45392 Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Proposed Rules 

1 7 U.S.C. 1 et seq. (2000). The Act can be 

accessed at http://www.access.gpo.gov/uscode/ 

title7/chapter1_.html. 

2 7 U.S.C. 6k(1)–(3). 

3 7 U.S.C. 23. 

4 17 CFR 3.12(a). The Commission’s regulations 

can be accessed at http://www.access.gpo.gov/nara/ 

cfr/waisidx_06/17cfrv1_06.html. 

5Commission Regulation 3.31(c)(3) permits the 

filing of a Uniform Termination Notice for 

Securities Industry Registration (Form U–5) in lieu 

of a Form 8–T to report the termination of any AP 

or principal of the sponsoring intermediary. 

6The termination notice filed by NASD members 

is the Form U–5. 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 3 

RIN 3038–AC45 

Termination of Associated Persons 

and Principals of Futures Commission 

Merchants, Introducing Brokers, 

Commodity Trading Advisors, 

Commodity Pool Operators and 

Leverage Transaction Merchants 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Proposed rules. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 

‘‘CFTC’’) is proposing to amend 

Commission Regulations 3.12 and 3.31 

(‘‘Proposed Amendments’’) to extend 

the period during which a registered 

futures commission merchant (‘‘FCM’’), 

introducing broker (‘‘IB), commodity 

trading advisor (‘‘CTA’’), commodity 

pool operator (‘‘CPO’’) or leverage 

transaction merchant (‘‘LTM’’) must file 

a notice with the National Futures 

Association (‘‘NFA’’) to report the 

termination of any associated person 

(‘‘AP’’) or principal of the registered 

intermediary. Under existing 

regulations, such intermediaries must 

file notices within 20 days after the 

termination of the AP or principal. The 

Commission’s proposal (‘‘Proposal’’) 

would provide 30, rather than 20, days 

for the filing of a termination notice. 

DATES: Comments must be received on 

or before September 13, 2007. 

ADDRESSES: Comments on the Proposal 

should be sent to David A. Stawick, 

Secretary, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. Comments may be sent by 

facsimile transmission to (202) 418–

5521, or by e-mail to secretary@cftc.gov. 

Reference should be made to ‘‘Proposal 

Regarding the Termination of 

Associated Persons and Principals of 

Futures Commission Merchants, 

Introducing Brokers, Commodity 

Trading Advisors, Commodity Pool 

Operators and Leverage Transaction 

Merchants.’’ Comments also may be 

submitted by connecting to the Federal 

eRulemaking Portal at http:// 

www.regulations.gov and following the 

comment submission instructions. 

FOR FURTHER INFORMATION CONTACT: 

Helene D. Schroeder, Special Counsel, 

Compliance and Registration Section, 

Division of Clearing and Intermediary 

Oversight, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581, telephone number: (202) 418–

5450; facsimile number: (202) 418–5528; 

and electronic mail: 

hschroeder@cftc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Section 4k of the Commodity 

Exchange Act (‘‘Act’’) 1 makes it 

unlawful for persons to be associated in 

certain specified capacities with an 

FCM, IB, CPO or CTA unless the person 

is registered with the entity or 

intermediary as an AP thereof.2 Section 

19 of the Act grants the Commission 

plenary authority over leverage 

transactions, and this authority includes 

the registration of APs of an LTM.3

Commission Regulation 3.12(a) makes 

it unlawful for any person to be 

associated with an FCM, IB, CTA, CPO 

or LTM in the capacity of an AP unless 

the person has registered under the Act 

as an AP of that sponsoring 

intermediary.4 Pursuant to Commission 

Regulation 3.12(c), application for 

registration as an AP must be on a Form 

8–R and accompanied by the applicant’s 

fingerprints as well as a sponsor 

certification that meets the requirements 

set forth in that Regulation. 

Commission Regulations 3.12(b) and 

3.31(c)(1) provide for the termination of 

an AP’s registration. Specifically, 

Section 3.31(c)(1) requires the 

sponsoring FCM, IB, CPO, CTA or LTM 

to file a Form 8–T notice 5 with NFA 

within 20 days of either of the following 

events: (1) The person fails to become 

associated with the sponsoring FCM, IB, 

CTA, CPO or LTM; or (2) the association 

with the sponsoring firm is otherwise 

terminated. Commission Regulation 

3.31(c)(2) provides for the termination 

of any principal of an FCM, IB, CPO, 

CTA or LTM, and it also requires the 

filing of a Form 8–T within 20 days after 

the termination of the principal’s 

affiliation. 

NFA Registration Rule 214(a) likewise 

specifies that such termination notices 

must be filed within 20 days after the 

termination of the affiliation of the AP 

or principal, and it imposes a $100 fee 

upon sponsoring firms that fail to file 

termination notices on a timely basis. 

By contrast, Article V, Section 3(a) of 

the Bylaws of the National Association 

of Securities Dealers, Inc. (‘‘NASD’’) 

specifies that NASD members must file 

termination notices with respect to 

registered persons, including varied 

securities representatives and principals 

thereof, within 30, rather than 20, days.6

II. NFA’s Petition 

NFA recently sought input from its 

members regarding possible 

enhancements to its online registration 

process. Several large NFA members 

that are dually registered as FCMs or IBs 

and securities broker-dealers (‘‘BDs’’) 

identified as a particular problem the 

aforementioned disparate regulatory 

timelines for filing termination notices. 

The dual registrants asserted that it is an 

undue regulatory burden for them to file 

within the 20-day period for some APs, 

while for the majority of their APs the 

NASD allows a 30-day period. The dual 

registrants also maintained that the 20- 

day period is difficult to comply with 

when a termination notice contains 

disclosure information that must be 

reviewed at the branch office level and 

then by the legal and/or registration 

departments of a firm. They also stated 

that, on occasion, an attorney 

representing an AP will review the 

notice prior to filing. 

In light of the difficulties identified by 

dual registrants, NFA petitioned the 

Commission to amend Regulation 

3.31(c)(1) to increase the number of days 

in which a firm must file a termination 

notice from 20 to 30 days. NFA claims 

that such an extension will provide 

sponsoring firms the time needed to 

properly review the termination notices 

and will conform the futures industry 

requirements to the securities industry’s 

time allowance. Given the disparate 

regulatory requirements applicable to 

firms that are dual registrants and the 

burden that complying with the 20-day 

period presents, the Commission 

believes it is appropriate to propose 

amendments to the relevant regulatory 

requirements. 

III. Proposal 

In accordance with the foregoing, the 

Proposed Amendments would extend 

the period of time in which a registered 

FCM, IB, CPO, CTA or LTM must file a 

notice with NFA to report the 

termination of any AP or principal of 

the registered intermediary. Under 

existing regulations, such intermediaries 

must file notices within 20 days after 

the termination of the AP or principal. 

The Proposed Amendments would 


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Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Proposed Rules 45393 

7 5 U.S.C. 601 et seq. 

8 47 FR 18618 (Apr. 30, 1982). 

9 47 FR 18618, 18619. 

10 5 U.S.C. 605(b). 

11 7 U.S.C. 19(a). 12 44 U.S.C. 3501 et seq. 

allow termination notices to be filed 

within 30 days after the AP or principal 

is terminated. These Proposed 

Amendments are intended to conform 

the futures industry requirements to the 

securities industry’s time allowance. 

IV. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) 7 requires that agencies, in 

proposing regulations, consider the 

impact of those regulations on small 

businesses. The Proposed Amendments 

would affect persons that are registered 

as FCMs, IBs, CPOs, CTAs and LTMs. 

The Commission has previously 

established certain definitions of ‘‘small 

entities’’ to be used by the Commission 

in evaluating the impact of its 

regulations on such entities in 

accordance with the RFA.8 The 

Commission previously determined that 

registered FCMs, CPOs and LTMs are 

not small entities for the purpose of the 

RFA.9 With respect to the remaining 

persons, CTAs and IBs, the Commission 

does not believe that the Proposed 

Amendments would place any 

additional burdens upon such persons 

inasmuch as these registrants already 

are subject to the requirement to file 

termination notices. Moreover, because 

the Proposed Amendments would 

provide these intermediaries with 

additional time in which to file 

termination notices, the Amendments 

actually would lessen the relevant 

regulatory burden. Accordingly, and 

based on Section 3(a) of the RFA,10 the 

Acting Chairman, on behalf of the 

Commission, certifies that the Proposed 

Amendments would not have a 

significant economic impact on a 

substantial number of small entities. 

However, the Commission invites the 

public to comment on this certification. 

B. Cost-Benefit Analysis 

Section 15(a) of the Act 11 requires the 

Commission to consider the costs and 

benefits of its action before issuing a 

new regulation under the Act. By its 

terms, Section 15(a) does not require the 

Commission to quantify the costs and 

benefits of a new regulation or to 

determine whether the benefits of the 

proposed regulation outweigh its costs. 

Rather, Section 15(a) simply requires 

the Commission to ‘‘consider the costs 

and benefits’’ of its action. 

Section 15(a) further specifies that 

costs and benefits shall be evaluated in 

light of five broad areas of market and 

public concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. The 

Commission, in its discretion, may 

choose to give greater weight to any one 

of the five enumerated areas and 

determine that, notwithstanding its 

costs, a particular regulation is 

necessary or appropriate to protect the 

public interest or to effectuate any of the 

provisions or to accomplish any of the 

purposes of the Act. 

The Proposed Amendments concern 

the filing of termination notices by 

registered intermediaries, in particular, 

FCMs, IBs, CPOs, CTAs and LTMs. 

Specifically, the Proposed Amendments 

would extend the period during which 

these registered intermediaries must file 

a notice with NFA to report the 

termination of any AP or principal of 

the sponsoring intermediary. 

The Proposed Amendments should 

have no effect on the protection of 

market participants and the public 

because they would not alter or modify 

the type or nature of information that 

must be filed with the Commission. 

Rather, they would provide registrants 

with additional time in which to file 

information that is already required to 

be filed and would conform the futures 

industry requirements to the securities 

industry’s time allowance for filing 

termination notices. 

The Proposed Amendments should 

enhance the efficiencies experienced by 

intermediaries because they would 

lessen burdens that make it difficult for 

intermediaries to comply with the time 

allowance provided for futures firms 

filing termination notices. 

The Proposed Amendments should 

have no effect on the following three 

enumerated areas: (1) Competitiveness 

or the financial integrity of futures 

markets; (2) price discovery; and (3) 

sound risk management practices. 

After considering these factors, the 

Commission has determined to publish 

the Proposed Amendments discussed 

above. The Commission invites public 

comment on its application of the costbenefit provision. Commenters also are 

invited to submit any data that they may 

have quantifying the costs and benefits 

of the Proposed Amendments with their 

comment letters. 

C. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(‘‘PRA’’) imposes certain obligations on 

federal agencies, including the 

Commission, in connection with their 

conducting or sponsoring any collection 

of information as defined by the PRA.12

The Proposed Amendments will not 

require a new collection of information 

on the part of any entities subject to the 

Proposed Amendments. Specifically, 

the Proposed Amendments will modify 

existing regulatory requirements by 

extending the period during which 

registered intermediaries are required to 

file notices with NFA to report the 

termination of APs and principals of the 

registered intermediary. Although the 

Proposed Amendments would alter the 

timeframe during which information is 

required to be collected, the estimated 

burden associated with the collection is 

not expected to increase or decrease as 

a result. All affected entities already 

must comply with a requirement to file 

termination notices. Accordingly, for 

purposes of the PRA, the Commission 

certifies that the Proposed Amendments 

will not impact the total annual 

reporting or recordkeeping burden 

associated with the above-referenced 

collection of information, which has 

been approved previously by OMB. 

Pursuant to the PRA, the Commission 

has submitted a copy of this 

certification to the Office of 

Management and Budget (‘‘OMB’’) for 

its review. 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 in 17 CFR Part 3 

Administrative practice and 

procedure, Brokers, Commodity futures, 

Reporting and recordkeeping 

requirements. 

For the reasons discussed in the 

preamble, the Commission proposes to 

amend 17 CFR part 3 as follows: 

PART 3—REGISTRATION 

1. The authority citation for part 3 

continues to read as follows: 

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

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

6n, 6o, 6p, 8, 9, 9a, 12, 12a, 13b, 13c, 16a, 

18, 19, 21, 23. 

2. Section 3.12 is proposed to be 

amended by revising paragraph (b) to 

read as follows: 

§ 3.12 Registration of associated persons 

of futures commission merchants, 

introducing brokers, commodity trading 

advisors, commodity pool operators and 

leverage transaction merchants. 

* * * * * 

(b) Duration of registration. A person 

registered in accordance with 


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45394 Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Proposed Rules 

paragraphs (c), (d), (f), (i), or (j) of this 

section and whose registration has not 

been revoked will continue to be so 

registered until the revocation or 

withdrawal of the registration of each of 

the registrant’s sponsors, or until the 

cessation of the association of the 

registrant with each of his sponsors. 

Such person will be prohibited from 

engaging in activities requiring 

registration under the Act or from 

representing himself to be a registrant 

under the Act or the representative or 

agent of any registrant during the 

pendency of any suspension of his or 

his sponsor’s registration. In accordance 

with § 3.31(c) of this part, each of the 

registrant’s sponsors must file a notice 

with the National Futures Association 

on Form 8–T or on a Uniform 

Termination Notice for Securities 

Industry Registration reporting the 

termination of the association of the 

associated person within thirty days 

thereafter. 

* * * * * 

3. Section 3.31 is proposed to be 

amended by revising paragraphs (c)(1) 

introductory text and (c)(2) to read as 

follows: 

§ 3.31 Deficiencies, inaccuracies, and 

changes, to be reported. 

* * * * * 

(c)(1) After the filing of a Form 8–R 

or a Form 3–R by or on behalf of any 

person for the purpose of permitting 

that person to be an associated person 

of a futures commission merchant, 

commodity trading advisor, commodity 

pool operator, introducing broker, or a 

leverage transaction merchant, that 

futures commission merchant, 

commodity trading advisor, commodity 

pool operator, introducing broker or 

leverage transaction merchant must, 

within thirty days after the occurrence 

of either of the following, file a notice 

thereof with the National Futures 

Association indicating: 

* * * * * 

(2) Each person registered as, or 

applying for registration as, a futures 

commission merchant, commodity 

trading advisor, commodity pool 

operator, introducing broker or leverage 

transaction merchant must, within 

thirty days after the termination of the 

affiliation of a principal with the 

registrant or applicant, file a notice 

thereof with the National Futures 

Association. 

* * * * * 

Issued in Washington, DC, on August 8, 

2007, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. E7–15869 Filed 8–13–07; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 301 

[REG–116215–07] 

RIN 1545–BG60 

Public Inspection of Material Relating 

to Tax-Exempt Organizations 

AGENCY: Internal Revenue Service, 

Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document contains 

proposed regulations that amend 

existing regulations issued under 

sections 6104 and 6110 of the Internal 

Revenue Code. The purpose of the 

proposed regulations is to clarify rules 

relating to information that is made 

available by the IRS for public 

inspection under section 6104(a) and 

materials that are made publicly 

available under section 6110. The 

changes reflect IRS practice as well as 

the United States Court of Appeals for 

the District of Columbia Circuit’s 

decision in Tax Analysts v. IRS, 350 

F.3d 100 (D.C. Cir. 2003). The Tax 

Analysts decision invalidated the 

portions of §§ 301.6104(a)–1(i) and 

301.6110–1(a) that excepted rulings that 

denied or revoked an organization’s tax 

exempt status from the public 

disclosure provisions of both sections 

6104 and 6110. The proposed 

regulations will affect organizations 

exempt from Federal income tax under 

section 501(a) or 527, organizations that 

were exempt but are no longer exempt 

from Federal income tax, and 

organizations that were denied taxexempt status. 

DATES: Written or electronic comments 

and requests for a public hearing must 

be received by November 13, 2007. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–116215–07), room 

5203, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. Submissions 

may be hand-delivered between the 

hours of 8 a.m. and 4 p.m. to 

CC:PA:LPD:PR (REG–116215–07), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC, or sent 

electronically via the Federal 

eRulemaking Portal at 

www.regulations.gov (IRS REG–116215–

07). 

FOR FURTHER INFORMATION CONTACT: 

Concerning submission of comments, 

Kelly Banks, (202) 622–7180 (not a tollfree number); concerning the proposed 

regulations, Mary Ellen Keys, (202) 622–

4570 (not a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

Since 1950, the Internal Revenue 

Code has provided for the public 

inspection of information that is 

submitted to the IRS by certain exempt 

organizations and certain trusts. Under 

section 6104(a), the IRS makes available 

for public inspection approved 

applications for exemption from Federal 

income tax for organizations described 

in section 501(c) or (d) and exempt 

under section 501(a), notices of status 

filed under section 527(i) by political 

organizations exempt from taxation 

under section 527, and certain related 

documents. Section 6104(a) also permits 

the IRS to disclose whether an 

organization is currently recognized as 

exempt and the subsection and 

paragraph number of section 501 under 

which it is recognized. Section 6104(b) 

imposes an additional obligation on the 

IRS to make available for public 

inspection annual information returns 

filed by organizations exempt from 

Federal income tax. Section 6104(c) 

governs when the IRS may disclose 

certain information about charitable and 

certain other exempt organizations to 

state officials. Section 6104(d) imposes 

a parallel obligation on organizations 

and trusts to make available for public 

inspection annual returns, applications 

for exemption and notices of status. The 

proposed regulations do not address the 

obligations imposed by subsections (b), 

(c) and (d). 

The decision in Tax Analysts v. IRS, 

350 F.3d 100 (D.C. Cir. 2003), 

invalidated the portions of existing 

§ 301.6104(a)–1(i)(1), (2), and (3) and 

§ 301.6110–1(a) that excluded rulings 

that denied or revoked an organization’s 

tax exempt status from the public 

disclosure provisions of both sections 

6104 and 6110. Sections 301.6104(a)–

1(i)(1), (2) and (3) excluded from 

disclosure by the IRS unfavorable 

rulings or determination letters in 

response to exemption applications, 

rulings or determination letters that 

make or modify a favorable 

determination letter, and technical 

advice memoranda that relate to a 

disapproved exemption application or 

the revocation or modification of a 

favorable determination letter. Thus, 


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