule 36.7 relieves an FCM or IB

from the requirement to provide an eligible

participant with a risk disclosure statement

pursuant to Commission Rules 1.55, 1.65, 33.7 or

190.10 in connection with Section 4(c) contract

market transactions as defined in Rule 36.1(c)(1).

10See CFTC Rule 1.55(a)(1)(iii).

11Commmission Rule 4.13 exempts a party from

registration as a CPO where: (1) the pool operator

receives no compensation for operating the pool,

other than reimbursement of administrative

expenses, operates only one pool, is not otherwise

required to register under the Act and is not

affiliated with any person required to register under

the Act, and no person involved with the pool

advertises in connection with the pool; or (2) the

total gross capital contributions for all pools a

person operates or intends to operate do not exceed

$200,000, and none of the pools operated by such

person has more than 15 participants at any time.

Persons who wish to claim registration relief under

Rule 4.13 must file a statement of intent with the

Commission before accepting funds or soliciting

customers for any pool operated by it and fulfill

other requirements specified in the rule.

12Cf. 60 FR at 51329–51330 (discussing ‘‘subject

to regulation’’ criteria as applied to investment

companies in definition of eligible participants in

Part 36 and eligible swap participants in Part 35).

13Rule 3.10(c) exempts from registration an FCM

which is ‘‘trading solely for proprietary accounts, as

defined in [Commission Rule] 1.3(y) * * * .’’ Rule

3.10(c) states that such FCMs, although exempt

from registration, remain ‘‘subject to all other

provisions of the Act, and of the rules, regulations

and orders thereunder.’’

are thus required to disclose all material

information. In addition, the

Commission has been able to assess

more fully its previous efforts to

consolidate and simplify risk disclosure

obligations for FCMs and IBs. Based

upon this experience, the Commission

believes that it is appropriate to provide

FCMs and IBs with relief from certain

risk disclosure and bankruptcy

statement requirements in the context of

accounts for specified sophisticated

customers and is thus proposing these

rule amendments.

II. Discussion

The amendments proposed herein

would eliminate the requirement that

FCMs and IBs provide specified,

financially accredited customers with

the Commission-mandated risk

disclosure statements pursuant to CFTC

Rules 1.55(a), 1.65(a)(3), 30.6(a), and

33.7(a) and obtain from such customers

a written acknowledgment of receipt of

the risk disclosure statement before

opening a commodity futures or options

account for such customers.

Additionally, the amendments would

relieve FCMs of the obligation to furnish

these financially accredited customers

with the bankruptcy disclosure

statement required by Rule 190.10(c)

before accepting non-cash property from

such customers to margin a futures

contract. While the proposed

amendments would relieve an FCM or

IB of the specific disclosure obligations

discussed above in connection with

futures or options transactions by

specified customers, these amendments

make clear that an FCM and IB would

remain obligated to provide such

customers with all disclosures that are

material in light of the circumstances of

the transaction in question. Under the

proposed amendments, FCMs or IBs

would remain free to provide customers

specified in proposed Rule 1.55(f) with

the Commission-approved risk and

bankruptcy disclosure statements

without obtaining a written

acknowledgment of receipt of these

statements from such qualified

customers.

A. Customers For Whom Relief May Be

Claimed

The categories of customers specified

in proposed Rule 1.55(f) for whom an

FCM or IB may claim the relief

proposed herein are based substantially

upon the categories of eligible swap

participants in Part 35 of the

Commission rules 7 and eligible

participants in Part 36 of the

Commission rules.8 The Commission

believes that the definitions of eligible

swap participants and eligible part 36

participants are appropriate models for

the definitions set forth in proposed

Rule 1.55(f) inasmuch as the Part 35 and

36 rules exempt parties from providing

mandatory risk disclosure statements (as

well as compliance with other

requirements) in connection with

transactions covered by those rules.9

However, certain minor differences

between the proposed categories of

qualified customers in proposed Rule

1.55(f) and the lists of eligible swap

participants and eligible participants in

parts 35 and 36, respectively, exist.

First, proposed Rule 1.55(f) does not

require a pool to have a minimum asset

level in order to qualify for the proposed

relief. Such a minimum asset test for

pools is unnecessary in light of current

Rule 1.55,10 which already relieves an

FCM or IB from the obligation to

provide a Rule 1.55 risk disclosure

statement to a commodity pool operated

by a CPO registered under the Act or

exempt from such registration.11 The

Commission believes that it is

appropriate to extend this relief to the

comparable risk disclosure obligations

set forth in CFTC Rules 1.65(a)(3),

30.6(a), 33.7(a) and 190.10(c). In

addition, proposed new Rule 1.55(f)

(unlike Parts 35 and 36) would not

restrict relief to entities not formed for

the specific purpose of eligibility for the

relief, since it is highly unlikely that any

entity would be formed specifically for

the purpose of avoiding receipt of a risk

disclosure statement.

As under Parts 35 and 36, an

investment company for which the

proposed relief may be claimed is

defined as one ‘‘subject to regulation

under the Investment Company Act.’’

This provision will permit FCMs and

IBs to apply the proposed relief to hedge

funds which, although subject to the

Investment Company Act, generally are

not regulated under it.12 Similarly,

proposed Rule 1.55(f)(10) would allow

an FCM or IB to claim relief with

respect to a customer who is a ‘‘futures

commission merchant * * * subject to

regulation under the Act.’’ Thus, FCMs

exempt from registration pursuant to

Commission Rule 3.10(c) would

nonetheless be qualifying customers

within the meaning of proposed Rule

1.55(f)(10) since such FCMs remain

subject to regulation under the Act.13

The categories of customers for whom

an FCM or IB would be able to claim the

proposed disclosure relief include: (1)

Regulated financial intermediaries, such

as banks, trust companies, savings

associations, credit unions, and

insurance companies; (2) registered

securities and futures entities, such as

broker-dealers regulated under the

Securities Exchange Act of 1934,

investment companies with assets

exceeding $5,000,000 and subject to

regulation under the Investment

Company Act, pools formed and

operated by a CPO registered under the

Act or exempt from such registration,

and FCMs, floor brokers or floor traders

regulated under the Act; (3) other

financially sophisticated persons, such

as employee benefit plans with assets in
47614 Federal Register / Vol. 62, No. 175 / Wednesday, September 10, 1997 / Proposed Rules

14 In this regard, the Commission intends that the

foreign entity be subject to regulation based upon

activities or functions similar to those performed by

a United States entity specified in proposed Rule

1.55(f). For example, to be within the meaning of

proposed Rule 1.55(f)(10), the activities of a foreign

FCM should be governed by regulations dealing

with its business as an FCM and not by an unrelated

regulatory regime.

15For example, FCMs and IBs would be required

to obtain and maintain the information required by

CFTC Rule 1.37 concerning all customers, including

customers listed in proposed Rule 1.55(f).

16Rule 166.3 requires FCMs and IBs to supervise

diligently the handling of commodity interest

accounts.

17The Commission also proposes to redesignate

current Rule 1.55(f) as 1.55(g).

18The commodity broker provisions of the

Bankruptcy Code, which mandate pro rata

distribution of cash and non-cash customer

property, including property specifically

identifiable to a customer, have been in effect for

approximately nineteen years, and the

Commission’s bankruptcy rules for fourteen years.

19 53 FR 46911 (November 21, 1988) (stating

conditions under which an FCM may hold funds of

its United States domiciled customers in a foreign

depository). The Commission has stated that the

subordination agreement discussed in Financial

and Segregation Interpretation No. 12 may be

incorporated in the Rule 190.10(c) bankruptcy

disclosure document or separately executed. Id. at

46914.

20 7 U.S.C. 6b.

21Current Commission Rule 1.55(f), which would

be redesignated as Rule 1.55(g) under the proposed

amendments, states that compliance with Rule 1.55

does not relieve an FCM or IB of any other

disclosure obligations it may have under applicable

law. See 50 FR 5380 (February 8, 1985) (adopting

Rule 1.55(d), since redesignated as Rule 1.55(f), and

explaining FCMs’ and IBs’ disclosure obligations

under the Act).

21 Id. at 5381. Further, as the Commission noted

when it adopted Rule 1.55(d) ‘‘the prescribed

excess of $5,000,000 and subject to the

Employee Retirement Income Security

Act of 1974, corporations, partnerships,

proprietorships and other entities with

total assets exceeding $10,000,000 or a

net worth of at least $1,000,000, and

natural persons with assets in excess of

$10,000,000; and (4) any governmental

entity, including the United States, any

state or foreign government, or any

political subdivision thereof, or any

multinational or supranational entity or

any instrumentality, agency or

department of any of the foregoing.

Like the definitions of Part 35 eligible

swap participant and Part 36 eligible

participant, the categories of customers

specified in proposed Rule 1.55(f)

would include certain regulated foreign

entities that perform roles or functions

similar to those performed by one of the

enumerated, regulated United States

entities. These foreign entities must

satisfy the same minimum asset or net

worth criteria as their United States

counterparts and, although not required

to be subject to regulation under

specified United States laws, they must

be subject to regulation in their home

jurisdiction.14 Thus, an FCM or IB

would be able to claim the proposed

relief in connection with opening a

futures or commodity option account for

a foreign employee benefit plan subject

to applicable foreign regulations, a

commodity pool operated by a foreign

person performing a function similar to

that of a CPO and subject to foreign

regulation as such, or a foreignregulated entity performing a function

similar to that of a United States

investment company, broker-dealer,

FCM, floor broker or floor trader, if such

customers satisfy applicable minimum

asset or net worth criteria.

As proposed, these amendments

require that a customer satisfy the

criteria set forth in proposed Rule

1.55(f) only at the time an account is

opened. An FCM or IB would be under

no obligation to monitor a customer’s

status to assure that the customer

continues to satisfy the Rule 1.55(f)

criteria throughout the time an account

remains open. Moreover, the proposed

amendment to Rule 1.65(a)(3), which

addresses accounts transferred other

than at a customer’s request, allows the

FCM or IB to whom such an account is

transferred to claim the proposed

disclosure relief with respect to a

customer who either: (1) as clearly

evidenced by information available to

the transferee firm, satisfied the

proposed 1.55(f) criteria at the time the

account was first opened with the

transferring FCM or IB; or (2) satisfies

such criteria at the time the account is

transferred.

Proposed Rule 1.55(f) will provide

FCMs and IBs with clear, objective

criteria for identifying the customers to

whom delivery of the Commissionapproved disclosure statements

pursuant to CFTC Rules 1.55(a),

1.65(a)(3), 30.6(a), 33.7(a) and 190.10(c)

is not required. These criteria should

serve to minimize any administrative

burdens associated with implementing

the proposed relief. In this regard, the

Commission notes that the proposed

rule contains no specific requirement

that FCMs and IBs maintain with their

books and records any information in

addition to that already required by

other Commission rules in order to

identify a particular customer’s

eligibility for the relief provided by the

proposed amendments.15 However,

FCMs and IBs are required to assure that

mandated disclosure statements are

provided to customers other than those

to whom this relief applies. In order to

substantiate compliance with such

disclosure requirements and exercise

meaningful supervision over customer

accounts, FCMs and IBs should assure

that adequate records are maintained

and reviewed on a regular basis.16 Thus,

FCMs and IBs should maintain

documentation relevant to the

qualifications of the customers for

whom the relief proposed herein will be

claimed and to confirm the identities of

customers to whom specified risk

disclosures have been made and from

whom acknowledgments have been

obtained.

B. Relief

The proposed amendments will

relieve FCMs and IBs from the

requirements to deliver disclosure

statements pursuant to Commission

Rules 1.55(a), 1.65(a)(3), 30.6(a), and

33.7(a) to customers who, at the time of

account opening, are within the

categories specified in proposed Rule

1.55(f).17 FCMs and IBs also would no

longer be required to obtain and retain

a signed statement from such customers

acknowledging that the customer

received and understood the required

risk disclosure statement.

Further, the Commission believes that

it is appropriate to relieve FCMs of the

obligation to provide disclosure

statements to these specified customers

pursuant to Rule 190.10(c). However,

the Commission requests comment

concerning the proposed relief with

respect to Rule 190.10(c), which

requires that the disclosure statement

specified therein be given only when

customers deposit non-cash property as

margin.18 The Commission also notes

that the proposed rule amendments do

not provide FCMs with relief with

respect to the subordination agreement

required by Financial and Segregation

Interpretation No. 12 to be executed by

a customer whose funds are held by an

FCM in foreign depositories, which may

be incorporated in the Rule 190.10(c)

bankruptcy statement.19

C. Continuing Disclosure Obligations

The proposed amendments make

clear that despite relief from the specific

disclosure obligations of CFTC Rules

1.55(a), 1.65(a)(3), 30.6(a), 33.7(a) or

190.10(c), FCMs and IBs remain

obligated under other statutory and

regulatory provisions, including Section

4b of the Act 20 and current CFTC Rule

1.55(f),21 to provide customers with all

material information relating to a

transaction, including information

relating to the risks involved in entering

a particular transaction. As the

Commission stated when it adopted

current Rule 1.55(f), these minimum

disclosure obligations arise under the

Act, under state law and under common

law.22 However, the required
Federal Register / Vol. 62, No. 175 / Wednesday, September 10, 1997 / Proposed Rules 47615

disclosure statement [of Rule 1.55] was not meant

to be an exhaustive explanation of the mechanics

and risks of futures trading or of particular

transactions, but rather was designed to highlight

some of the inherent risks of futures trading for new

customers.’’ Id. at 5382.

22See, e.g., Yameen v. Madda Trading Company,

[1980–1982 Transfer Binder] Comm. Fut. L. Rep.

(CCH) ¶21,125 (CFTC 1980) (FCM and its associated

person (‘‘AP’’) breached duty to customer by not

disclosing limitations of stop loss orders after

having discussed favorable features of these orders);

Ruddy v. First Commodity Corp. of Boston, [1980–

1982 Transfer Binder] Comm. Fut L. Rep. (CCH)

¶21,435 (CFTC 1981) (FCM and AP breached duty

to customer for whom they had discretionary

authority by failing either to contact him promptly

or to remove the hedges entered for him once the

strategy under which the hedges had been

recommended and placed and failed), aff’d sub

nom. First Commodity Corp. of Boston v. CFTC, 676

F.2d 1 (1st Cir. 1982); In the Matter of JCC, Inc.,

[1992–1994 Transfer Binder] Comm. Fut. L. Rep.

(CCH) ¶26,080 (CFTC 1994) (omission and

misrepresentation of material information about a

trading program, including information concerning

applicable fees and potential risks, violated

antifraud provisions of Act), aff’d sub nom. JCC,

Inc. v. CFTC, 63 F.3d 1557 (11th Cir. 1995). 24Pub. L. 104–13 (May 13, 1995).

disclosures may differ in particular

cases, depending upon the nature of the

relationship between the FCM or IB and

its customer and such factors as whether

the FCM or IB has discretionary

authority over an account or is merely

executing trades according to a

customer’s instructions.23

III. Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act

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

agencies, in proposing rules, consider

the impact of those rules on small

businesses. The rules discussed herein

will affect FCMs and IBs. The

Commission has already established

certain definitions of ‘‘small entities’’ to

be used by the Commission in

evaluating the impact of its rules on

such small entities in accordance with

the RFA. FCMs have been determined

not to be small entities under the RFA.

With respect to IBs, the Commission

has stated that it is appropriate to

evaluate within the context of a

particular rule proposal whether some

or all IBs should be considered to be

small entities and, if so, to analyze the

economic impact on such entities at that

time. The proposed rule amendments

would not require any IB to alter its

current method of doing business.

Instead the proposed amendments

would provide IBs with relief from

certain disclosure and recordkeeping

requirements with respect to certain

identified customers. Presumably, an IB

would only choose to make use of such

relief if it were cost-effective to do so.

Further, these rule amendments as

proposed should impose no additional

burden or requirements on IBs and,

thus, if adopted would not have a

significant economic impact on a

substantial number of IBs.

B. Paperwork Reduction Act

The Paperwork Reduction Act of

1995 24 imposes certain requirements on

federal agencies (including the

Commission) in connection with their

conducting or sponsoring any collection

of information as defined by the

Paperwork Reduction Act.

There is no burden associated with

the proposed rule amendments to Rule

1.55 or Rule 1.65. While these proposed

rule amendments have no burden, the

group of rules (3038–0024) of which

these rules are a part has the following

burden:

Average burden hours per response 128

Number of Respondents 3,148

Frequency of response 36

Three OMB approved collections

would be affected by the adoption of

these proposed rule amendments. In

compliance with the Paperwork

Reduction Act, the Commission,

through this rule proposal, solicits

comments to:

(1) Evaluate whether the proposed

collection of information is necessary for the

proper performance of the functions of the

agency, including the validity of the

methodology and assumptions used; (2)

evaluate the accuracy of the agency’s

estimate of the burden of the proposed

collection of information including the

validity of the methodology and assumptions

used; (3) enhance the quality, utility, and

clarity of the information to be collected; and

(4) minimize the burden of the collection of

the information on those who are to respond,

including through the use of appropriate

automated, electronic, mechanical, or other

technological collection techniques or other

forms of information technology, e.g.,

permitting electronic submission of

responses.

The Commission has submitted this

proposed rule and its associated

information collection requirements to

the Office of Management and Budget.

Three OMB approved collections would

be affected by the adoption of this rule.

These are:

3038–0007—Regulation of Domestic

Exchange-Traded Commodity Options. The

burden associated with collection 3038–

0007, including this proposed rule, is as

follows:

Average burden hours per response 50.57

Number of Respondents 190,422

Frequency of response 1,111

The burden associated with this

specific proposed rule, is as follows:

Average burden hours per response 0.08

Number of Respondents 175

Frequency of response 115

3038–0021—Regulations Governing

Bankruptcies of Commodity Brokers. The

burden associated with collection 3038–

0021, including this proposed rule, is as

follows:

Average burden hours per response 0.35

Number of Respondents 472

Frequency of response 34

The burden associated with this

specific proposed rule, is as follows:

Average burden hours per response 0.05

Number of Respondents 235

Frequency of response 8

3038–0035—Rules Relating to the Offer

and Sale of Foreign Futures and Options. The

burden associated with collection 3038–

0035, including this proposed rule, is as

follows:

Average burden hours per response 15.70

Number of Respondents 2,832

Frequency of response 48

The burden associated with this

specific proposed rule, is as follows:

Average burden hours per response 0.60

Number of Respondents 360

Frequency of response 4

Persons wishing to comment on the

information which would be required

by this proposed/amended rule should

contact the Desk Officer, CFTC, Office of

Management and Budget, Room 10202,

NEOB, Washington, DC 20503, (202)

395–7340. Copies of the information

collection submission to OMB are

available from the CFTC Clearance

Officer, 1155 21st Street NW.,

Washington, DC 20581, 202) 418–5160.

List of Subjects

17 CFR Part 1

Customer protection, Risk disclosure

statements, Commodity futures.

17 CFR Part 30

Foreign futures and options

transactions, Customer protection, Risk

disclosure statements.

17 CFR Part 33

Domestic exchange-traded commodity

options transactions.

17 CFR Part 190

Bankruptcy.

In consideration of the foregoing and

pursuant to the authority contained in

the Commodity Exchange Act and in

particular sections 2(a)(1), 4b, 4c, 4d, 4f,

4g and 8a of the Act, as amended, 7

U.S.C. 2, 6b, 6c, 6d, 6f, 6g and 12a, the

Commission hereby proposes to amend

Chapter I of title 17 of the Code of

Federal Regulations as follows:
47616 Federal Register / Vol. 62, No. 175 / Wednesday, September 10, 1997 / Proposed Rules

PART 1—GENERAL REGULATIONS

UNDER THE COMMODITY EXCHANGE

ACT

1. The authority citation for Part 1

continues to read as follows:

Authority: 7 U.S.C. 1a, 2, 2a, 4, 4a, 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, 24.

2. Section 1.55 is amended by revising

paragraph (a)(1), by removing paragraph

(a)(1)(iii), by redesignating paragraph (f)

as paragraph (g), and by adding new

paragraph (f) to read as follows:

§ 1.55 Distribution of ‘‘Risk Disclosure

Statement’’ by futures commission

merchants and introducing brokers.

(a)(1) Except as provided in § 1.65, no

futures commission merchant, or in the

case of an introduced account no

introducing broker, may open a

commodity futures account for a

customer, other than for a customer

specified in paragraph (f) of this section,

unless the futures commission merchant

or introducing broker first:

* * * * *

(f) A futures commission merchant or,

in the case of an introduced account an

introducing broker, may open a

commodity futures account for a

customer without furnishing such

customer the disclosure statements or

obtaining the acknowledgments

required under paragraph (a) of this

section, § 1.65(a)(3), and § 30.6(a),

§ 33.7(a), and § 190.10(c) of this chapter,

provided that the futures commission

merchant or, in the case of an

introduced account the introducing

broker, provides such customer with

such disclosure as is material in the

circumstances and the customer is, at

the time at which the account is opened:

(1) A bank or trust company;

(2) A savings association or credit

union;

(3) An insurance company;

(4) An investment company subject to

regulation under the Investment

Company Act of 1940 (15 U.S.C. Sec.

80a–1, et seq.) or a foreign entity

performing a similar role or function

subject as such to foreign regulation,

provided that such investment company

has total assets exceeding $5,000,000;

(5) A pool operated by a commodity

pool operator registered under the

Commodity Exchange Act or exempt

from such registration or by a foreign

person performing a similar function to

that of a commodity pool operator and

subject as such to foreign regulation;

(6) A corporation, partnership,

proprietorship, organization, trust, or

other entity: (A) which has total assets

exceeding $10,000,000; or (B) which has

a net worth of $1,000,000;

(7) An employee benefit plan subject

to the Employee Retirement Income

Security Act of 1974, or a foreign person

performing a similar role or function

and subject as such to foreign

regulation, with total assets exceeding

$5,000,000 or whose investment

decisions are made by a bank, trust

company, insurance company,

investment adviser subject to regulation

under the Investment Advisers Act of

1940 (15 U.S.C. 80b–1, et seq.), or a

commodity trading advisor subject to

regulation under the Commodity

Exchange Act;

(8) Any governmental entity

(including the United States, any state,

or any foreign government) or political

subdivision thereof, or any

multinational or supranational entity or

any instrumentality, agency, or

department of any of the foregoing;

(9) A broker-dealer subject to

regulation under the Securities

Exchange Act of 1934 (15 U.S.C. 78a, et

seq.) or a foreign person performing a

similar role or function subject as such

to foreign regulation, acting on its own

behalf: provided, however, that if such

broker-dealer is a natural person or

proprietorship, the broker-dealer must

also meet the requirements of

paragraphs (f)(6) or (f)(11) of this

section;

(10) A futures commission merchant,

floor broker, or floor trader subject to

regulation under the Commodity

Exchange Act or a foreign person

performing a similar role or function

subject as such to foreign regulation; or

(11) Any natural person with total

assets exceeding $10,000,000.

* * * * *

3. Section 1.65 is amended by

redesignating paragraph (a)(3)(ii) as

(a)(3)(iii) and adding new paragraph

(a)(3)(ii) to read as follows:

§ 1.65 Notice of bulk transfers and

disclosure obligations to customers.

(a) * * *

(3) * * *

(ii) As to customers for which the

transferee futures commission merchant

or introducing broker has clear evidence

that such customer was at the time the

account was opened by the transferring

futures commission merchant or

introducing broker, or is at the time the

account is being transferred, a customer

listed in section 1.55(f) of this chapter;

or

* * * * *

PART 30—FOREIGN FUTURES OR

FOREIGN OPTIONS TRANSACTIONS

4. The authority citation for Part 30

continues to read:

Authority: 7 U.S.C. 1a, 2, 4, 6, 6c and 12a,

unless otherwise noted.

5. Section 30.6 is amended by revising

paragraph (a) to read as follows:

§ 30.6 Disclosure.

(a) Futures commission merchants

and introducing brokers. Except as

provided in § 1.65 of this chapter, no

futures commission merchant, or in the

case of an introduced account no

introducing broker, may open a foreign

futures or option account for a foreign

futures or option customer, other than

for a customer specified in § 1.55(f) of

this chapter, unless the futures

commission merchant or introducing

broker first furnishes the customer with

a separate written disclosure statement

containing only the language set forth in

§ 1.55(b) of this chapter or as otherwise

approved under § 1.55(c) of this chapter

(except for nonsubstantive additions

such as captions), which has been

acknowledged in accordance with § 1.55

of this chapter; Provided, however, that

the risk disclosure statement may be

attached to other documents as the

cover page or the first page of such

documents and as the only material on

such page.

* * * * *

PART 33—REGULATION OF

DOMESTIC EXCHANGE-TRADED

COMMODITY OPTION TRANSACTIONS

6. The authority citation for Part 33

continues to read:

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

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

7, 7a, 7b, 8, 9, 11, 12a, 12c, 13a, 13a-1, 13b,

19, and 21, unless otherwise noted.

7. Section 33.7 is amended by revising

paragraph (a)(1) to read as follows:

§ 33.7 Disclosure.

(a)(1) Except as provided in § 1.65 of

this chapter, no futures commission

merchant, or in the case of an

introduced account no introducing

broker, may open or cause the opening

of a commodity option account for an

option customer, other than for a

customer specified in § 1.55(f) of this

chapter, unless the futures commission

merchant or introducing broker first:

* * * * *

PART 190—BANKRUPTCY

8. The authority citation for Part 190

continues to read:
Federal Register / Vol. 62, No. 175 / Wednesday, September 10, 1997 / Proposed Rules 47617

Authority: 7 U.S.C. 1a, 2, 4a, 6c, 6d, 6g, 7a,

12, 19, and 24, and 11 U.S.C. 362, 546, 548,

556 and 761–766, unless otherwise noted.

9. Section 190.10 is amended by

revising paragraph (c)(1) to read as

follows:

§ 190.10 General.

* * * * *

(c) Disclosure statement for non-cash

margin. (1) Except as provided in § 1.65,

no commodity broker (other than a

clearing organization) may accept

property other than cash from or for the

account of a customer, other than a

customer specified in § 1.55(f) of this

chapter, to margin, guarantee, or secure

a commodity contract unless the

commodity broker first furnishes the

customer with the disclosure statement

set forth in paragraph (c)(2) of this

section in boldface print in at least 10

point type which may be provided as

either a separate, written document or

incorporated into the customer

agreement, or with another statement

approved under § 1.55(c) of this chapter

and set forth in appendix A to § 1.55

which the Commission finds satisfies

this requirement.

* * * * *

Issued in Washington, DC on September 3,

1997 by the Commission.

Jean A. Webb,

Secretary of the Commission.

[FR Doc. 97–23882 Filed 9–9–97; 8:45 am]

BILLING CODE 6351–01–P

DEPARTMENT OF THE INTERIOR

Office of Surface Mining Reclamation

and Enforcement

30 CFR Part 773

RIN 1029–AB80

Notification and Permit Processing

AGENCY: Office of Surface Mining

Reclamation and Enforcement, Interior.

ACTION: Proposed rule; withdrawal.

SUMMARY: After reviewing comments

received during the public comment

period, the Office of Surface Mining

Reclamation and Enforcement (OSM) is

withdrawing the proposed Notification

and Permit Processing rule published in

the Federal Register on October 26,

1994 (59 FR 53884).

DATES: This withdrawal is effective

September 10, 1997.

FOR FURTHER INFORMATION CONTACT:

Scott Boyce, 1951 Constitution Avenue,

N.W., Washington, DC 20240;

Telephone: (202) 208–2986 commercial

or FTS. E-mail: sboyce@osmre.gov.

SUPPLEMENTARY INFORMATION: In a letter

dated September 29, 1992, Mr. Jim B.

Wyant of Vincennes, Indiana, presented

a petition for rulemaking to OSM. The

‘‘Notice of availability of a petition to

initiate rulemaking and request for

comment’’ was published in the Federal

Register on November 12, 1992 (57 FR

53670). On August 24, 1993 (58 FR

44630), the Director of OSM published

his ‘‘Notice of decision on petition for

rulemaking’’ and stated that OSM would

initiate Federal rulemaking. The

proposed rule was published in the

Federal Register on October 26, 1994

(59 FR 53884), and would have revised

the permit notification provisions of 30

CFR 773.15 and the permit processing

provisions of 30 CFR 773.15(c) and

773.17. On December 23, 1994 (59 FR

66287), OSM extended the comment

period for the proposed rule until

February 27, 1995. In order to

accommodate requests for a public

hearing the comment period was

reopened on March 10, 1995, and

extended until March 23, 1995. A public

hearing was held on March 16, 1995, in

Vincennes, Indiana.

Comments on the proposed

rulemaking reveal that there are no

widespread problems with the existing

rules that warrant a national

rulemaking. Accordingly, the proposed

rule published on October 26, 1994 (59

FR 53884), is withdrawn.

Dated: September 4, 1997.

Bob Armstrong,

Assistant Secretary, Land and Minerals

Management.

[FR Doc. 97–23957 Filed 9–9–97; 8:45 am]

BILLING CODE 4310–05–M

DEPARTMENT OF THE INTERIOR

Office of Surface Mining Reclamation

and Enforcement

30 CFR Part 870

RIN 1029–AB93

Abandoned Mine Land Reclamation

Fund Reauthorization Implementation

AGENCY: Office of Surface Mining

Reclamation and Enforcement, Interior.

ACTION: Proposed rule.

SUMMARY: The Office of Surface Mining

Reclamation and Enforcement (OSM) of

the U.S. Department of the Interior is

proposing to remove its regulation at 30

CFR 870.17. The regulation governs the

scope of audits conducted in connection

with OSM’s abandoned mine land

reclamation program.

DATES: Written comments: OSM will

accept written comments on the

proposed rule until 5 p.m., Eastern time,

on November 10, 1997.

Public hearings: Upon request, OSM

will hold public hearings on the

proposed rule at dates, times and

locations to be announced in the

Federal Register prior to the hearings.

OSM will accept requests for public

hearings until 5 p.m., Eastern time, on

October 1, 1997. Individuals wishing to

attend, but not testify, at any hearing

should contact the person identified

under FOR FURTHER CONTACT before the

hearing date to verify that the hearing

will be held.

ADDRESSES: Written comments: Handdeliver or mail to the Office of Surface

Mining Reclamation and Enforcement,

Administrative Record, Room 117, 1951

Constitution Avenue, NW., Washington,

D.C. 20240.

Electronic Mail: You may send

comments through the Internet to

OSM’s Administrative Record at:

osmrules@osmre.gov. Copies of any

messages received electronically will be

filed with the Administrative Record.

Public hearings: You may submit a

request for a public hearing orally or in

writing to the person and address

specified under FOR FURTHER

INFORMATION CONTACT. The address, date

and time for any public hearing held

will be announced prior to the hearings.

Any individual who requires special

accommodation to attend a public

hearing should also contact the person

listed under FOR FURTHER INFORMATION

CONTACT.

FOR FURTHER INFORMATION CONTACT: Jim

Krawchyk, Division of Compliance

Management, Office of Surface Mining

Reclamation and Enforcement, 3

Parkway Center, Pittsburgh, PA 15220.

Telephone 412–921–2676. E-mail:

jkrawchy@osmre.gov.

SUPPLEMENTARY INFORMATION:

I. Public Comment Procedures

II. Background

III. Discussion of Proposed Rule and

Guidelines

IV. Procedural Matters

I. Public Comment Procedures

Written Comments: Written or

electronic comments submitted on the

proposed rule should be specific,

should be confined to issues pertinent

to the proposed rule, and should

explain the reason for any

recommended change. Where

practicable, commenters should submit

three copies of their comments.

Comments received after the close of the

comment period (see DATES) or

delivered to an address other than those

listed above (see ADDRESSES), may not