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[Federal Register: July 23, 1999 (Volume 64, Number 141)]
[Rules and Regulations]
[Page 39912-39913]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23jy99-2]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 3


Compliance With Commission Regulation 3.31 Requirements for
Reporting Deficiencies, Inaccuracies, and Changes Resulting From
Exchange Disciplinary and Access Denial Actions

AGENCY: Commodity Futures Trading Commission.

ACTION: Advisory.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'')
advises registrants and applicants for registrant status that they are
relieved of filing a Form 3-R, as required under Commission regulation
3.31, if the information to be reported is solely the result of an
exchange disciplinary or access denial action. The Commission has
recently delegated to the National Futures Association (``NFA'') the
duty to receive and to process exchange disciplinary and access denial
action information filed by the exchanges in accordance with Commission
Regulation 9.11. Thus, the NFA will possess the foregoing information
that registrants and applicants for registrant status would otherwise
be required to include in a Form 3-R.

EFFECTIVE DATE: July 23, 1999.

FOR FURTHER INFORMATION CONTACT: Rachel F. Berdansky, Special Counsel,
or Joshua R. Marlow, Attorney-Advisor, Division of Trading and Markets,
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street, NW, Washington, DC 20581. Telephone: (202) 418-5490.

SUPPLEMENTARY INFORMATION:

I. Introduction

    The Commission has published elsewhere today in the Federal
Register an Advisory and a Notice and Order relating to the filing,
processing, and maintenance of exchange disciplinary or access denial
actions required under Regulation 9.11 (``Regulation 9.11
notices'').\1\ The Advisory, among other things, permits exchanges to
file either electronic or written Regulation 9.11 notices with the NFA
rather than filing these notices with the Commission. The Notice and
Order accompanying the Advisory delegates to the NFA the duty to
receive and to process disciplinary and access denial action
information filed by exchanges pursuant to Regulation 9.11(a). As part
of this delegation, the NFA will serve as the official custodian of
records for exchange disciplinary and access denial actions.
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    \1\ Regulation 9.11(a) requires that whenever an exchange
decision pursuant to which a disciplinary or access denial action is
to be imposed has become final, the exchange must provide written
notice of such action to the person against whom the action was
taken and the Commission within 30 days thereafter.
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    Information contained in exchange Regulation 9.11 notices must be
reported by registrants--and applicants awaiting registration--on Form
3-R, pursuant to Regulation 3.31. Regulation 3.31(a) requires an
applicant or registrant as a futures commission merchant, commodity
trading advisor, commodity pool operator, introducing broker, or
leverage transaction merchant to correct promptly any deficiency or
inaccuracy in Form 7-R or Schedule D to Form 7-R which has rendered the
information contained therein non-current or inaccurate. These
corrections must be made on Form 3-R. Section (b) imposes a similar
requirement on an applicant or registrant as a floor broker, floor
trader, associated person, any person qualifying for temporary no-
action under Part 1.66 of the Commission's regulations,\2\ and each
principal of a futures commission merchant, commodity trading advisor,
commodity pool operator, introducing broker, or leverage transaction
merchant. These individuals must use Form 3-R to make changes to Form
8-R.
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    \2\ Regulation 1.66 grants no-action relief to those floor
traders granted trading privileges on a contract market on or before
April 26, 1993 from the then-new registration requirements for floor
traders under Regulation 3.11.
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    As the official custodian of records for exchange Regulation 9.11
filings, the NFA will now have disciplinary information currently
required to be reported in a Form 3-R prior to an individual or entity
subject to an exchange disciplinary or access denial action actually
filing the form. Therefore, to avoid duplicative regulatory reporting,
the Commission hereby advises all individuals and entities subject to
Regulation 3.31 that they are relieved from Regulation 3.31 reporting
obligations resulting from an exchange disciplinary or access denial
action and reported by an exchange pursuant to a Regulation 9.11
notice.

II. Compliance With Regulation 3.31

    The NFA has apprised the Commission that exchange Regulation 9.11
notices will be regularly reviewed by the NFA's registration processing
group staff.\3\ This is the same staff

[[Page 39913]]

currently responsible for receiving and processing Form 3-Rs filed
pursuant to Regulation 3.31. Exchange disciplinary information reported
in Regulation 9.11 filings will be posted on the NFA's Background
Affiliation Status Information Center (``BASIC'') database.\4\ On a
daily basis, the NFA will print copies of all entries made in BASIC.
These copies will be forwarded to the registration processing group and
treated as substitutes for Form 3-Rs. The registration processing group
will then update the necessary registration records and the paper copy
will be placed in the registrant's or potential registrant's file.
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    \3\ Pursuant to Section 8a(10) of the Commodity Exchange Act,
the NFA has been delegated numerous registration functions by the
Commission. Part 3 of Commission Regulations, 17 C.F.R. Sec. 3
(1998), is dedicated to registration. Most registration functions
were delegated to the NFA in 1983. 49 FR 35158 (August 3, 1983)
(``NFA's registration rules . . . apply to all persons required to
be registered under the Act (and not otherwise exempt by Commission
rule or order) . . . [A]ll documents referred to in [Part 3]
regulations will be filed with, submitted to or given by NFA at its
Chicago office instead of the Commission.'') Subsequent orders have
added to, or clarified, this delegation. See 48 FR 51809 (November
14, 1983); 48 FR 8226 (March 5, 1984); 49 FR 39593 (October 9,
1984), amended by 49 FR 45418 (November 16, 1984); 50 FR 34885
(August 28, 1985); 51 FR 25929 (July 17, 1986); 51 FR 34490
(September 29, 1986); 54 FR 19594 (May 8, 1989); 54 FR 41133
(October 5, 1989); 58 FR 19657 (April 15, 1993); 59 FR 38957 (August
1, 1994); 62 FR 36050 (July 3, 1997); 63 FR 18821 (April 16, 1998);
and 63 FR 63913 (November 17, 1998). An earlier Notice and Order
delegated to the NFA limited registration functions with respect to
introducing brokers and their associated persons. See 49 FR 15940
(April 13, 1983).
    \4\ A description of BASIC and how exchange disciplinary data is
posted on the system can be found in the Advisory and Notice and
Order published elsewhere today in the Federal Register.
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III. Conclusion

    The information contained in a Form 3-R filed as a result of an
exchange disciplinary or access denial action is identical to that
included in an exchange Regulation 9.11 filing. Pursuant to the
Commission's delegation to the NFA to receive and to process exchange
Regulation 9.11 notices and to maintain a database of the information
contained therein, the NFA will have timely access to exchange
Regulation 9.11 notices. Therefore, the Commission, in order to avoid
duplicative regulatory reporting, is permitting any individual or
entity otherwise required under Regulation 3.31(a) or (b) to file a
Form 3-R as a result of an exchange disciplinary or access denial
action to forego this reporting obligation. The Commission emphasizes
that this relief applies only with respect to exchange disciplinary or
access denial actions. All other reporting obligations under Regulation
3.31 remain unchanged.

    Issued in Washington, D.C. on July 19, 1999 by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 99-18805 Filed 7-22-99; 8:45 am]
BILLING CODE 6351-01-M
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