Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54355 

1See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Public Law 111–203, 124 

Stat. 1376 (2010). The text of the Dodd-Frank Act 

may be accessed through the Commission’s Web 

site, www.cftc.gov. 

2Pursuant to Section 701 of the Dodd-Frank Act, 

Title VII may be cited as the ‘‘Wall Street 

Transparency and Accountability Act of 2010.’’ 

3 7 U.S.C. 1 et seq. (2006). The Commission’s 

regulations are found at 17 CFR part 1 et seq. 

(2012). Both the CEA and the Commission’s 

regulations also may be accessed through the 

Commission’s Web site. 

4See Section 721(a) of the Dodd-Frank Act, 

which re-organized (and in some cases amended) 

existing definitions in, and added new definitions 

to, Section 1a of the CEA. The CPO and CTA 

definitions, as amended, are codified at CEA 

sections 1a(11) and 1a(12), respectively. 

5 76 FR 11701. 

6 76 FR 11701. Part 4 applies to CPOs with 

respect to their activities affecting pool participants 

and to CTAs with respect to their activities affecting 

clients. Depending on the nature of its activities, a 

CPO or CTA may also come within the definition 

of the term ‘‘swap dealer’’ or ‘‘major swap 

participant’’ in new CEA Section 1a(49) or 1a(33), 

respectively. As directed by the Dodd-Frank Act, 

the Commission has adopted new regulations that 

establish business conduct standards for SDs and 

MSPs. See 77 FR 9734 (Feb. 17, 2012). These new 

regulations apply to SDs and MSPs with respect to 

the counterparties with whom they transact swap 

business, and govern different activity than that to 

which the Part 4 regulations apply. 

7These comment letters currently are available on 

the Commission’s Web site. 

8Comment letter from Chris Barnard (Mar. 29, 

2011). 

9Comment letter from Kyle Vandergrift (Apr. 20, 

2011). 

10See 76 FR 33066, 33069–70 (June 7, 2011). 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 4 

RIN 3038–AD49 

Amendments to Commodity Pool 

Operator and Commodity Trading 

Advisor Regulations Resulting From 

the Dodd-Frank Act 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final rules. 

SUMMARY: The Commodity Futures 

Trading Commission (Commission) is 

amending its regulations governing the 

operations and activities of commodity 

pool operators (CPOs) and commodity 

trading advisors (CTAs) in order to have 

those regulations reflect changes made 

to the Commodity Exchange Act (CEA) 

by the Dodd-Frank Wall Street Reform 

and Consumer Protection Act (DoddFrank Act). 

DATES: Effective Date: November 5, 

2012. 

FOR FURTHER INFORMATION CONTACT: 

Barbara S. Gold, Associate Director, or 

Christopher W. Cummings, Special 

Counsel, Division of Swap Dealer and 

Intermediary Oversight, 1155 21st Street 

NW., Washington, DC 20581. Telephone 

number: 202–418–6700 and electronic 

mail: bgold@cftc.gov or 

ccummings@cftc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. The Dodd-Frank Act 

On July 21, 2010, President Obama 

signed the Dodd-Frank Act.1 Title VII of 

the Dodd-Frank Act 2 amended the 

CEA 3 to establish a comprehensive new 

regulatory framework for swaps and 

security-based swaps. The goal of this 

legislation was to reduce risk, increase 

transparency, and promote market 

integrity within the financial system by, 

among other things: (1) Providing for the 

registration and comprehensive 

regulation of swap dealers (SDs) and 

major swap participants (MSPs); (2) 

imposing clearing and trade execution 

requirements on standardized derivative 

products; (3) creating robust 

recordkeeping and real-time reporting 

regimes; and (4) enhancing the 

Commission’s rulemaking and 

enforcement authorities with respect to, 

among others, all registered entities and 

intermediaries subject to the oversight 

of the Commission. Among the changes 

made by the Dodd-Frank Act to the CEA 

were to include within the CPO 

definition the operator of a collective 

investment vehicle that trades swaps, 

and to include within the CTA 

definition a person who provides advice 

concerning swaps.4

B. The Proposed Amendments to Part 4 

Part 4 of the Commission’s regulations 

sets forth a comprehensive regulatory 

framework for the operations and 

activities of CPOs and CTAs. It includes 

disclosure, reporting and recordkeeping 

requirements for registered CPOs and 

CTAs, registration and compliance 

exemptions for CPOs and CTAs, and 

other provisions, including anti-fraud 

provisions, applicable to CPOs and 

CTAs, regardless of registration status. 

To ensure that the Part 4 regulations 

applied to CPOs and CTAs in the 

context of these intermediaries’ 

involvement with swap transactions, on 

March 3, 2011, the Commission 

proposed certain amendments to Part 4 

(Proposal).5

As the Commission explained in the 

Proposal, because many of the existing 

Part 4 regulations generally applied to 

CPOs and CTAs, they would continue to 

be applicable to CPOs and CTAs with 

respect to their swap activities without 

the need for amendment thereto. The 

Commission noted that in other 

instances, however, the text of certain 

existing Part 4 regulations was specific 

to activities involving futures contracts, 

commodity options, and off-exchange 

retail foreign currency (‘‘commodity 

interests’’), and it did not include, refer 

to or otherwise take account of swap 

activities. As the Commission stated: 

‘‘The Proposal [was] intended to clarify 

and ensure that the requirements 

governing the operations and activities 

of CPOs and CTAs continue to apply for 

these intermediaries in the context of 

their involvement with swap 

transactions.’’ 6 Accordingly, the 

Commission proposed to amend 

Regulations 4.7, 4.10, 4.22, 4.23, 4.24 

4.30, 4.33 and 4.34 to include in each 

of these regulations a reference to swaps 

or swap activities. 

II. Comments on the Proposal 

The Commission received two 

comment letters on the Proposal,7 each 

of which supported the Proposal. One of 

these letters stated that the Proposal 

‘‘should act to reduce risk and increase 

its transparency, and promote market 

integrity by ensuring that all entities are 

consistently regulated to the extent that 

their trading and other activities pertain 

to swaps.’’ 8 The other letter urged the 

Commission ‘‘to work quickly and 

diligently on writing these rules and 

putting them in place as soon as 

possible.’’ 9

III. The Final Regulations 

In light of the supportive comments it 

received, with one exception the 

Commission is adopting the 

amendments to the Part 4 regulations it 

proposed. That exception concerns the 

proposed amendment to Regulation 

4.10(a) that, for the purposes of Part 4, 

would have expanded the definition of 

the term ‘‘commodity interest’’ to 

include ‘‘swaps.’’ This proposal was 

superseded by a proposed amendment 

to Regulation 1.3(yy) that, for the 

purposes of all of the Commission’s 

regulations, would define the term 

‘‘commodity interest’’ to include 

‘‘swaps.’’ 10 Accordingly, the 

Commission is considering the 

proposed definition of the term 

‘‘commodity interest’’ in connection 

with its consideration of the comment 

letters it received on its proposed 

amendment to Regulation 1.3(yy). 

A. Adding ‘‘Swap’’ Terms to Part 4 

As proposed, the Commission is 

inserting ‘‘swap,’’ ‘‘swap transaction’’ or 

a similar term at various regulations 

throughout Part 4. See the amendments 

to Regulations 4.23(a)(1), 4.24(g), (h)(1), 

and (i)(2) for CPOs and Regulations 

4.34(g) and 4.34(i)(2) for CTAs. For 

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54356 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

11 76 FR at 11702. 

12See Regulation 45.2, which requires SDs and 

MSPs to keep full, complete and systematic records, 

together with all pertinent data and memoranda, of 

all activities relating to their business with respect 

to swaps, as prescribed by the Commission. (NonSD and non-MSP counterparties subject to the 

Commission’s jurisdiction have a similar 

requirement, but only with respect to each swap to 

which they are a counterparty.) 

13 76 FR at 11702. In this regard, the Commission 

has proposed regulations addressing the 

circumstances in which non-bank SDs may be 

required or permitted to accept margin payments in 

uncleared swap transactions. See 76 FR 23732 (Apr. 

28, 2011). Accordingly, this amendment to 

Regulation 4.30 should not be interpreted to impose 

or authorize any such margin requirements. 

14See 77 FR 9734, 9739–40 (Feb. 17, 2012). 

15 76 FR at 11702. 

16 5 U.S.C. 601 et seq. 

17By its terms, the RFA does not apply to 

‘‘individuals.’’ See 48 FR 14933, n. 115 (Apr. 6, 

1983). 

18 5 U.S.C. 601(2), 603, 604 and 605. 

19 76 FR at 11703. 

example, Regulation 4.23(a)(1) is being 

amended to include ‘‘swap type and 

counterparty’’ in the itemized daily 

record that a CPO must make and keep 

with respect to a pool’s commodity 

interest transactions. 

At other Part 4 regulations, the 

Commission has included as proposed 

the term ‘‘swap dealer’’ among the 

persons for whom a CPO or CTA must 

provide information in its Disclosure 

Document and for whom a CPO must 

provide information in a pool’s periodic 

Account Statement. See the 

amendments to Regulations 4.22(a)(3), 

4.24(j)(1), (j)(3), (l)(1), and (l)(2) for 

CPOs and Regulations 4.34(j)(1), (j)(3), 

(k)(1) and (k)(2) for CTAs. For example, 

Regulations 4.24(j) and 4.34(j) are being 

amended to include SDs in the group of 

persons as to which conflicts of interest 

must be disclosed by CPOs and CTAs. 

Similarly, the Commission has 

included as proposed ‘‘a registered swap 

dealer’’ among the persons listed in 

Regulation 4.7(a)(2) that do not have to 

satisfy a portfolio requirement in order 

to be a qualified eligible person (QEP), 

such that a CPO or CTA that has 

claimed relief under Regulation 4.7 may 

accept the SD as a pool participant or 

advisory client without regard to the 

size of its investment portfolio. As the 

Commission explained, ‘‘this would be 

consistent with the current treatment of 

other financial intermediaries registered 

with the Commission (such as futures 

commission merchants [FCMs] and 

retail foreign exchange dealers [RFEDs]) 

as QEPs under Regulation 4.7(a)(2).’’ 11

B. Including Books and Records 

Relating to Swap Transactions within 

Part 4 

The Commission has adopted as 

proposed amendments to Part 4 that 

require a CPO or CTA to make and keep 

certain books and records generated by 

the swap transactions in which it 

engages on behalf of not only its pool 

participants and clients, but also itself. 

See the amendments to Regulations 

4.23(a)(7) and (b)(1) for CPOs and 

Regulations 4.33(a)(6) and (b)(1) for 

CTAs. The amendments to Regulations 

4.23(a)(7) and 4.33(a)(6) require CPOs 

and CTAs to retain each 

acknowledgment of a swap transaction 

received from an SD. The amendments 

to Regulations 4.23(b)(1) and 4.33(b)(1) 

make clear that if a CPO or CTA was a 

counterparty to a swap transaction, then 

it would be subject to the swap data 

recordkeeping and reporting 

requirements of Part 45 of the 

Commission’s regulations, as 

applicable.12

C. Regulation 4.30 

Subject to certain exceptions, 

Regulation 4.30 provides that no CTA 

may solicit, accept or receive from an 

existing or prospective client funds, 

securities or other property in the 

trading advisor’s name (or extend credit 

in lieu thereof) to purchase, margin, 

guarantee or secure any commodity 

interest of the client. 

The Commission proposed to amend 

Regulation 4.30 by adding to the list of 

intermediaries then excepted from the 

foregoing prohibition—i.e., registered 

FCMs, leverage transaction merchants 

and RFEDs—a registered SD in 

connection with a swap that was not 

cleared through a derivatives clearing 

organization. The Commission 

explained that this amendment to 

Regulation 4.30 was necessary 

‘‘[b]ecause swap dealers will generally 

fall within the statutory definition of 

CTA, and because a swap dealer 

engaging in uncleared swap transactions 

may be accepting funds or other 

property from its counterparties as 

variation and initial margin 

payments.’’ 13

Subsequently, the Commission 

amended Regulation 4.6 to provide 

therein for an exclusion from the 

definition of the term ‘‘commodity 

trading advisor’’ for an SD, provided the 

commodity interest and swap advisory 

activities of the SD are solely incidental 

to the conduct of its business as an 

SD.14 Because not all SDs may always 

meet the ‘‘solely incidental’’ proviso, 

the Commission has determined to 

amend Regulation 4.30 as proposed, 

such that any registered SD who is a 

CTA is not subject to the regulation’s 

operational prohibition. 

D. Deleting Regulation 4.32 

The Commission has deleted as 

proposed Regulation 4.32, which 

concerned trading by a registered CTA 

on or subject to the rules of a derivatives 

transaction execution facility (DTEF) for 

non-institutional customers. As the 

Commission explained: 

Section 734(a) of the Dodd-Frank Act 

repeals Section 5a of the CEA, which is the 

section establishing and providing for the 

regulation of DTEFs. Accordingly, because 

subsequent to the effective date of the DoddFrank Act Regulation 4.32 will no longer 

have a statutory basis or purpose, the 

Proposal would remove and reserve 

Regulation 4.32.15

IV. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) 16 requires federal agencies to 

consider the impact of those rules on 

small businesses.17 A regulatory 

flexibility analysis or certification 

typically is required for ‘‘any rule for 

which the agency publishes a general 

notice of proposed rulemaking pursuant 

to’’ the notice-and-comment provisions 

of the Administrative Procedure Act, 5 

U.S.C. 553(b).18 The amendments to the 

Part 4 regulations contained herein will 

affect CPOs and CTAs. The Commission 

stated in the Proposal that: 

With respect to CPOs, the Commission 

previously has determined that a CPO is a 

small entity for the purpose of the RFA if it 

meets the criteria for an exemption from 

registration under Regulation 4.13(a)(2). 

Thus, because the Proposal applies to 

registered CPOs, the RFA is not applicable to 

it. As for CTAs, the Commission previously 

has stated that it would evaluate within the 

context of a particular rule proposal whether 

all or some affected CTAs would be 

considered to be small entities and, if so, the 

economic impact on them of the particular 

rule. In this regard, the Commission notes 

that the Proposal applies to registered CTAs. 

Moreover, the Proposal would not have a 

significant economic impact on any CPO or 

CTA who would be affected thereby, because 

it would merely bring within the current Part 

4 regulatory structure of disclosure, reporting 

and recordkeeping information with respect 

to swap activities. It would not impose any 

additional operative requirements or 

otherwise direct or confine the activities of 

CPOs and CTAs.19

The Commission did not receive any 

comments regarding its RFA analysis in 

the Proposal. Accordingly, pursuant to 5 

U.S.C. 605(b), the Chairman, on behalf 

of the Commission, certifies that the 

amendments to the Part 4 regulations 

being published today by this Federal 

Register release will not have a 

significant economic impact on a 

substantial number of small entities. 

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Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54357 

20 44 U.S.C. 3501 et seq. 

21See 7 U.S.C. 12(a)(5). 

22As is explained above, when the Dodd-Frank 

Act extended the statutory definitions of the terms 

‘‘commodity pool operator’’ and ‘‘commodity 

trading advisor,’’ those existing Part 4 regulations 

that applied generally to CPOs and CTAs became 

applicable to CPOs and CTAs captured by the 

expanded statutory definitions, without further 

amendment. Certain other existing Part 4 

regulations, however, spoke specifically to activities 

involving commodity interests, but not to swap 

activities. Accordingly, this rulemaking amends this 

latter subset of Part 4 regulations by making them 

applicable to swap activities, thus closing the 

regulatory gap that would otherwise exist. 23 76 FR 11701, 11703. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA) 20 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. 

The amendments to the Part 4 

regulations will not require any new 

collection of information from any 

entity that is subject to them. 

Additionally, the Commission did not 

receive any comments regarding its PRA 

analysis in the Proposal. Accordingly, 

for purposes of the PRA, the Chairman, 

on behalf of the Commission, certifies 

that the amendments to the Part 4 

regulations being published today by 

this Federal Register release will not 

impose any new reporting or 

recordkeeping requirements. 

C. Cost-Benefit Analysis 

Prior to the passage of the Dodd-Frank 

Act, the Part 4 regulations did not apply 

to swap-related activities. This preDodd-Frank Act construct provides a 

useful reference point from which to 

compare the costs and benefits of the 

proposed regulations to the alternative 

where the Commission would not be 

taking any action to incorporate swaprelated information into Part 4. 

As a result of the Dodd-Frank Act 

including swap-related activities among 

the activities on which the CPO and 

CTA definitions are based, CPOs and 

CTAs who engage in swap-related 

activities are now subject to Part 4. In 

various places, however, the wording of 

particular provisions of Part 4 was 

incomplete or inconsistent in the 

context of CPOs and CTAs involved 

with swap transactions; there is no 

regulatory need for the prohibition in 

Regulation 4.30 against directly 

accepting margin payments to apply to 

an SD; and the subject matter of 

Regulation 4.32 (trading on DTEFs) was 

rendered moot by the Dodd-Frank Act. 

Under such a scenario, the costs to the 

public of inaction would be, in 

qualitative terms, failure to receive Part 

4 disclosure, reporting and 

recordkeeping protections from their 

CPOs and CTAs with regard to their 

swap activities, an unnecessary burden 

on SDs, and regulatory text that is 

obsolete. The costs of these 

amendments, if any, will be minimal— 

limited to the costs associated with 

including information related to swaps 

in the Disclosure Documents, Account 

Statements and books and records 

already required of CPOs and CTAs 

under existing Part 4 regulations. 

Moreover, this information should be 

readily available to CPOs and CTAs. 

The costs cannot be feasibly quantified 

or estimated, because they will vary 

according to each registrant’s internal 

processes and registration category. In 

contrast, the amendments will yield 

significant if unquantifiable benefit to 

the public, relative to inaction, by 

clarifying the application of Part 4 and 

the obligations of CPOs and CTAs to 

their participants and clients, 

respectively. 

In the CEA,21 Congress provided the 

Commission with the authority to 

promulgate regulations that, among 

other things, are reasonably necessary to 

effectuate any of the provisions or to 

accomplish any of the purposes of the 

CEA. In accordance with Section 15(a) 

of the CEA, it is in this post-Dodd-Frank 

Act environment that the Commission 

considers the costs and benefits of its 

actions before promulgating a regulation 

under the CEA or issuing an order. 

Section 15(a) specifies that the costs 

and benefits shall be evaluated in light 

of the following five broad areas of 

market and public concern: (1) 

Protection of market participants and 

the public; (2) efficiency, 

competitiveness, and financial integrity 

of futures markets; (3) price discovery; 

(4) sound risk management practices; 

and (5) other public interest 

considerations. 

In light of the provisions of the DoddFrank Act that expand the ‘‘commodity 

pool operator’’ and ‘‘commodity trading 

advisor’’ definitions to include swaprelated activities, these amendments 

incorporate into the existing Part 4 

framework regulations to take account 

of the swap-related activities of CPOs 

and CTAs. Specifically, the 

amendments subject CPOs and CTAs 

when involved with swap transactions 

to the same Part 4 requirements that 

apply when they are involved with 

commodity interest transactions, to the 

extent regulations in place at the time of 

the enactment of the Dodd-Frank Act 

did not clearly do so.22 The revision to 

Regulation 4.30 excepts SDs from the 

prohibition on accepting margin to treat 

them equivalently with FCMs and 

RFEDs. In addition, these amendments 

delete Regulation 4.32, pertaining to 

trading by registered CTAs on DTEFs, 

given the repeal by the Dodd-Frank Act 

of CEA Section 5a, which authorized 

such trading facilities. 

In the Proposal the Commission 

sought public comment on the costs and 

benefits of its contemplated 

amendments to Part 4.23 The 

Commission did not receive any 

comments in response to this request. 

Section 15(a) Factors 

(1) Protection of market participants 

and the public. 

The Commission believes the 

amendments to the Part 4 regulations 

will provide protection to market 

participants and the public by requiring 

CPOs and CTAs to include information 

on swap intermediaries and activities in 

the disclosure, reporting and 

recordkeeping framework under Part 4. 

For example, Regulation 4.24(j) has 

provided protections to commodity pool 

participants by requiring their CPO to 

disclose any actual or potential conflict 

of interest with any FCM with whom 

their pool was required to maintain its 

account. The amendment to Regulation 

4.24(j) the Commission has adopted will 

provide similar protections, by requiring 

the CPO to disclose any actual or 

potential conflict of interest with any 

SD with whom their pool maintains its 

swap positions. 

(2) Efficiency, competitiveness, and 

financial integrity of the futures 

markets. 

The Commission does not expect the 

amendments to Part 4 to have an impact 

on the efficiency, competitiveness and 

financial integrity of the commodity 

interest markets. 

(3) Price Discovery. 

The Commission does not expect the 

amendments to Part 4 to have an impact 

on the market’s price discovery 

functions. 

(4) Sound risk management practices. 

The Commission does not expect the 

amendments to Part 4 to have an impact 

on risk management practices by CPOs, 

CTAs and other Commission registrants. 

However, the requirement that CPOs 

and CTAs account for SD, MSP and 

swap activities when complying with 

their disclosure, reporting and 

recordkeeping requirements under Part 

4 will benefit prospective and actual 

pool participants and clients by 

ensuring that these participants and 

clients are afforded the same customer 

protections as participants and clients 

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54358 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

in all other commodity pools and 

managed account programs. 

(5) Other public interest 

considerations. 

The Commission has not identified 

any other public interest considerations 

regarding the costs and benefits of the 

amendments to Part 4. 

List of Subjects in 17 CFR Part 4 

Advertising, Brokers, Commodity 

futures, Commodity pool operators, 

Commodity trading advisors, Customer 

protection, Reporting and recordkeeping 

requirements, Swaps. 

For the reasons presented above, the 

Commission hereby amends Chapter I of 

Title 17 of the Code of Federal 

Regulations as follows: 

PART 4—COMMODITY POOL 

OPERATORS AND COMMODITY 

TRADING ADVISORS 

■ 1. The authority citation for Part 4 is 

revised to read as follows: 

Authority: 7 U.S.C. 1a, 2, 6b, 6c, 6l, 6m, 6n, 

6o, 12a and 23, as amended by Title VII of 

the Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Pub. L. 111–203, 

124 Stat. 1376 (July 21, 2010). 

■ 2. Section 4.7 is amended by adding 

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

§ 4.7 Exemption from certain part 4 

requirements for commodity pool operators 

with respect to offerings to qualified eligible 

persons and for commodity trading 

advisors with respect to advising qualified 

eligible persons. 

* * * * * 

(a) * * * 

(2) * * * 

(i) * * * 

(C) A swap dealer registered pursuant 

to section 4s(a)(1) of the Act, or a 

principal thereof; 

* * * * * 

■ 3. Section 4.22 is amended by revising 

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

§ 4.22 Reporting to pool participants. 

(a) * * * 

(3) The Account Statement must also 

disclose any material business dealings 

between the pool, the pool’s operator, 

commodity trading advisor, futures 

commission merchant, retail foreign 

exchange dealer, swap dealer, or the 

principals thereof that previously have 

not been disclosed in the pool’s 

Disclosure Document or any 

amendment thereto, other Account 

Statements or Annual Reports. 

* * * * * 

■ 4. Section 4.23 is amended by: 

■ a. Revising paragraphs (a)(1) and 

(a)(7); and 

■ b. Revising paragraph (b)(1), to read as 

follows: 

§ 4.23 Recordkeeping. 

* * * * * 

(a) * * * 

(1) An itemized daily record of each 

commodity interest transaction of the 

pool, showing the transaction date, 

quantity, commodity interest, and, as 

applicable, price or premium, delivery 

month or expiration date, whether a put 

or a call, strike price, underlying 

contract for future delivery or 

underlying physical, swap type and 

counterparty, the futures commission 

merchant and/or retail foreign exchange 

dealer carrying the account and the 

introducing broker, if any, whether the 

commodity interest was purchased, sold 

(including, in the case of a retail forex 

transaction, offset), exercised, expired 

(including, in the case of a retail forex 

transaction, whether it was rolled 

forward), and the gain or loss realized. 

* * * * * 

(7) Copies of each confirmation or 

acknowledgment of a commodity 

interest transaction of the pool, and 

each purchase and sale statement and 

each monthly statement for the pool 

received from a futures commission 

merchant, retail foreign exchange dealer 

or swap dealer. 

* * * * * 

(b) * * * 

(1) An itemized daily record of each 

commodity interest transaction of the 

commodity pool operator and each 

principal thereof, showing the 

transaction date, quantity, commodity 

interest, and, as applicable, price or 

premium, delivery month or expiration 

date, whether a put or a call, strike 

price, underlying contract for future 

delivery or underlying physical, swap 

type and counterparty, the futures 

commission merchant or retail foreign 

exchange dealer carrying the account 

and the introducing broker, if any, 

whether the commodity interest was 

purchased, sold, exercised, or expired, 

and the gain or loss realized; Provided, 

however, that if the pool operator is a 

counterparty to a swap, it must comply 

with the swap data recordkeeping and 

reporting requirements of Part 45 of this 

chapter, as applicable. 

* * * * * 

■ 5. Section 4.24 is amended by: 

■ a. Revising paragraph (g); 

■ b. Revising paragraph (h)(1)(i); 

■ c. Revising paragraph (i)(2)(xii); 

■ d. Revising paragraphs (j)(1)(vi) and 

(j)(3); and 

■ e. Revising paragraphs (l)(1)(iii), (l)(2) 

introductory text and (l)(2)(i), to read as 

follows: 

§ 4.24 General disclosures required. 

* * * * * 

(g) Principal risk factors. A discussion 

of the principal risk factors of 

participation in the offered pool. This 

discussion must include, without 

limitation, risks relating to volatility, 

leverage, liquidity, counterparty 

creditworthiness, as applicable to the 

types of trading programs to be 

followed, trading structures to be 

employed and investment activity 

(including retail forex and swap 

transactions) expected to be engaged in 

by the offered pool. 

(h) * * * 

(1) * * * 

(i) The approximate percentage of the 

pool’s assets that will be used to trade 

commodity interests, securities and 

other types of interests, categorized by 

type of commodity or market sector, 

type of swap, type of security (debt, 

equity, preferred equity), whether 

traded or listed on a regulated exchange 

market, maturity ranges and investment 

rating, as applicable; 

* * * * * 

(i) * * * 

(2) * * * 

(xii) Any costs or fees included in the 

spread between bid and asked prices for 

retail forex or, if known, swap 

transactions; and 

* * * * * 

(j) * * * 

(1) * * * 

(vi) Any other person providing 

services to the pool, soliciting 

participants for the pool, acting as a 

counterparty to the pool’s retail forex or 

swap transactions, or acting as a swap 

dealer with respect to the pool. 

* * * * * 

(3) Included in the description of such 

conflicts must be any arrangement 

whereby a person may benefit, directly 

or indirectly, from the maintenance of 

the pool’s account with the futures 

commission merchant and/or retail 

foreign exchange dealer and/or from the 

maintenance of the pool’s swap 

positions with a swap dealer, or from 

the introduction of the pool’s account to 

a futures commission merchant and/or 

retail foreign exchange dealer and/or 

swap dealer by an introducing broker 

(such as payment for order flow or soft 

dollar arrangements) or from an 

investment of pool assets in investee 

pools or funds or other investments. 

* * * * * 

(l) * * * 

(1) * * * 

(iii) The pool’s futures commission 

merchants and/or retail foreign 

exchange dealers and/or swap dealers 

and its introducing brokers, if any. 

(2) With respect to a futures 

commission merchant and/or retail 

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Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 54359 

foreign exchange dealer and/or swap 

dealer or an introducing broker, an 

action will be considered material if: 

(i) The action would be required to be 

disclosed in the notes to the futures 

commission merchant’s, retail foreign 

exchange dealer’s, swap dealer’s or 

introducing broker’s financial 

statements prepared pursuant to 

generally accepted accounting 

principles; 

* * * * * 

■ 6. Section 4.30 is revised to read as 

follows: 

§ 4.30 Prohibited activities. 

(a) Except as provided in paragraph 

(b) of this section, no commodity 

trading advisor may solicit, accept or 

receive from an existing or prospective 

client funds, securities or other property 

in the trading advisor’s name (or extend 

credit in lieu thereof) to purchase, 

margin, guarantee or secure any 

commodity interest of the client. 

(b) The prohibition in paragraph (a) of 

this section shall not apply to: 

(1) A futures commission merchant 

that is registered as such under the Act; 

(2) A leverage transaction merchant 

that is registered as a commodity trading 

advisor under the Act; 

(3) A retail foreign exchange dealer 

that is registered as such under the Act; 

or 

(4) A swap dealer that is registered as 

such under the Act, with respect to 

funds, securities or other property 

accepted to purchase, margin, guarantee 

or secure any swap that is not cleared 

through a derivatives clearing 

organization. 

§ 4.32 [Removed and Reserved] 

■ 7. Section 4.32 is removed and 

reserved. 

■ 8. Section 4.33 is amended by: 

■ a. Revising paragraph (a)(6); and 

■ b. Revising paragraph (b)(1), to read as 

follows: 

§ 4.33 Recordkeeping. 

* * * * * 

(a) * * * 

(6) Copies of each confirmation or 

acknowledgment of a commodity 

interest transaction, and each purchase 

and sale statement and each monthly 

statement received from a futures 

commission merchant, a retail foreign 

exchange dealer or a swap dealer. 

* * * * * 

(b) * * * 

(1) An itemized daily record of each 

commodity interest transaction of the 

commodity trading advisor, showing the 

transaction date, quantity, commodity 

interest, and, as applicable, price or 

premium, delivery month or expiration 

date, whether a put or a call, strike 

price, underlying contract for future 

delivery or underlying physical, swap 

type and counterparty, the futures 

commission merchant and/or retail 

foreign exchange dealer carrying the 

account and the introducing broker, if 

any, whether the commodity interest 

was purchased, sold (including, in the 

case of a retail forex transaction, offset), 

exercised, expired (including, in the 

case of a retail forex transaction, 

whether it was rolled forward), and the 

gain or loss realized; Provided, however, 

that if the trading advisor is a 

counterparty to a swap, it must comply 

with the swap data recordkeeping and 

reporting requirements of Part 45 of this 

chapter, as applicable. 

* * * * * 

■ 9. Section 4.34 is amended by: 

■ a. Revising paragraph (g); 

■ b. Revising paragraph (i)(2); 

■ c. Revising paragraph (j)(3); and 

■ d. Revising paragraphs (k)(1)(iii), 

(k)(2) introductory text and (k)(2)(i), to 

read as follows: 

§ 4.34 General disclosures required. 

* * * * * 

(g) Principal risk factors. A discussion 

of the principal risk factors of this 

trading program. This discussion must 

include, without limitation, risks due to 

volatility, leverage, liquidity, and 

counterparty creditworthiness, as 

applicable to the trading program and 

the types of transactions and investment 

activity expected to be engaged in 

pursuant to such program (including 

retail forex and swap transactions, if 

any). 

* * * * * 

(i) * * * 

(2) Where any fee is determined by 

reference to a base amount including, 

but not limited to, ‘‘net assets,’’ ‘‘gross 

profits,’’ ‘‘net profits,’’ ‘‘net gains,’’ 

‘‘pips’’ or ‘‘bid-asked spread,’’ the 

trading advisor must explain how such 

base amount will be calculated. Where 

any fee is based on the difference 

between bid and asked prices on retail 

forex or swap transactions, the trading 

advisor must explain how such fee will 

be calculated; 

* * * * * 

(j) * * * 

(3) Included in the description of any 

such conflict must be any arrangement 

whereby the trading advisor or any 

principal thereof may benefit, directly 

or indirectly, from the maintenance of 

the client’s commodity interest account 

with a futures commission merchant 

and/or retail foreign exchange dealer, 

and/or from the maintenance of the 

client’s swap positions with a swap 

dealer or from the introduction of such 

account through an introducing broker 

(such as payment for order flow or soft 

dollar arrangements). 

(k) * * * 

(1) * * * 

(iii) Any introducing broker through 

which the client will be required to 

introduce its account to the futures 

commission merchant and/or retail 

foreign exchange dealer and/or swap 

dealer. 

(2) With respect to a futures 

commission merchant, retail foreign 

exchange dealer, swap dealer or 

introducing broker, an action will be 

considered material if: 

(i) The action would be required to be 

disclosed in the notes to the futures 

commission merchant’s, retail foreign 

exchange dealer’s, swap dealer’s or 

introducing broker’s financial 

statements prepared pursuant to 

generally accepted accounting 

principles; 

* * * * * 

Dated: Issued in Washington, DC, on 

August 23, 2012, by the Commission. 

Sauntia S. Warfield, 

Assistant Secretary of the Commission. 

Appendices to Amendments to 

Commodity Pool Operator and 

Commodity Trading Advisor 

Regulations Resulting From the DoddFrank Act—Commission Voting 

Summary and Statements of 

Commissioners 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Gensler and 

Commissioners Sommers, Chilton, O’Malia 

and Wetjen voted in the affirmative; no 

Commissioner voted in the negative. 

Appendix 2—Statement of Chairman 

Gary Gensler 

I support the final rule to amend certain 

provisions of Part 4 of the Commission’s 

regulations regarding the operations and 

activities of commodity pool operators 

(CPOs) and commodity trading advisors 

(CTAs). The amendments ensure that CFTC 

regulations with regard to CPOs and CTAs 

reflect changes made to the Commodity 

Exchange Act by the Dodd-Frank Wall Street 

Reform and Consumer Protection Act (DoddFrank Act). 

Consistent with Dodd-Frank’s expansion of 

the CPO and CTA definitions to include 

those involved in swaps and advising on 

swaps, the final amendments require swaps 

information to be included in the disclosure, 

reporting and recordkeeping obligations that 

currently exist for CPOs and CTAs under Part 

4. Such information will enhance customer 

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54360 Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Rules and Regulations 

protections by increasing the transparency of 

CPO and CTA swap activities to their pool 

participants and clients. 

[FR Doc. 2012–21606 Filed 9–4–12; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF COMMERCE 

Patent and Trademark Office 

37 CFR Parts 1 and 41 

[PTO–C–2011–0007] 

RIN 0651–AC55 

CPI Adjustment of Patent Fees for 

Fiscal Year 2013 

AGENCY: United States Patent and 

Trademark Office, Commerce. 

ACTION: Final rule. 

SUMMARY: The United States Patent and 

Trademark Office (Office or USPTO) is 

adjusting certain patent fee amounts for 

fiscal year 2013 to reflect fluctuations in 

the Consumer Price Index (CPI). The 

patent statute provides for the annual 

CPI adjustment of patent fees set by 

statute to recover the higher costs 

associated with doing business as 

reflected by the CPI. 

DATES: This final rule is effective on 

October 5, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Gilda Lee by email at 

Gilda.Lee@uspto.gov, by telephone at 

(571) 272–8698, or by fax at (571) 273– 

8698. 

SUPPLEMENTARY INFORMATION:

Executive Summary 

Purpose: Section 41(f) of Title 35 of 

the United States Code provides the 

USPTO with the authority to adjust 

certain statutory patent fees to reflect 

fluctuations during the preceding 

twelve months in the Consumer Price 

Index (CPI). The purpose of this 

provision is to allow the USPTO to 

recover higher costs of providing 

services as reflected by the CPI. This 

final rule sets forth which fees will be 

adjusted and how the adjustment is 

calculated based on the current 

fluctuation in the CPI over the twelve 

months preceding this notice. 

Summary of Major Provisions: The 

USPTO is adjusting certain patent fees 

in accordance with 35 U.S.C. 41(f), as 

amended by the Consolidated 

Appropriations Act (Pub. L. 108–447, 

118 Stat. 2809 (2004)) and the LeahySmith America Invents Act (Pub. L. 

112–29). The fee increase helps the 

USPTO to meet its strategic goals and 

maintain effective and efficient 

operation of the patent system. 

Costs and Benefits: This rulemaking is 

not economically significant as that 

term is defined in Executive Order 

12866 (Sept. 30, 1993). 

Background 

Statutory Provisions: Patent fees are 

set by or under the authority provided 

in 35 U.S.C. 41, 119, 120, 132(b), 156, 

157(a), 255, 302, 311, 376, section 

532(a)(2) of the Uruguay Round 

Agreements Act (URAA) (Pub. L. 103– 

465, § 532(a)(2), 108 Stat. 4809, 4985 

(1994)), and section 4506 of the 

American Inventors Protection Act of 

1999 (AIPA) (Pub. L. 106–113, 113 Stat. 

1501, 1501A–565 (1999)). For fees paid 

under 35 U.S.C. 41(a) and (b) and 

132(b), independent inventors, small 

business concerns, and nonprofit 

organizations who meet the 

requirements of 35 U.S.C. 41(h)(1) are 

entitled to a fifty-percent reduction. 

The USPTO published a notice 

proposing to adjust the patent fees 

charged under 35 U.S.C. 41(a) and (b) 

for fiscal year 2013 to reflect 

fluctuations in the CPI on May 14, 2012. 

The fiscal year 2005 Consolidated 

Appropriations Act (section 801 of 

Division B) provided that 35 U.S.C. 

41(a), (b), and (d) shall be administered 

in a manner that revises patent 

application fees (35 U.S.C. 41(a)) and 

patent maintenance fees (35 U.S.C. 

41(b)), and provides for a separate filing 

fee (35 U.S.C. 41(a)), search fee (35 

U.S.C. 41(d)(1)), and examination fee 

(35 U.S.C. 41(a)(3)) during fiscal years 

2005 and 2006. See Public Law 108– 

447, 118 Stat. 2809, 2924–30 (2004). The 

Omnibus Appropriations Act, 2009, 

extended the patent and trademark fee 

provisions of the fiscal year 2005 

Consolidated Appropriations Act 

through September 30, 2011. See Public 

Law 112–4, 125 Stat. 6 (2011); Public 

Law 111–322, 124 Stat. 3518 (2010); 

Public Law 111–317, 124 Stat. 3454 

(2010); Public Law 111–290, 124 Stat. 

3063 (2010); Public Law 111–242, 124 

Stat. 2607 (2010); Public Law 111–224, 

124 Stat. 2385 (2010); Public Law 111– 

117, 123 Stat. 3034 (2009); Public Law 

111–8, 123 Stat. 524 (2009); Public Law 

111–6, 123 Stat. 522 (2009); Public Law 

111–5, 123 Stat. 115 (2009); Public Law 

110–329, 122 Stat. 3574 (2008); Public 

Law 110–161, 121 Stat. 1844 (2007); 

Public Law 110–149, 121 Stat. 1819 

(2007); Public Law 110–137, 121 Stat. 

1454 (2007); Public Law 110–116, 121 

Stat. 1295 (2007); Public Law 110–92, 

121 Stat. 989 (2007); Public Law 110–5, 

121 Stat. 8 (2007); Public Law 109–383, 

120 Stat. 2678 (2006); Public Law 109– 

369, 120 Stat. 2642 (2006); and Public 

Law 109–289, 120 Stat. 1257 (2006). The 

Leahy-Smith America Invents Act, 

enacted September 16, 2011, codified 

the patent and trademark fee provisions 

of the fiscal year 2005 Consolidated 

Appropriations Act. 

Section 11 of the Leahy-Smith 

America Invents Act provides for a 

surcharge of fifteen percent, rounded by 

standard arithmetic rules, on all fees 

charged or authorized by 35 U.S.C. 

41(a), (b), and (d)(1), as well as by 35 

U.S.C. 132(b). Section 11 of the Act 

provides that this fifteen percent 

surcharge is effective ten days after the 

date of enactment (i.e., September 26, 

2011). Section 11 also provides that this 

fifteen percent surcharge shall 

terminate, with respect to a fee to which 

the surcharge applies, on the effective 

date of the setting or adjustment of that 

fee pursuant to the exercise of the 

authority under section 10 of the Act for 

the first time with respect to that fee. 

Section 10 fee-setting will be 

implemented in a future separate 

rulemaking. 

As for this rulemaking, Section 41(f) 

of Title 35, United States Code, provides 

that fees established under 35 U.S.C. 

41(a) and (b) may be adjusted on 

October 1, 1992, and every year 

thereafter, to reflect fluctuations in the 

Consumer Price Index over the previous 

twelve months. If the annual change in 

CPI is one percent or less, no fee 

adjustment for CPI fluctuations will be 

pursued. 

This CPI increase will be 

implemented on October 1, 2012. This 

interim increase in fees is necessary to 

allow the USPTO to meet its strategic 

goals within the time frame outlined in 

the FY 2013 President’s Budget. The 

interim fee increase is a bridge to 

provide resources until the USPTO 

exercises its fee-setting authority and 

develops a new fee structure that will 

provide sufficient financial resources in 

the long term. An adequately funded 

USPTO will optimize the administration 

of the U.S. intellectual property system, 

and thereby move innovation to the 

marketplace more quickly, creating and 

sustaining U.S. jobs and enhancing the 

health and living standards of 

Americans. 

Fee Adjustment Level: The patent 

statutory fees established by 35 U.S.C. 

41(a) and (b) are adjusted to reflect the 

most recent fluctuations occurring 

during the twelve-month period prior to 

publication of the final rule 

implementing this CPI adjustment, as 

measured by the Consumer Price Index 

for All Urban Consumers (CPI–U). The 

Office of Management and Budget 

(OMB) has advised that in calculating 

these fluctuations, the USPTO should 

use CPI–U data as determined by the 

Secretary of Labor, which is found at 

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