[Federal Register Volume 61, Number 122 (Monday, June 24, 1996)]
[Rules and Regulations]
[Pages 32323-32327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15995]



=======================================================================
-----------------------------------------------------------------------

COMMODITY FUTURES TRADING COMMISSION

16 CFR Chapter I


Determination Concerning Telemarketing Rules

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of determination that existing Commodity Exchange Act 
provisions, Commission Regulations, and National Futures Association 
(``NFA'') rules provide protection from abusive and deceptive 
telemarketing practices ``substantially similar'' to that provided by 
the Federal Trade Commission's recently promulgated telemarketing rule.

-----------------------------------------------------------------------

SUMMARY: Pursuant to its obligations under section 3(e) of the 
Telemarketing and Consumer Fraud and Abuse Prevention Act 
(``Telemarketing Act''),<SUP>1 15 U.S.C. 6102(e), and corresponding 
section 6(f) of the Commodity Exchange Act (``CEA''),<SUP>2 7 U.S.C. 
9b, the Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') hereby provides notice of its determination that existing CEA 
provisions, Commission Regulations under the CEA,<SUP>3 and CFTC-
approved NFA rules,<SUP>4 interpretations, and other requirements in 
the area of telemarketing, provide protection from deceptive and 
abusive telemarketing practices ``substantially similar'' to that 
provided by the Federal Trade Commission's (``FTC's'') recently 
promulgated Telemarketing Sales Rule, 16 CFR Part 310 (Prohibition of 
Deceptive and Abusive Telemarketing Acts).<SUP>5 Accordingly, the CFTC 
will not promulgate additional rules under the Telemarketing Act at 
this time. Background information and a discussion of the basis for the 
CFTC's determination that existing provisions of its regulations and 
enabling statute, together with NFA telemarketing requirements, provide 
protection against deceptive and abusive telemarketing acts and 
practices substantially similar to that provided by the FTC's rule are 
set forth below.

    \1\ 15 U.S.C. 6101-08.
    \2\ Citations to the CEA in this notice refer to the Commodity 
Exchange Act, codified at 7 U.S.C. 1 et seq. (1994).
    \3\ Citations to ``Commission Regulations'' or ``CFTC 
Regulations'' refer to the CFTC's regulations, codified at 17 CFR 
1.1. et seq.
    \4\ Section 17 of the CEA, 7 U.S.C. 21, requires the CFTC to 
review and approve the rules of registered futures associations, 
which have explicit self-regulatory obligations under the CEA and 
Commission Regulations. To date, NFA, which began operations in 
1982, is the only registered futures association.
    \5\ 60 FR 43842 (August 23, 1995).
---------------------------------------------------------------------------

EFFECTIVE DATE: June 24, 1996.

FOR FURTHER INFORMATION CONTACT: Nancy L. Walsh, Attorney, Division of 
Enforcement, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1155 21st Street, NW, Washington, D.C. 20581. Telephone: (202) 
418-5330.
SUPPLEMENTARY INFORMATION:

I. The Telemarketing Act

    The Telemarketing Act, signed into law on August 16, 1994, ``to 
strengthen the authority of the Federal Trade Commission to protect 
consumers in connection with sales made with a telephone, and for other 
purposes,'' <SUP>6 required that the FTC adopt rules prohibiting 
deceptive and abusive telemarketing practices. As discussed below, the 
Telemarketing Act also added a new Section 6(f) to the CEA, 7 U.S.C. 
9b, which requires, subject to certain exceptions, that the CFTC 
``promulgate, or require each registered futures association to 
promulgate, rules substantially similar'' to the FTC's telemarketing 
rules within six months of the effective date of the FTC rules.<SUP>7
---------------------------------------------------------------------------

    \6\ H.R. Rep. No. 20, 103d Cong., 1st Sess. at 1 (1993).
    \7\ See Section 6(f) of the CEA, 7 U.S.C. 9b. The Telemarketing 
Act similarly requires the Securities and Exchange Commission 
(``SEC'') to promulgate telemarketing rules within the same time 
frame unless it determines: (1) that federal securities laws or SEC 
rules provide substantially similar protection; or (2) that SEC 
telemarketing rules would not be necessary or appropriate in the 
public interest, or would be inconsistent with the maintenance of 
fair and orderly markets. See Section 3(d) of the Telemarketing Act, 
15 U.S.C. 6102(d).
---------------------------------------------------------------------------

A. Congressional Findings

    In imposing rulemaking and other obligations on the FTC, the CFTC, 
and the SEC, the Telemarketing Act lists the following Congressional 
findings: (1) That telemarketing differs from other sales activities 
given sellers' mobility and ability to make sales across state lines 
without direct contact with consumers; (2) that interstate 
telemarketing fraud is a problem of such magnitude that FTC resources 
are

[[Page 32324]]

insufficient to protect consumers; (3) that telemarketing fraud results 
in approximately $40 billion/year in losses; and (4) that consumers are 
victims of other forms of telemarketing deception and abuse as 
well.<SUP>8 Consequently, Congress found that it should enact 
legislation to offer customers necessary protection from telemarketing 
deception and abuse.<SUP>9
---------------------------------------------------------------------------

    \8\ See Section 2 of the Telemarketing Act, 15 U.S.C. 6101.
    \9\ See Section 2(5) of the Telemarketing Act, 15 U.S.C. 
6101(5).
---------------------------------------------------------------------------

B. Rulemaking Obligations

1. Imposed on the FTC <SUP>10
---------------------------------------------------------------------------

    \10\ See Sections 3(a)-(c) of the Telemarketing Act, 15 U.S.C. 
6102(a)-(c).
---------------------------------------------------------------------------

    The Telemarketing Act required the FTC, within 365 days of the 
statute's enactment, to ``prescribe rules prohibiting deceptive 
telemarketing acts or practices and other abusive telemarketing acts or 
practices.'' <SUP>11 Those rules, the statute provides, must define 
deceptive telemarketing acts or practices and must include: a 
prohibition of any pattern of unsolicited telephone calls; restrictions 
on calling times for unsolicited calls; and a requirement that 
telemarketers ``promptly and clearly'' disclose the purpose of calls 
and make other appropriate disclosures. Under the Telemarketing Act, 
telemarketing rules promulgated by the FTC shall not apply to any 
person ``registered or exempt from registration'' under the CEA as a 
futures commission merchant (``FCM''), introducing broker (``IB''), 
commodity trading advisor (``CTA''), commodity pool operator (``CPO''), 
leverage transaction merchant, floor broker, or floor trader, or any 
person associated with such firms, entities or persons.<SUP>12
---------------------------------------------------------------------------

    \11\ The statute was enacted on August 16, 1994, and, as noted 
above, see supra n. 5, the FTC issued its final Telemarketing Sales 
Rule on August 23, 1995.
    \12\ See Section 3(e)(1) of Telemarketing Act, 15 U.S.C. 
6102(e)(1), and section 6(f)(1) of Commodity Exchange Act, 7 U.S.C. 
9b(1). See also 60 FR at 43843, n. 18 (FTC statement of basis and 
purpose for final FTC telemarketing rule confirming that such 
persons--as well as certain securities professionals regulated by 
the SEC--are excluded from coverage of the FTC's rule).
---------------------------------------------------------------------------

2. Imposed on the CFTC
    As noted above, the Telemarketing Act requires the CFTC to 
promulgate, or require each registered futures association to 
promulgate, rules ``substantially similar'' to those of the FTC, within 
six months of the effective date of the FTC's rules, absent certain 
exceptions discussed below.<SUP>13 Any CFTC telemarketing rules 
promulgated would apply to any person registered or exempt from 
registration under the CEA in connection with such person's business as 
an FCM, IB, CTA, CPO, leverage transaction merchant, floor broker, or 
floor trader, and to any person associated with such firms, entities, 
or persons.<SUP>14
---------------------------------------------------------------------------

    \13\ The FTC's Telemarketing Sales Rule became effective 
December 31, 1995. 60 FR 43842. Accordingly, the CFTC, by June 30, 
1996, must promulgate rules or publish a notice of its determination 
that one of the listed exceptions applies.
    \14\ Section 6(f)(1) of the CEA, 7 U.S.C. 9b(1). These persons 
(as well as certain securities professionals) are specifically 
excluded from coverage by the FTC's telemarketing rule. See supra n. 
12.
---------------------------------------------------------------------------

    The CFTC, however, is not required to promulgate rules if it 
determines either: (1) That CFTC rules provide ``substantially 
similar'' protection from deceptive and abusive telemarketing practices 
by certain persons registered or exempt from registration under the CEA 
as the FTC's telemarketing rule;<SUP>15 or (2) that CFTC telemarketing 
rules are not necessary or appropriate in the public interest, or for 
the protection of customers in the futures and options markets, or 
would be inconsistent with ``the maintenance of fair and orderly 
markets.'' If the CFTC determines that one of these exceptions applies, 
it must publish the reasons for its determination in the Federal 
Register.
---------------------------------------------------------------------------

    \15\ The CFTC has properly considered NFA rules and other 
requirements, as well as CFTC Regulations and provisions of the CEA, 
in analyzing whether this exception applies. Because the 
Telemarketing Act requires either the CFTC or ``a registered futures 
association'' to promulgate rules, see section 6(f)(1) of the CEA, 7 
U.S.C. 9b(1), consideration of CFTC-approved NFA rules is necessary 
to evaluate whether existing protection is ``substantially similar'' 
to that provided by the FTC's rule. NFA, as noted above, is the only 
registered futures association. See supra n. 4. In addition, 
Commission Regulation 170.15 and NFA By-Law 1101 essentially work to 
require that all commodity professionals who deal with customers be 
members of NFA, thus assuring that NFA rules apply to the listed 
categories of professionals, except for floor traders and floor 
brokers who are exchange members and generally not engaged in 
telemarketing.
---------------------------------------------------------------------------

II. The FTC's Final Rule

    The FTC's Telemarketing Sales Rule, 16 CFR Part 310, became 
effective December 31, 1995.<SUP>16 Most of the substantive provisions 
of the rule appear in sections 310.3 and 310.4. Section 310.3 makes it 
a deceptive telemarketing act or practice and a violation of the FTC's 
rule for telemarketers or sellers to engage in certain prohibited 
deceptive acts or practices, including, in particular, failing to 
disclose or misrepresenting specified material information. Section 
310.4 identifies certain ``abusive'' conduct (for example, engaging in 
threats or using profane language), establishes ``pattern of call'' and 
calling time restrictions, and requires sellers and telemarketers to 
make specific oral disclosures (including the identity of the seller, 
the purpose of the call, the nature of the goods or services being 
sold, and, if a prize promotion is offered, that no purchase or payment 
is necessary to participate in the promotion).
---------------------------------------------------------------------------

    \16\ 60 FR 43842 (August 23, 1995).
---------------------------------------------------------------------------

III. CFTC's Existing Protection Against Deceptive and Abusive 
Telemarketing Acts and Practices Is ``Substantially Similar'' to 
Protection Under the FTC Rule

A. Generally

    As stated above, the CFTC has determined that existing statutory 
provisions, regulations, and NFA rules governing telemarketing 
practices of registered commodity professionals provide protection from 
deceptive and abusive telemarketing that is ``substantially similar'' 
to the protection provided by the FTC's Telemarketing Sales Rule. To 
reach that determination, the CFTC carefully analyzed and compared the 
FTC's Telemarketing Sales Rule and analogous provisions of the CEA, 
Commission Regulations, and NFA rules. The Commission also considered 
information from NFA on the scope and application of its telemarketing 
and sales practice rules. Given the substantially similar protection 
provided by existing CEA provisions, Commission Regulations, and NFA 
rules, and the fact that the FTC's rule addresses some areas not within 
the Commission's jurisdiction, the Commission has determined, pursuant 
to Section 6(f)(2) of the CEA, 7 U.S.C. 9b(2), not to promulgate 
additional telemarketing rules at this time.
    Since it began operations in 1975, the CFTC has attacked fraudulent 
telemarketing schemes within its jurisdiction consistently and 
vigorously, and with considerable success. In doing so, the CFTC brings 
federal court injunctive actions and administrative actions; it assists 
the United States' Attorneys in criminal prosecutions; and it files 
joint actions with states.
    While, as reflected by the chart below, certain CEA provisions, 
Commission Regulations, and NFA rules address and prohibit the same 
acts and practices targeted by the FTC's Telemarketing Sales Rule, 
those provisions are part of a comprehensive regulatory scheme 
developed specifically for the futures and commodity options markets. 
The FTC's Telemarketing Rule, on the other hand, defines the terms, 
``telemarketer'' and ``goods or services'' broadly without

[[Page 32325]]

regard to the subject matter of particular solicitations.<SUP>17 In 
light of the agencies' different regulatory missions, the FTC's 
Telemarketing Sales Rule addresses the telemarketing of certain goods 
and services that are not within the CFTC's jurisdiction or expertise, 
such as prize promotions and awards. Accordingly, not every provision 
of the FTC's Telemarketing Sales Rule has a precisely equivalent 
analogue in the CEA, Commission Regulations, or NFA Rules.
---------------------------------------------------------------------------

    \17\ Section 310.2(t) of the FTC's Telemarketing Sales Rule, for 
example, defines ``telemarketer'' as ``any person who, in connection 
with telemarketing, initiates or receives telephone calls to or from 
a customer.'' The FTC similarly defines the phrase, ``goods or 
services'' broadly to cover ``any tangible and intangible goods or 
services including, but not limited to, leases, licenses, or 
memberships,'' as well as prizes and awards. See Statement of Basis 
and Purpose, 60 FR at 43844.
---------------------------------------------------------------------------

B. Comparison Chart: FTC Telemarketing Sales Rule and Existing CEA 
Provisions, Commission Regulations, and NFA Rules

    The following chart provides a side-by-side description and 
comparison of substantive provisions of the FTC's Telemarketing Sales 
Rule and certain analogous provisions of the CEA, Commission 
Regulations, and NFA rules.<SUP>18 Given the CFTC's and the FTC's 
different regulatory missions and the fact that the FTC's rule 
addresses certain subjects and products outside the CFTC's 
jurisdiction, not every subject addressed by the FTC's Telemarketing 
Sales Rule is governed or addressed by a corresponding provision of the 
CEA, Commission Regulations, or NFA Rules. The chart is intended to 
provide an overview and concise summary of the FTC's rule and relevant 
provisions of the CEA, Commission Regulations, and NFA Rules. The chart 
is not intended to be an exhaustive list of every CEA provision, 
Commission rule, and NFA rule or requirement relating to each provision 
of the FTC's rule.

    \18\ Provisions of the FTC's rule are listed and described on 
the left, and analogous provisions of the CEA, Commission 
Regulations or NFA rules are listed and described on the right.

                            Section 310.3: Deceptive Telemarketing Acts or Practices                            
                                                                                                                
(a): Prohibited Deceptive Acts/          Antifraud provisions of the CEA and Commission Regulations require     
 Practices. It is a deceptive act or      disclosure of material information.                                   
 practice to:                                                                                                   
(1) Fail to disclose the following       Reg. 1.55 requires FCMs and IBs, before opening accounts, to furnish   
 ``material information'' in clear and    customers with standard written risk disclosure statement disclosing  
 conspicuous manner before customer       the substantial risk of loss from trading commodity futures contracts 
 pays: total costs; all material          and secure signed acknowledgement. See Reg. 30.6 (disclosure          
 limits, restrictions, conditions to      requirements for FCMs and IBs opening foreign futures or option       
 purchasing, receiving or using goods     account); Part 4 of Regs. (CPOs and CTAs, before soliciting,          
 or services; any refund, cancellation,   accepting, or receiving funds, must furnish disclosure document and   
 exchange policy; (for prize promotion)   risk disclosure statement, disclosing, among other things, break-even 
 odds of receiving prize; and all         point, the pool or trading advisor's business background, principal   
 material costs/conditions to redeeming   risk factors, fees and expenses, and performance information); Reg.   
 prize;.                                  4.21 et seq. (for CPOs); Reg. 4.31 et seq. (for CTAs). Reg. 32.5      
                                          requires options disclosure statement, including description of       
                                          transaction, costs, effect of foreign currency fluctuations, and      
                                          disclosure of volatile nature of commodities markets, risk of loss,   
                                          and other information. Reg. 31.11 (leverage transaction merchants must
                                          furnish disclosure document and secure signed acknowledgement).       
(2) Misrepresent, directly or by         CEA, 4b(a)(i), 7 U.S.C. 6b(a)(i), makes it unlawful, in connection with
 implication, listed material             certain commodity futures transactions, to cheat or defraud or attempt
 information.                             to cheat or defraud another person.                                   
                                         CEA, 4o, 7 U.S.C. 6o, among other things, makes it unlawful for CPOs   
                                          and CTAs to employ a device, scheme, or artifice to defraud or to     
                                          engage in any transaction, practice or course of business which       
                                          operates as a fraud or deceit.                                        
                                         Regs. 32.9 and 33.10 make it unlawful, among other things, to cheat or 
                                          defraud or attempt to cheat or defraud any other person, make or cause
                                          to be made any false report or statement, or deceive or attempt to    
                                          deceive any other person, in connection with commodity option         
                                          transactions.                                                         
                                         NFA Rule 2-2(a) provides that no member or associate shall cheat,      
                                          defraud, deceive or attempt to cheat, defraud, or deceive any         
                                          commodity futures customer.                                           
                                         See also CEA, 4b(a)(ii), 7 U.S.C. 6b(a)(ii) (unlawful willfully to make
                                          or cause to be made any false report or statement); CEA, 4b(a)(iii), 7
                                          U.S.C. 6b(a)(iii) (unlawful willfully to deceive or attempt to deceive
                                          another person).                                                      
(3) Fail to obtain or submit verifiable  Signed risk disclosure requirements (discussed above). Reg. 166.2      
 authorization before submitting check,   (prohibits FCMs and IBs from trading for customer account without     
 draft or other negotiable paper drawn    prior specific authorization or written authorization allowing trading
 on person's account for payment; or      without separate authorization for each individual transaction).      
                                          Segregation requirements for handling customer funds also provide     
                                          protection. CEA, 4d(2), 7 U.S.C. 6d(2), Regs. 1.20-1.30, 1.32, and    
                                          1.36.                                                                 
(4) Make false/misleading statement to   Compare to discussion of Section 310.3 above.                          
 induce payment.                                                                                                
(b): Assisting/Facilitating deceptive    CEA, 13(a), 7 U.S.C. 13c(a) (Aiding and Abetting): person who commits, 
 act/practice to provide substantial      or willfully aids, abets, counsels, commands, induces or procures     
 assistance or support to seller or       commission of a violation of CEA, may be held responsible as          
 telemarketer when person knows or        principal. CEA, 13(b), 7 U.S.C. 13c(b) (Controlling Person): person   
 avoids knowing seller or telemarketer    who directly or indirectly controls any person who has violated CEA or
 is engaged in act/practice that          Commission rules may be liable for violation to the same extent as    
 violates Rule.                           controlled person. CEA, 2(a)(1)(A)(iii), 7 U.S.C. 4 (Vicarious        
                                          Liability): corporations, partnerships, associations, and individuals 
                                          liable for acts and omissions of employees and agents. Reg. 166.3     
                                          (Supervision): registrants must supervise diligently their employees  
                                          and agents in all aspects of their futures activities.                
(c): Credit Card Laundering............  To the extent credit card laundering is part of a scheme to violate the
                                          CEA or Commission Regulations, CEA, 13, 7 U.S.C. 13c (Aiding and      
                                          Abetting) could be used to address conduct.                           
                                                                                                                
                             Section 310.4: Abusive Telemarketing Acts or Practices                             
                                                                                                                
(a): Abusive Conduct Generally--It is                                                                           
 abusive conduct to:                                                                                            

[[Page 32326]]

                                                                                                                
    (1) Engage in threats, intimidation  NFA Compliance Rule 2-29(a)(2) prohibits high pressure sales practices,
     or use profane or obscene            including threatening or intimidating solicitations and the use of    
     language;.                           profane or obscene language. See NFA's recent Notice to Members <SUP>19    
                                          (confirming that NFA Compliance Rule 2-29(a)(2) prohibits threats and 
                                          intimidation, calling at irregular hours, and the use of profane or   
                                          obscene language).<SUP>20                                                  
                                         NFA Compliance Rule 2-9 requires each NFA member to supervise          
                                          diligently its employees and agents in all aspects of their futures   
                                          activities. Interpretive Notice to NFA Compliance Rule 2-9 imposes    
                                          enhanced telemarketing supervisory requirements, including tape-      
                                          recording certain sales solicitations, on a member firm if a certain  
                                          threshold number or percentage of its APs formerly were employed by   
                                          firms disciplined by NFA or the CFTC for sales practice fraud.        
    (2) Request/receive payment to       See Comparison with 310.3(c).                                          
     remove derogatory information from                                                                         
     credit history unless listed                                                                               
     conditions met;.                                                                                           
    (3) Request/receive payment for      See Comparison with 310.3(c).                                          
     recovering money or any item of                                                                            
     value paid in previous telephone                                                                           
     transaction; or.                                                                                           
    (4) Request/receive payment before   See Comparison with 310.3(c).                                          
     securing loan and indicating high                                                                          
     chance of getting loan.                                                                                    
    (b): Pattern of Calls Abusive act/   See Comparison with 310.4(a) (NFA Compliance Rule 2-29(a)(2), NFA      
     practice to: (i) make calls          Notice to Members, and NFA Compliance Rule 2-9). NFA considers pattern
     repeatedly or continuously with      of calls in initiating complaints under NFA Compliance Rule 2-        
     intent to annoy, abuse or harass;    29(a)(2).<SUP>21                                                           
     or (ii) initiate call when person                                                                          
     has stated that he/she does not                                                                            
     want to receive call.                                                                                      
    (c): Calling Time Restrictions       See Comparison with 310.4(a) (NFA Compliance Rule 2-29(a)(2), NFA      
     Calls must be between 8:00 a.m.      Notice to Members).<SUP>22                                                 
     and 9:00 p.m.                                                                                              
    (d) Required Oral Disclosures......  See Comparison with 310.4(a) (NFA Compliance Rule 2-29(a)(2) and NFA   
                                          Compliance Rule 2-9).                                                 
        Abusive telemarketing act NOT    General antifraud provisions apply to oral statements, and additional  
         to disclose: seller's            requirements govern promotional materials and advertisements (Reg.    
         identity; call's purpose;        4.41 for CPOs/CTAs; NFA Compliance Rule 2-9 and Interpretive Notice). 
         nature of goods/services; and    NFA Rules on disclosure and promotional materials also require certain
         that no purchase necessary to    information concerning a customer's ``break-even'' point as well as   
         win prize or participate in      balanced presentation.                                                
         promotion.                                                                                             
                                         In addition, prior to trading, extensive written disclosure and        
                                          acknowledgement requirements must be met. See Regs. 1.55, 4.13, 4.21, 
                                          4.24, 4.25, 4.31, 4.34, 4.35, 33.7, 32.5, 30.6, 31.11. Regs. 1.55 and 
                                          33.7 require FCMs and IBs to furnish ``Risk Disclosure Statement'' and
                                          receive acknowledgement.<SUP>23 Reg. 4.21 requires CPOs to provide         
                                          disclosure document before soliciting, accepting, or receiving funds. 
                                          Reg. 4.13 applies to exempt CPOs. Reg. 4.31 requires CTAs to provide  
                                          disclosure document before soliciting or entering into agreement with 
                                          prospective client.                                                   
                                                                                                                
                                          Section 310.5: Recordkeeping                                          
                                                                                                                
(a) Seller/telemarketer must keep the    Recordkeeping Requirements under CEA and Commission Regulations. See   
 following for 24 months from date        CEA, 4g, 4n, 7 U.S.C. 6g, 6n; Regs. 1.12, 1.18, 1.31, 1.33, 1.34,     
 produced: advertisements, brochures,     1.35, 1.37, 1.55, 3.12, 4.23, and 4.32.<SUP>24 Generally, Reg. 1.31        
 scripts, promotional materials; name/    requires all required books and records be kept for 5 years, and be   
 address of prize recipients and prizes   readily accessible for CFTC and Department of Justice inspection for  
 of $25 or more awarded; name/address     the first 2 years.                                                    
 of customers and goods purchased; name/                                                                        
 address/telephone and job titles of                                                                            
 sales employees; and verification                                                                              
 authorizations.                                                                                                
                                         Registration requirements for APs, see Reg. 3.12, cover certain        
                                          information required by FTC rule. NFA Compliance Rule 2-29 and        
                                          accompanying Interpretive Notice impose recordkeeping and other       
                                          requirements for brochures, scripts, and promotional material. NFA    
                                          Rule 2-10 requires members to maintain all books and records          
                                          appropriate to the conduct of their business. See also Reg. 1.40 (FCMs
                                          and contract markets must furnish CFTC, upon request, copies of       
                                          letters, circulars, telegrams or reports published or given general   
                                          circulation on crop or market information or conditions affecting the 
                                          price of any commodity).                                              
(b) Keep records as in manner seller/    See Comparison for 310.5(a).                                           
 telemarketer keeps records in ordinary                                                                         
 course of business.                                                                                            

[[Page 32327]]

                                                                                                                
(c) Seller and telemarketer may, by      See Comparison for 310.5(a).                                           
 written agreement, allocate                                                                                    
 recordkeeping obligations.                                                                                     
(d) Governs recordkeeping upon           See Comparison for 310.5(a).                                           
 dissolution or sale of business.                                                                               
                                                                                                                
                              Section 310.7: Actions by States and Private Persons                              
                                                                                                                
(a): Requires Attorney General, other    CEA, 6d, 7 U.S.C. 13a-2, authorizes states to prosecute violations of  
 State officers authorized to bring       CEA in federal court; notice of filing and copy of pleading must be   
 suit, and any private person who         given to the CFTC.                                                    
 brings an action under Telemarketing                                                                           
 Act to serve written notice of action                                                                          
 on FTC.                                                                                                        
                                         CEA, 14, 7 U.S.C. 18 (Reparations Procedure) authorizes reparations    
                                          actions by any person complaining of violation of CEA, Commission     
                                          Regulations, or Commission order by a registrant. See also Part 12 of 
                                          Regs. (Rules Relating to Reparations Proceedings).                    
                                         CEA, 17(b)(10), 7 U.S.C. 21(b)(10), requires NFA to provide procedure  
                                          through arbitration or otherwise to settle customer claims and        
                                          grievances against its members. NFA Code of Arbitration, Section 2    
                                          provides generally that members must submit to arbitration for any    
                                          dispute filed with NFA by a customer. See also Reg. 170.8 (Settlement 
                                          of Customer Disputes).                                                
(b): Nothing in this section prohibits   CEA, 6d(8), 7 U.S.C. 13a-2(8), allows states to proceed in state court 
 Attorney General or other authorized     against certain registrants for violations of antifraud provisions.   
 State officials from proceeding in       CEA, 12(e), 7 U.S.C. 16(e), authorizes states to proceed in state     
 State court for violations of any        court for illegal ``off-exchange'' transactions.                      
 civil or criminal state statute.                                                                               
                                                                                                                
<SUP>19 See NFA Notice to Members (June 19, 1996).                                                                   
<SUP>20 Of the thirty-eight complaints that NFA has issued alleging a violation of NFA Compliance Rule 2-29(a)(2),   
  NFA considered a pattern of inappropriate calling (i.e., calling at irregular hours or making excessive calls)
  as a factor in initiating eighteen cases and the use of profane language as a factor in three cases.          
<SUP>21 As confirmed by NFA's recent Notice to Members, repeated or continuous calls made with an intent to annoy,   
  abuse, or harass are specifically prohibited by Rule 2-29(a)(2).                                              
<SUP>22 NFA considers the time when calls were placed when issuing complaints under NFA Compliance Rule 2-29(a)(2).  
  See supra n. 20.                                                                                              
<SUP>23 Neither Reg. 1.55 nor Reg. 33.7 relieves FCMs and IBs from otherwise applicable disclosure and other         
  requirements. See Reg. 1.55(f) (FCMs and IBs not relieved from any other disclosure obligation under          
  applicable law); Reg. 33.7(f) (FCMs and IBs not relieved from any other obligation under CEA or CFTC          
  regulations, including obligation to disclose all material information).                                      
<SUP>24 Regs. 1.10, 1.12, 1.18, 1.31, 1.32, 1.35 govern recordkeeping and reporting obligations for FCMs and IBs.    
  Reg. 1.33 requires FCMs to furnish monthly and confirmation statements. Reg. 1.34 requires FCMs to keep       
  ``point balance'' and monthly listings of open option positions carried for option customers marked to market.
  CEA, 4n, 7 U.S.C. 6n, requires CPOs and CTAs to keep books and records for at least 3 years, but is superseded
  by the general five-year requirement of Reg. 1.31. Regs. 4.23 and 4.33 also govern recordkeeping by CPOs and  
  CTAs.                                                                                                         



D. Conclusion

    As the chart and discussion above reflect, existing provisions of 
the CEA, Commission Regulations, and NFA rules address and prohibit 
many of the same categories of telemarketing abuse targeted by the 
FTC's recently promulgated Telemarketing Sales Rule. Accordingly, the 
CFTC has determined that existing rules provide protection from 
deceptive and abusive telemarketing acts and practices that is 
``substantially similar'' to the protection provided by the FTC's rule. 
Given its determination, the CFTC has also determined that it is 
unnecessary for it to promulgate additional telemarketing rules under 
the Telemarketing Act at this time.
    To ensure that it remains apprised of developments in the area of 
telemarketing, however, the CFTC has asked NFA to continue to focus, in 
the course of performing member audits,<SUP>25 on telemarketing acts 
and practices that it believes may fall outside the scope of existing 
rules and to inform the Commission of the results of those 
audits.<SUP>26 Should the information provided by NFA indicate a need 
for additional telemarketing rules, advisories, or other guidance, the 
Commission will work with NFA to undertake rulemaking or other 
activities necessary to provide appropriate protection. Through such 
ongoing monitoring and evaluation of telemarketing acts and practices, 
the CFTC will ensure that its rules continue to provide protection from 
deceptive and abusive telemarketing acts and practices as those 
practices may arise in the future.

    \25\ As part of its audit and compliance functions, NFA conducts 
``front-office audits,'' which address sales practices, including 
telemarketing.
    \26\ NFA's obligation to report on any such telemarketing acts 
and practices is separate from, and additional to, its existing 
reporting and auditing obligations under the CEA and Commission 
Regulations.
---------------------------------------------------------------------------

    Issued in Washington, DC, on June 18, 1996.
Jean A. Webb,
Secretary to the Commission.
[FR Doc. 96-15995 Filed 6-21-96; 8:45 am]
BILLING CODE 6351-01-P