Federal Register / Vol. 60, No. 239 / Wednesday, December 13, 1995 / Rules and Regulations 63907

The large number of SIAPs, their

complex nature, and the need for a

special format make their verbatim

publication in the Federal Register

expensive and impractical. Further,

airmen do not use the regulatory text of

the SIAPs, but refer to their graphic

depiction on charts printed by

publishers of aeronautical materials.

Thus, the advantages of incorporation

by reference are realized and

publication of the complete description

of each SIAP contained in FAA form

documents is unnecessary. The

provisions of this amendment state the

affected CFR (and FAR) sections, with

the types and effective dates of the

SIAPs. This amendment also identifies

the airport, its location, the procedure

identification and the amendment

number.

The Rule

This amendment to part 97 is effective

upon publication of each separate SIAP

as contained in the transmittal. Some

SIAP amendments may have been

previously issued by the FAA in a

National Flight Data Center (FDC)

Notice to Airmen (NOTAM) as an

emergency action of immediate flight

safety relating directly to published

aeronautical charts. The circumstances

which created the need for some SIAP

amendments may require making them

effective in less than 30 days. For the

remaining SIAPs, an effective date at

least 30 days after publication is

provided.

Further, the SIAPs contained in this

amendment are based on the criteria

contained in the U.S. Standard for

Terminal Instrument Approach

Procedures (TERPS). In developing

these SIAPs, the TERPS criteria were

applied to the conditions existing or

anticipated at the affected airports.

Because of the close and immediate

relationship between these SIAPs and

safety in air commerce, I find that notice

and public procedure before adopting

these SIAPs are impracticable and

contrary to the public interest and,

where applicable, that good cause exists

for making some SIAPs effective in less

than 30 days.

The FAA has determined that this

regulation only involves an established

body of technical regulations for which

frequent and routine amendments are

necessary to keep them operationally

current. It, therefore—(1) is not a

‘‘significant regulatory action’’ under

Executive Order 12866; (2) is not a

‘‘significant rule’’ under DOT

Regulatory Policies and Procedures (44

FR 11034; February 26, 1979); and (3)

does not warrant preparation of a

regulatory evaluation as the anticipated

impact is so minimal. For the same

reason, the FAA certifies that this

amendment will not have a significant

economic impact on a substantial

number of small entities under the

criteria of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 97

Air traffic control, Airports,

Navigation (Air).

Issued in Washington, DC on December 1,

1995.

Thomas C. Accardi,

Director, Flight Standards Service.

Adoption of the Amendment

Accordingly, pursuant to the

authority delegated to me, part 97 of the

Federal Aviation Regulations (14 CFR

part 97) is amended by establishing,

amending, suspending, or revoking

Standard Instrument Approach

Procedures, effective at 0901 UTC on

the dates specified, as follows:

PART 97—STANDARD INSTRUMENT

APPROACH PROCEDURES

1. The authority citation for part 97 is

revised to read as follows:

Authority: 49 U.S.C. 106(g), 40103, 40113,

40120, 44701; and 14 CFR 11.49(b)(2).

2. Part 97 is amended to read as

follows:

§§ 97.23, 97.25, 97.27, 97.29, 97.31, 97.33,

97.35 [Amended]

By amending: § 97.23 VOR, VOR/

DME, VOR or TACAN, and VOR/DME

or TACAN; § 97.25 LOC, LOC/DME,

LDA, LDA/DME, SDF, SDF/DME;

§ 97.27 NDB, NDB/DME; § 97.29 ILS,

ILS/DME, ISMLS, MLS, MLS/DME,

MLS/RNAV; § 97.31 RADAR SIAPs;

§ 97.33 RNAV SIAPs; and § 97.35

COPTER SIAPs, identified as follows:

* * * Effective January 4, 1996

Jacksonville, FL, Jacksonville Intl, ILS RWY

13, Amdt 5

Olive Branch, MS, Olive Branch, LOC/DME

RWY 18, Orig

Salt Lake City, UT, Salt Lake City Intl, ILS/

DME RWY 16L, Amdt 9

Salt Lake City, UT, Salt Lake City Intl, ILS/

DME RWY 16R, Amdt 1

Salt Lake City, UT, Salt Lake City Intl, ILS/

DME RWY 34L, Amdt 1

Salt Lake City, UT, Salt Lake City Intl, ILS/

DME RWY 34R, Amdt 1

Superior, WI, Richard I. Bong, GPS RWY 13,

Orig

Superior, WI, Richard I. Bong, GPS RWY 31,

Orig

* * * Effective February 1, 1996

Syracuse, NY, Syracuse Hancock Intl, VOR or

GPS RWY 14, Amdt 21

* * * Effective February 29, 1996

Crossett, AR, Z M Jack Stell Field, GPS RWY

23, Orig

De Kalb, IL, De Kalb Taylor Muni, GPS RWY

9, Orig

Indianapolis, IN, Indianapolis Metropolitan,

GPS RWY 33, Orig

New Castle, IN, New Castle-Henry Co Muni,

VOR OR GPS RWY 27, Amdt 9

New Castle, IN, New Castle-Henry Co Muni,

NDB OR GPS RWY 9, Amdt 5

New Castle, IN, New Castle-Henry Co Muni,

NDB RWY 27, Amdt 5

Ames, IA, Ames Muni, GPS RWY 31, Orig

Fairfield, IA, Fairfield Muni, GPS RWY 36,

Orig

Houma, LA, Houma-Terrebonne, GPS RWY

12, Orig

New Orleans, LA, Lakefront, GPS RWY 18R,

Orig

Bar Harbor, ME, Hancock County-Bar Harbor,

GPS RWY 4, Orig

Sullivan, MO, Sullivan Regional, GPS RWY

24, Orig

Woodbine, NJ, Woodbine Muni, VOR–A,

Orig

Woodbine, NJ, Woodbine Muni, VOR or

GPS–A, Amdt 2 Cancelled

Silver City, NM, Grant County, GPS RWY 26,

Orig

Ponca City, OK, Ponca City Muni, NDB OR

GPS RWY 17, Amdt 4

Ponca City, OK, Ponca City Muni, NDB RWY

35, Amdt 3

Ponca City, OK, Ponca City Muni, GPS RWY

35, Orig

[FR Doc. 95–30368 Filed 12–12–95; 8:45 am]

BILLING CODE 4910–13–M

COMMODITY FUTURES TRADING

COMMISSION

17 CFR Part 3

Ethics Training for Registrants

AGENCY: Commodity Futures Trading

Commission.

ACTION: Final rule.

SUMMARY: On July 22, 1994, the

Commodity Futures Trading

Commission (Commission) published

for comment proposed amendments to

Rule 3.34, which governs ethics training

for Commission registrants. 59 FR

37446. Based upon its review of the

comments received and its own

reconsideration of the proposed

amendments, the Commission has

determined to adopt the rule

amendments as proposed, with certain

modifications discussed herein.

EFFECTIVE DATE: These rule amendments

will become effective January 12, 1996.

However, with respect to existing ethics

training providers, the provision of

§ 3.34(b)(5) relating to promotional and

instructional materials, including

videotape and computer presentations,

will become applicable March 12, 1996.

FOR FURTHER INFORMATION CONTACT:

Lawrence B. Patent, Associate Chief

Counsel, or Myra R. Silberstein,
63908 Federal Register / Vol. 60, No. 239 / Wednesday, December 13, 1995 / Rules and Regulations

1This provision of the Act is codified at 7 U.S.C.

6p(b)(1994) and states that:

The Commission shall issue regulations to require

new registrants, within 6 months after receiving

such registration, to attend a training session, and

all other registrants to attend periodic training

sessions, to ensure that registrants understand their

responsibilities to the public under this Act,

including responsibilities to observe just and

equitable principles of trade, any rule or regulation

of the Commission, any rule of any appropriate

contract market, registered futures association, or

other self-regulatory organization, or any other

applicable Federal or state law, rule or regulation.

2 58 FR 19575, 19584–19587, 19593–19594 (April

15, 1993).

3 58 FR 47890 (September 13, 1993). The

Commission has reviewed applications from more

than twenty-five persons seeking to provide ethics

training to registrants.

4Sections 8a (2) and (3) of the Act, 7 U.S.C. 12a

(2) and (3) (1994).

5 17 CFR 3.34(b)(3)(1995).

6 17 CFR 3.1(a)(1995).

7Thus, if an entity organizes a corporation to

offer ethics training and hires an instructor to

conduct the lectures, the notice must include

within its coverage the entity, the corporation and

the instructor. Such notice must also be amended

as necessary to cover any additional instructors

required to handle the number of persons enrolling

in the ethics training program.

8 7 U.S.C. 12a(2) or (3)(1994). The Act specifies

several grounds for disqualification from

registration including, among others, a prior

revocation of registration, felony conviction, and an

injunction relating to futures or securities activities.

9Pursuant to Rule 1.63, each SRO must maintain

in effect rules which render a person ineligible to

serve on its governing boards, disciplinary

committees, or arbitration panels who, among other

things, has been found within the prior three years

to have committed a disciplinary offense or entered

into a settlement agreement where the charge

involved a ‘‘disciplinary offense,’’ is currently

suspended from trading on any contract market, is

suspended or expelled from membership in any

SRO, or is currently subject to an agreement with

the Commission or an SRO not to apply for

registration or membership. A ‘‘disciplinary

offense’’ for these purposes means any violation of

the Act or the rules promulgated thereunder or SRO

rules other than those relating to (1) decorum or

attire, (2) financial requirements, or (3) reporting or

recordkeeping, unless resulting in fines aggregating

more than $5,000 in a calendar year, provided such

SRO rule violations did not involve fraud, deceit or

conversion, or result in a suspension or expulsion.

17 CFR 1.63 (1995).

Attorney-Advisor, Division of Trading

and Markets, Commodity Futures

Trading Commission, 1155 21st Street,

N.W., Washington, D.C. 20581.

Telephone (202) 418–5450.

SUPPLEMENTARY INFORMATION:

I. Background

Section 210 of the Futures Trading

Practices Act of 1992 added a new

paragraph (b) to Section 4p of the

Commodity Exchange Act (Act),

mandating ethics training for all persons

registered under the Act.1 On April 15,

1993, the Commission adopted Rule

3.34 to implement this Congressional

mandate.2 By Federal Register release

issued on September 13, 1993, the

Commission provided further guidance

with respect to the contents of

applications to be submitted by persons

seeking to provide ethics training to

registrants.3

Proposed amendments to Rule 3.34,

published in July 1994, would: (1)

require a certification by persons

seeking to provide ethics training that

they would not be disqualified from

registration under the Act; (2) limit

certain representations that ethics

training providers may make concerning

their status as such; (3) facilitate the use

of videotape and electronic

presentations; and (4) enhance the

ability of a registered futures association

to track the ethics training attendance

dates of registrants. The Commission

received four comment letters on the

proposed rule amendments. The

commenters included a registered

futures association, a computer-based

ethics training provider and two other

ethics training providers. The

commenters generally supported, or

acknowledged their understanding of,

the objectives of the proposed rule

amendments. Some commenters,

however, criticized the scope of the

proposed rule amendments. Further,

one of the ethics training providers who

submitted comments requested

additional time to update its program

materials to comply with the changes

that would be required by the rule

amendments. Comments addressed to

specific provisions of the proposed rule

amendments and the Commission’s

resolution of the issues raised therein

are discussed below in the context of

the relevant rule provision.

Based upon its review of the

comments received on the proposed

amendments and in light of its

experience in administering this

program, the Commission has adopted

amendments to Rule 3.34 regarding

ethics training providers. The

provisions of Rule 3.34 relating to the

topics to be covered in ethics training

and the minimum requirements for

attendance at such training remain

unchanged. The amendments adopted

herein will, subject to proposed

amendments to Rule 3.34 published in

this edition of the Federal Register,

permit a person to be included by a

registered futures association on a list of

authorized providers of such training

upon filing of a notice with a registered

futures association certifying that: (1) he

is not subject to a statutory

disqualification from registration under

the Act; 4 (2) barred from service on selfregulatory organization (SRO) governing

boards or committees pursuant to

Commission Rule 1.63 or SRO rules; or

(3) subject to a pending proceeding with

respect to possible violations of the Act

or rules or orders promulgated

thereunder. These amendments will

also prohibit certain representations

with respect to a person’s status as an

ethics training provider; allow wider

use of ethics training presentations by

videotape and computer; and require

ethics training providers to furnish

records of attendees to a registered

futures association upon request.

By separate release published in this

edition of the Federal Register, the

Commission is proposing several

additional amendments to Rule 3.34 to

address certain further issues relating to

ethics training providers. These

amendments would require ethics

training providers other than SROs: (1)

To satisfy the same proficiency testing

requirements as registrants; and (2) have

at least three years of pedagogical or

relevant industry experience.

II. Amendments to Commission Rule

3.34

A. Required Certifications by Applicants

to Become Ethics Training Providers

Currently, three categories of persons

may provide ethics training to

Commission registrants pursuant to

Rule 3.34: (1) SROs; (2) entities

accredited to conduct continuing

education programs by a state

professional licensing authority in the

fields of law, finance, accounting or

economics; or (3) any other person

whose program ‘‘is approved by the

Commission for this purpose.’’ 5 The

amendments to Rule 3.34 proposed in

July 1994 would have continued to

permit SROs and state-accredited

continuing education providers to act as

ethics training providers without

compliance with any additional

requirements. With respect to persons

other than SROs or state-accredited

entities, the proposed amendments

would permit such persons to provide

ethics training upon filing of a notice

with a registered futures association

certifying that the person, all principals

thereof (as defined in Commission Rule

3.1(a)) 6 and any individuals who, on

behalf of such person, conduct inperson ethics training sessions or

prepare ethics training videotape or

electronic presentations,7 are not subject

to: (1) any statutory disqualification

from registration under Sections 8a(2) or

(3) of the Act; 8 (2) a bar from service on

SRO governing boards or committees

arising from relevant disciplinary

history, as specified in Commission

Rule 1.63 9 or any SRO rule adopted

thereunder; or (3) a pending

adjudicatory proceeding under Sections

6(c), 6(d), 6c, 6d, 8a or 9 of the Act or
Federal Register / Vol. 60, No. 239 / Wednesday, December 13, 1995 / Rules and Regulations 63909

10A pending proceeding is a basis to bar a person

whose registration has expired within the preceding

sixty days from obtaining a temporary license upon

mailing a new registration application (see 17 CFR

3.11(c)(1)(i)(B), 3.11(c)(1)(ii)(B), 3.12(d)(1)(iv), and

3.12(i)(1)(iv)(1995)), to bar a person from serving as

a sponsor or special supervisor of a conditioned or

restricted registrant (see 17 CFR

3.60(b)(2)(i)(A)(1995)), and to prevent withdrawal

from registration (see 17 CFR 3.33(f)(1) (1995)).

11The requirements discussed above apply to a

certification from any ethics training provider. As

discussed below, if the ethics training provider will

offer training by means of videotape or electronic

presentation, the provider’s certification would also

be required to include a statement with respect to

verification of registrants’ attendance.

12Section 4p(b) of the Act.

13However, if a firm is subject to a pending

adjudicatory proceeding as described above, the

firm may submit a certification to a registered

futures association with an explanation describing

the circumstances of the proceeding, particularly

with respect to the scope and nature of the

proceeding in relation to the size of the firm. For

example, a proceeding that is limited to a single

branch office of a firm and that does not involve

fraud or failure to supervise might be treated

differently than a proceeding involving allegations

extending to the overall operations of the firm or

making claims of fraud. The Commission would

expect the registered futures association to consult

the Commission concerning specific certifications

in cases involving an ethics provider that is or

becomes subject to a proceeding.

14 In the proposing release, the Commission also

is inviting comments concerning the continued

appropriateness of permitting SROs to offer ethics

training without qualifying to do so in the same

manner as other providers.

Commission Rules 3.55, 3.56 or 3.60.10

This certification procedure will replace

the existing application procedure for

entities that are not SROs or stateaccredited providers of continuing

education in the fields of law, finance,

accounting or economics.

The Commission believes that it is

appropriate to require persons seeking

to act as ethics trainers to provide a

certification of the nature outlined

above in order to assure a minimum

level of fitness to act as ethics trainers.11

The statutory requirement for ethics

training is intended ‘‘to ensure that

registrants understand their

responsibilities to the public under [the]

Act, including responsibilities to

observe just and equitable principles of

trade, any rule or regulation of the

Commission, any rules of any

appropriate contract market, registered

futures association, or other selfregulatory organization or any other

applicable Federal or State law, rule or

regulation.’’ 12 The Commission believes

that, generally, it would be inconsistent

with this Congressional mandate and

contrary to the public interest for a

person to instruct others about their

responsibilities under the Act and other

applicable requirements if such person

has a disciplinary history that reflects a

failure to comply with such provisions.

The Commission has used several

objective, established benchmarks to

identify persons with disciplinary

histories that call into question their

suitability to provide ethics training.

Disqualifying disciplinary histories for

this purpose would be those which

constitute disqualifications from

registration under the Act or bars from

service on SRO governing boards or

committees, pending adjudicatory

proceedings, including disqualification

proceedings relating to possible

violations of the Act or Commission

rules. The Commission has also

provided in the final rules, as in the

proposed rules, that the certification

requirement imposes a continuing duty;

consequently, if the certification

becomes inaccurate, the provider must

so inform the registered futures

association, which shall then refuse to

include such person on, or remove such

person from, the list of ethics training

providers.13

One effect of these amendments is to

permit the National Futures Association

(NFA), currently the only registered

futures association, to maintain a list of

eligible ethics training providers for

purposes of Commission Rule 3.34. In

its comment letter on the proposed

amendments, NFA recommended that

the rule amendments provide

procedural protection for ethics training

providers who are either rejected or

removed from the list by NFA. In

particular, NFA recommended that

providers rejected or removed from the

list be afforded a hearing before NFA

with an opportunity to appeal to the

Commission. The Commission believes

such a procedure to be appropriate and,

accordingly, has incorporated it in the

final rules as subparagraph 3.34(b)(3)(v).

The Commission contemplates that the

hearing before NFA in these

circumstances could be limited to

written submissions and that any

subsequent appeal to the Commission

would be based on the record before

NFA.

NFA also stated in its comment letter

that it was uncertain how information

regarding statutory disqualifications

could be verified, particularly if it could

not require that fingerprints be provided

and thus would be unable to access the

Federal Bureau of Investigations

criminal records database. Although

cognizant of this limitation, the

Commission believes that, in the first

instance, NFA should employ the other

existing databases that it uses to verify

applications of registrants, including the

Clearinghouse of Disciplinary

Information which NFA maintains with

respect to futures industry data and the

Securities and Exchange Commission

database on securities industry

violations.

Another commenter stated that all

ethics training providers, including

state-accredited continuing education

entities and SROs, should be subject to

prior approval by the Commission. The

Commission’s ethics training rule has

not previously required state-accredited

entities and SROs to file an application

before providing ethics training to

registrants. When the Commission

originally adopted Rule 3.34(b), it did

not require applications for

authorization to provide ethics training

by SROs and state-accredited entities

because SROs are subject to the

Commission’s regulatory framework and

oversight, while state-accredited entities

are subject to certification and review by

the relevant state. However, in the

proposed rule amendments published

elsewhere in this edition of the Federal

Register, the Commission is now

proposing that state-accredited entities

be subject to certification and

monitoring applicable to other ethics

training providers, as discussed above.

The Commission believes that in the

absence of such compliance, given the

lack of uniformity in state continuing

education accreditation requirements, it

will not have sufficient assurance that

such providers have a minimum level of

knowledge of relevant statutory and

regulatory requirements or of fitness to

provide ethics training.14

One commenter stated that those

ethics training providers whose

applications to provide ethics training

have already been granted by the

Commission should be exempt from the

certification process set forth in the

proposed amendments to Rule 3.34. The

Commission agrees with this view and

will provide NFA with the current list

of authorized ethics training providers

for inclusion in the list of authorized

providers. However, NFA will be

expected to monitor existing providers

as well as new providers and may

remove any provider for cause as

contemplated by subparagraph

(b)(3)(iv). As noted above, if

circumstances change such that an

ethics provider’s certification becomes

inaccurate, the provider must so inform

the NFA. Upon such notice from the

provider (or otherwise), NFA shall

refuse to include such person on or

remove such person from the list of

authorized providers.

B. Delegation of Authority

The purposes of subparagraphs

(b)(3)(iii) through (b)(3)(v) of Rule 3.34

are to permit NFA to maintain a list of

eligible ethics training providers.
63910 Federal Register / Vol. 60, No. 239 / Wednesday, December 13, 1995 / Rules and Regulations

15 7 U.S.C. 21(j)(1994).

16 In comparable areas, such as registration and

review of promotional material, the Commission

has delegated authority to NFA to develop and

implement specific standards and, in those

instances, NFA has established standards above the

minimum levels previously established by the

Commission or set forth in the Act. See, e.g., NFA

Rule 2–8(d) (minimum experience requirements for

an associated person to exercise discretion over an

account).

17This additional language has been added to

clarify the proposal and is consistent with the

intent of Rule 3.34.

18Rule 3.34(b)(5) also contains a proviso that it

‘‘shall not be construed to prohibit a statement that

a person is included on a list of ethics training

providers maintained by a registered futures

association if such statement is true in fact and if

the effect of such a listing is not misrepresented.’’

Therefore, the Commission hereby

delegates authority to NFA: (1) To

maintain the list of eligible ethics

training providers for purposes of

Commission Rule 3.34, including the

authority to refuse to include persons on

such list pursuant to the criteria set

forth in Rule 3.34(b)(3)(iii) or criteria

established by NFA and approved by

the Commission; (2) to establish

guidelines as to the required proficiency

and experience of ethics training

providers; (3) to receive and evaluate

complaints concerning such providers

and conduct other appropriate reviews

of providers’ operations, subject to

Commission oversight; (4) to develop

appropriate procedures to verify

certifications filed by potential ethics

training providers; and (5) to require

that such certifications be updated

periodically. NFA’s procedures must be

submitted to the Commission for review

pursuant to Section 17(j) of the Act,15

which governs Commission review and

approval of registered futures

association rules.

In its comment letter on the proposed

amendments to Rule 3.34, NFA

supported the Commission’s proposal to

delegate responsibility to NFA for the

processing and review of applications of

prospective ethics training providers

and confirmed its willingness to assume

this responsibility. However, NFA

suggested that the Commission establish

objective standards for NFA to follow in

discharging these responsibilities. NFA

expressed the view that ethics training

providers should satisfy a proficiency

standard that is objective, readily

measurable and would assure that

providers possess a working knowledge

of the industry and its regulations.

As noted above, the Commission is

proposing, by separate Federal Register

release, certain minimum requirements

with respect to proficiency testing and

experience to be applicable to ethics

training providers other than SROs.

These proposals include a requirement

that ethics training providers be subject

to the same proficiency testing

requirements as the registrants they

propose to instruct. This proficiency test

will generally be the National

Commodity Futures Examination (Series

3 Exam).

The Commission is also proposing to

require that ethics training providers

other than SROs demonstrate that they

have at least three years of pedagogical

or relevant industry experience. The

Commission’s delegation of authority to

NFA includes authority to establish

guidelines concerning the specific types

of pro-ficiency tests and experience

necessary to satisfy these

requirements.16 Of course, NFA may

submit to the Commission for decision

any specific matters which have been

delegated to it and Commission staff

will be available to discuss with NFA

staff issues relating to the

implementation of these rules,

including the review of operations of

ethics training providers.

C. Permissible Representations

To date, in granting the applications

of persons seeking to provide ethics

training, the Commission has made

clear that it is not approving the specific

content of the proposed ethics training

program or expressing any opinion as to

the program’s quality or accuracy. The

Commission believes that it is

appropriate to clarify by rule the effect

of authorization to provide ethics

training under Rule 3.34 for all

providers. Accordingly, the Commission

proposed in Rule 3.34(b)(5) to prohibit

any representation or implication that

an ethics training provider has been

sponsored, recommended or approved,

or the provider’s abilities or

qualifications or the content, quality or

accuracy of the training program

provided, has in any respect been

passed upon or endorsed by the

Commission, a registered futures

association, or any representative

thereof.

The commenters voiced no objections

to this proposed provision. However,

one commenter requested that the

effective date of these rule amendments

be delayed for ninety days for existing

ethics training providers to enable them

to modify their presentations and

materials to comply with the adopted

changes. The Commission believes that

all providers should be given ninety

days in which to comply with the

requirement to include the specified

statement in promotional and

instructional material. Therefore, the

effective date of Rule 3.34(b)(5) will be

ninety days following publication,

rather than thirty days following

publication, which is the effective date

for all other provisions.

Accordingly, the Commission has

adopted Rule 3.34(b)(5) to provide that

no SRO, state-accredited continuing

education entity or other person

included on a list of ethics training

providers ‘‘may represent or imply in

any manner whatsoever that such

person has been sponsored,

recommended or approved, or that such

person’s abilities or qualifications, the

content, quality or accuracy of his

training program, or the positions taken

in the course of resolving any actual or

hypothetical situations presenting

ethical or legal issues,17 have in any

respect been passed upon or endorsed,

by the Commission or a registered

futures association.’’ Rule 3.34(b)(5)

further provides that any promotional or

instructional material used in

connection with ethics training ‘‘must

prominently state that the Commission

and any registered futures association

have not reviewed or approved the

specific content of the training program

and do not recommend the provider of

such training.’’ 18

In the July 1994 release, the

Commission also proposed to limit the

use an ethics training provider may

make of that status in certain

adjudicatory proceedings. As stated in

the proposing release, the Commission

did not believe that a person should be

able to use his or her status as an ethics

training provider to qualify as an expert

witness or to present expert testimony

in an adjudicatory proceeding before the

Commission or to which the

Commission is a party. While the

commenters voiced no objections to this

provision, the Commission, upon

reconsideration of this issue, has

determined that the prohibitions of the

representations specified in paragraph

(b)(5) should suffice to bar inappropriate

use of status as an ethics training

provider. Therefore, the Commission

has not adopted proposed paragraphs

(b)(5)(ii) and (b)(5)(iii) of Rule 3.34,

which would have limited certain uses

of status as an ethics training provider.

However, the Commission emphasizes

that inclusion on the list of authorized

ethics training providers should not be

viewed as a warranty of expertise and

that in its view such status should not

be accorded weight in determinations of

the provider’s qualifications as an

expert witness.

D. Videotape and Electronic

Presentations

Commission Rule 3.34(b)(3) provides

that a program of ethics training may be
Federal Register / Vol. 60, No. 239 / Wednesday, December 13, 1995 / Rules and Regulations 63911

19 58 FR 19575, 19586–19587.

20 59 FR 37446, 37448.

21 58 FR 19575, 19586–19587.

22Revised Rule 3.34(b)(4) also requires that

records of trainer evaluations be maintained.

23 17 CFR 1.31 (1995). When the Commission

adopted Rule 3.34, it stated that it would monitor

the effectiveness of the requirement for maintaining

a record of ethics training attendance and might

reconsider the issue at a later date if appropriate.

58 FR 19575, 19587.

offered by videotape or electronic

presentation. In adopting Rule 3.34, the

Commission initially provided that

videotape or computer training, in lieu

of in-person ethics training, should only

be available when geographical

inconven-ience or other factors made inperson training impracticable.19

However, in proposing amendments to

Rule 3.34 in July 1994, the Commission

indicated that any registrant may meet

his ethics training requirement through

in-person courses or through the use of

videotape or computer presentations

regardless of circumstances.20

The Commission also wishes to make

clear, however, that if videotape or

electronic training is offered, the

provider must be able to verify that the

video has been viewed or the electronic

training completed by the registrant

before the provider issues a certificate of

attendance to the registrant.21 Therefore,

Rule 3.34(b)(3)(iii)(B), as revised by the

amendments adopted herein, requires

that, if a provider will conduct training

by means of videotape or electronic

presentations, either exclusively or in

addition to in-person training, the

provider’s certification required under

Rule 3.34(b)(3)(iii) must be

supplemented to include a

representation that the provider will

maintain documentation reasonably

designed to verify that registrants have

properly completed ethics training for

the minimum time required (one, two or

four hours).

The Commission envisages that an

appropriate verification regime for a

provider would include procedures

such as the following. The provider

would maintain a list of the computerbased ethics program purchasers and

match each completed program with a

record of purchase. Registrants would

be required to enter identifying

information, such as name, firm’s name,

business address, telephone number,

date of birth, NFA and/or Social

Security number, on the control disk

and return a signed statement with the

completed computer disk certifying that

he did in fact complete the ethics

training course in the manner set out in

the instructions.

With respect to the fulfillment of the

minimum time requirements and

verification of the registrants’

participation in the program, the ethics

training provider could use a computerbased test to assure that the registrant

has attained a minimum level of

understanding of the materials covered,

drawing upon matters covered in video

and written materials, as well as the

computer program, to the extent

applicable. To assure that each section

of the program is completed, registrants

would be required to pass each section

of the test prior to answering questions

in later sections of the test. While those

who fail the test would be required to

retake it until it is successfully

completed, only the time spent on the

first test could be credited toward the

ethics training time required by Rule

3.34. Registrants answering quickly

would be given additional questions to

answer, and the program would cease

recording elapsed time for those slow to

answer questions. Thus, registrants

would be monitored both as to time

spent and material covered. If a provider

wished to follow a different verification

regime, he could do so if such steps had

been submitted to and not found

objectionable by a registered futures

association.

The Commission contemplates that an

ethics training provider would be able

to document that a registrant had

undertaken the various steps required

for the provider to verify completion.

The provider would be required under

revised Rule 3.34(b)(4) to maintain

documentation substantiating its

determination that ethics training has

been properly completed by a registrant

and to support its issuance of a

certificate of attendance.22

As noted above with respect to the

limitations upon representations

concerning authorization to provide

ethics training, certain commenters

requested that the effective date of the

rule amendments be delayed for ninety

days for existing ethics training

providers to enable the providers to

modify their video or electronic

presentations and materials to comply

with the rule amendments. Since new

paragraph (b)(5) of Rule 3.34 concerning

permissible representations applies to

all promotional or instructional

materials, that provision encompasses

videotape and electronic presentations.

Accordingly, the deferred effective date

for the provision discussed above

should accommodate any concerns of

these commenters with respect to

videotape or electronic presentations

and materials.

E. Recordkeeping

Rule 3.34(b)(4), which governs

recordkeeping by an ethics training

provider, requires ethics training

providers to maintain records of

materials used in and attendees at such

training in accordance with Commission

Rule 1.31, i.e., for a five-year period.23

The Commission proposed to add a

provision to these recordkeeping

requirements to require providers of

ethics training to furnish records of

attendees at such training to a registered

futures association in such format as the

registered futures association may

request. As noted in the proposing

release, NFA is willing to compile

information on ethics training

attendance for inclusion in the

registration database and believes that

ethics training providers should

cooperate with NFA requests for the

information which providers are already

required to maintain. In its comment

letter, NFA stated that it was confident

that the Commission’s amendment to

Rule 3.34(b), requiring providers to

furnish a list of ethics training attendees

to NFA, will streamline the

recordkeeping needed in this area.

Further, NFA believes that this

requirement will reduce the burden

borne by registrant firms in determining

whether a prospective employee has

satisfied his ethics training requirement.

The Commission believes compilation

of ethics training attendance data by

NFA (or other registered futures

associations) will produce a central

repository of such information, which

should benefit all registrants and

facilitate oversight of compliance with

the ethics training requirement. To

facilitate NFA’s incorporation of this

data in the registration database, ethics

training providers should include

appropriate identifiers of registrants,

such as NFA identification number, and

follow other format conventions

requested by NFA.

One commenter requested that ethics

training providers be permitted to use

identifiers other than NFA identification

numbers, e.g., name, date of birth or

social security number, in reporting

attendees to NFA. While this comment

may have merit, the final rule

amendments require providers to

respond to NFA requests for information

and to furnish to NFA the information

that providers are already required to

maintain. The specific data needed by

NFA to maintain and compile its

database may be decided by NFA. The

Commission does not believe that it

should be unduly burdensome for ethics

training providers to obtain NFA

identification numbers from attendees,

unless such persons have not yet

registered or filed an application for
63912 Federal Register / Vol. 60, No. 239 / Wednesday, December 13, 1995 / Rules and Regulations

24Ethics training may be taken up to six months

prior to the date of application for registration. See

58 FR 19575, 19585.

registration.24 However, NFA should

arrange with providers to accomplish

this task by the most efficient means for

all concerned.

III. Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA),

5 U.S.C. 601–611 (1988), requires that

agencies, in proposing rules, consider

the impact of those rules on small

businesses. The rule amendments

discussed herein will affect only those

ethics training providers that are not

SROs or entities accredited to conduct

continuing education programs by a

state professional licensing authority in

the fields of law, finance, accounting or

economics. The Commission believes

that the impact of these rule

amendments on other providers of

ethics training or persons seeking to

become providers of ethics training

should be minimal. The procedure for

becoming an ethics training provider

will be simplified. The restrictions upon

permissible representations by ethics

training providers concerning their

status as such essentially codify

conditions already imposed by the

Commission to date in granting

applications of individual ethics

training providers. Finally, since ethics

training providers are already required

to maintain records of attendees,

furnishing such information to NFA

upon request should not be unduly

burdensome. Therefore, these rules will

not have significant economic impact on

a substantial number of small entities.

B. Paperwork Reduction Act

The Paperwork Reduction Act of 1980

(PRA), 44 U.S.C. 3501 et seq., 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. In

compliance with the PRA, the

Commission has previously submitted

this rule and its associated information

collection requirements to the Office of

Management and Budget. While the

amendments adopted herein have no

burden, Rule 3.34 is a part of a group

of rules which has the following burden:

Rules 3.16, 3.32 and 3.34 (3038–0023,

approved June 2, 1993):

Average Burden Hours Per Response—

1.13

Number of Respondents—60,980

Frequency of Response—On Occasion

and Triennially

Persons wishing to comment on the

information which will be required by

these rules as amended should contact

Jeff Hill, Office of Management and

Budget, room 3228, NEOB, Washington,

D.C. 20503, (202) 395–7340. Copies of

the information collection submission to

OMB are available from Joe F. Mink,

CFTC Clearance Officer, 1155 21st St.

N.W., Washington, D.C. 20581, (202)

418–5170.

List of Subjects in 17 CFR Part 3

Registration, Ethics training

Accordingly, the Commission,

pursuant to the authority contained in

the Commodity Exchange Act and, in

particular, Sections 1a, 4d, 4e, 4g, 4m,

4p, 8a and 17 thereof (7 U.S.C. 1a, 6d,

6e, 6g, 6m, 6p, 12a and 21 (1994)),

hereby amends Part 3 of Chapter I of

Title 17 of the Code of Federal

Regulations as follows:

PART 3—REGISTRATION

1. The authority citation for Part 3

continues to read as follows:

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

6e, 6f, 6g, 6h, 6i, 6k, 6m, 6o, 6p, 8, 9, 9a, 12,

12a, 13b, 13c, 16a, 18, 19, 21 and 23; 5 U.S.C.

552, 552b.

2. Section 3.34 is amended by revising

paragraphs (b)(3) and (b)(4) and by

adding paragraph (b)(5) to read as

follows:

§ 3.34 Mandatory ethics training for

registrants.

* * * * *

(b) * * *

(3) The training required by this

section must be provided by or pursuant

to a program of training (including

videotape or electronic presentation)

sponsored by:

(i) A self-regulatory organization;

(ii) An entity accredited to conduct

continuing education programs by a

state professional licensing authority in

the fields of law, finance, accounting or

economics; or,

(iii) A person included on a list

maintained by a registered futures

association who has filed a notice with

the registered futures association

certifying that:

(A) Such person, any principals

thereof (as defined in § 3.1(a)) and any

individuals, on behalf of such person,

who present ethics training or who

prepare an ethics training videotape or

electronic presentation are not subject

to:

(1) Statutory disqualification from

registration under Sections 8a(2) or (3)

of the Act;

(2) A bar from service on selfregulatory organization governing

boards or committees based on

disciplinary histories pursuant to § 1.63

of this chapter or any self-regulatory

organization rule adopted thereunder; or

(3) A pending adjudicatory

proceeding under Sections 6(c), 6(d), 6c,

6d, 8a or 9 of the Act, or §§ 3.55, 3.56

or 3.60; and

(B) If the person will conduct training

via videotape or electronic presentation,

either exclusively or in addition to inperson training, he will maintain

documentation reasonably designed to

verify the attendance of registrants at

such videotape or electronic

presentation for the minimum time

required.

(iv) The certification required by

paragraph (b)(3)(iii) of this section is

continuous and if circumstances change

which result in the certification

becoming inaccurate, the person must

promptly so inform the registered

futures association. Upon notice of such

inaccuracy, the registered futures

association shall refuse to include such

person on or remove such person from

the list referred to in paragraph

(b)(3)(iii) of this section.

(v) The registered futures association

shall develop and submit to the

Commission in accordance with Section

17(j) of the Act rules to provide

reasonable procedures for making

determinations not to include or to

remove persons from the list referred to

in paragraph (b)(3)(iii) of this section.

Such rules shall permit a hearing before

the registered futures association with

an opportunity for appeal to the

Commission. Such appeal shall consist

solely of consideration of the record

before the registered futures association

and the opportunity for the presentation

of supporting reasons to affirm, modify,

or set aside the decision of the

registered futures association.

(4) Any person providing ethics

training under this section must

maintain records of the materials used

in such training, and of the attendees at

such training, documentation to verify

completion by a registrant of training

through videotape or electronic

presentation and evaluations of trainers

in accordance with § 1.31 of this

chapter. All such books and records

shall be open to inspection by any

representative of the Commission or the

U.S. Department of Justice and persons

providing ethics training shall be

subject to audit by any representative of

the Commission. Records of attendees at

such training shall be provided upon

request to a registered futures

association in such format as specified

by the registered futures association.

(5) No person referred to in paragraph

(b)(3) of this section may represent or
Federal Register / Vol. 60, No. 239 / Wednesday, December 13, 1995 / Rules and Regulations 63913

imply in any manner whatsoever that

such person has been sponsored,

recommended or approved, or that such

person’s abilities or qualifications, the

content, quality or accuracy of his

training program, or the positions taken

in the course of resolving any actual or

hypothetical situations presenting

ethical or legal issues, have in any

respect been passed upon or endorsed,

by the Commission, a registered futures

association, or any representative

thereof. Any promotional or

instructional material used in

connection with the training required by

this section must prominently state that

the Commission and any registered

futures association have not reviewed or

approved the specific content of the

training program and do not recommend

the provider of such training: Provided,

however, that this paragraph shall not be

construed to prohibit a statement that a

person is included on a list of ethics

training providers maintained by a

registered futures association if such

statement is true in fact and if the effect

of such a listing is not misrepresented.

* * * * *

Issued in Washington, D.C. on December 7,

1995, by the Commission.

Jean A. Webb,

Secretary of the Commission.

[FR Doc. 95–30358 Filed 12–12–95; 8:45 am]

BILLING CODE 6351–01–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 20, and 25

[TD 8630]

RIN 1545–AR56

Actuarial Tables Exceptions

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final

income, estate, and gift tax regulations

relating to exceptions to the use of the

valuation tables in the regulations for

valuing annuities, interests for life or a

term of years, and remainder or

reversionary interests, the valuation of

which was the subject of final

regulations published on June 10, 1994.

These regulations are necessary in order

to provide guidance consistent with

court decisions concluding that the

valuation tables are not to be used in

certain situations.

EFFECTIVE DATE: These regulations are

effective December 13, 1995.

FOR FURTHER INFORMATION CONTACT:

William L. Blodgett, telephone (202)

622–3090 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

On June 10, 1994, the IRS published

in the Federal Register (59 FR 30100)

final income tax regulations under

sections 170, 642, 664 and 7520 of the

Internal Revenue Code (Code), and final

estate and gift tax regulations under

sections 2031, 2512 and 7520 of the

Code providing actuarial tables to be

used in valuing annuities, interests for

life or a term of years, and remainder or

reversionary interests under section

7520. On June 10, 1994, the IRS also

published in the Federal Register (59

FR 30180) proposed amendments to the

income, estate, and gift tax regulations

prescribing circumstances when the

published actuarial tables cannot be

used to value interests. This regulation

finalizes those amendments.

Written comments responding to the

notice of proposed rulemaking were

received. Requests for a public hearing

were also received but were

subsequently withdrawn. After

consideration of all the comments

received, those amendments are revised

and adopted by this Treasury decision.

Explanation of Provisions

Section 7520(a), which is effective for

transfers after April 30, 1989, provides

that the value of annuities, interests for

life or a term of years, and remainder or

reversionary interests is to be

determined under tables published by

the IRS. Section 7520(e) provides that,

for purposes of section 7520, the term

tables includes formulas. Section

7520(b) provides that section 7520 shall

not apply for purposes of any provision

specified in regulations. The Conference

Report accompanying the Technical and

Miscellaneous Revenue Act of 1988,

H.R. Conf. Rep. No. 1104, 100th Cong.,

2d Sess. 113 (1988) (1988–3 C.B. 603),

states that section 7520 does not apply

in ‘‘situations specified in Treasury

regulations.’’ A summary of the

principal comments received and

revisions made in the final regulations

in response to those comments is

provided below.

1. Valuation of Annuities, Income

Interests, etc.

Under the proposed regulations, the

tables cannot be used if the instrument

of transfer does not provide the

beneficiary of the annuity, income

interest, or remainder interest with the

degree of beneficial enjoyment that is

consistent with the traditional character

of that property interest under

applicable local law. One comment

letter suggested that, as a result of

enactment of section 2702, it may no

longer be necessary to prescribe special

rules in the case of a trust corpus

consisting of nonproductive property. It

was decided to retain these rules

because this issue will continue to arise

in certain situations where section 2702

does not apply; e.g., the valuation of a

gift of an income interest for purposes

of determining the section 2503(b) gift

tax exclusion; the valuation of the

bequest of an income interest for

purposes of the section 2013 estate tax

credit.

In response to comments, the final

regulations provide additional guidance

for determining under what

circumstances a life tenant or term

certain beneficiary of tangible property

possesses adequate beneficial use such

that the tables would be used to value

the interest.

A number of comments were received

on the valuation of an annuity that is

payable from a trust corpus that will

exhaust prior to the annuitant reaching

the presumed terminal age prescribed

by the tables (age 110). Under the

proposed regulations, the interest would

be valued, not as a right to receive the

annuity for the life of the annuitant, but

rather as the right to receive the annuity

for the shorter of the life of the

annuitant or the date on which the

corpus will exhaust. One commentator

agreed that the possibility of exhaustion

of corpus should be taken into account

in cases of relatively severe

underfunding of the trust. However, it

was suggested that, if the underfunding

was relatively less severe, it should be

disregarded. After further consideration

of this issue, the IRS has concluded that

the method described in the proposed

regulations for determining the value of

the annuity is consistent with

fundamental principles for determining

present value and long-standing IRS

position. See, Rev. Rul. 77–454 (1977–

2 C.B. 351); Rev. Rul. 70–452 (1970–2

C.B. 199); Moffett v. Commissioner, 269

F.2d 738 (4th Cir. 1959); United States

v. Dean, 224 F.2d 26 (1st Cir. 1955).

However, in response to requests, the

explanation of the methodology and

computation has been amplified.

2. Terminal Illness

Under the proposed regulations, the

tables cannot be used if the individual,

who is the measuring life with respect

to the property interest, is terminally ill.

Under the proposed regulations, the

individual is terminally ill if that

individual was known to have an

incurable illness or deteriorating

physical condition such that there is at