Document ID: SEC-2014-0678-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Futures Association
Posted Date: 2014-04-25T04:00Z

[Federal Register Volume 79, Number 80 (Friday, April 25, 2014)]
[Notices]
[Pages 23028-23030]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-09391]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71976; File No. SR-NFA-2014-01]

Self-Regulatory Organizations; National Futures Association; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
the Interpretive Notice to NFA Compliance Rules 2-7 and 2-24 and 
Registration Rule 401: Proficiency Requirements for SFPs

April 21, 2014.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Exchange Act''),\1\ and Rule 19b-7 under the Exchange Act,\2\ notice 
is hereby given that on April 7, 2014, National Futures Association 
(``NFA'') filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change described in Items I and II 
below, which Items have been prepared by NFA. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons. NFA also filed this proposed rule change on 
November 20, 2012 with the Commodity Futures Trading Commission 
(``CFTC'').
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
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    NFA, on November 20, 2012, requested that the CFTC make a 
determination that review of the proposed rule change of NFA is not 
necessary.\3\ On February 14, 2013, the CFTC notified NFA that it had 
determined not to review the proposed rule change.\4\
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    \3\ See Letter dated November 20, 2012 from Thomas W. Sexton, 
III, Senior Vice President/General Counsel, NFA to Sauntia Warfield, 
Assistant Secretary, Office of the Secretariat, CFTC.
    \4\ See Letter dated February 14, 2013 from Gary Barnett, 
Director, Division of Swap Dealer and Intermediary Oversight, to 
Thomas W. Sexton, III, Senior Vice President/General Counsel, NFA.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The amendments to the Interpretive Notice entitled ``NFA Compliance 
Rules 2-7 and 2-24 and Registration Rule 401: Proficiency Requirements 
for Security Futures Products'' (``Notice'') extends the relief from 
having to take a proficiency exam to engage in security futures 
activities from December 31, 2012 to December 31, 2015.
    The text of the Interpretive Notice is available on NFA's Web site 
at www.nfa.futures.org, the Commission's Web site at www.sec.gov, the 
self-regulatory organization's office, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NFA included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NFA has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Section 15A(k) of the Exchange Act \5\ makes NFA a national 
securities association for the limited purpose of

[[Page 23029]]

regulating the activities of NFA Members (``Members'') who are 
registered as brokers or dealers under Section 15(b)(11) of the 
Exchange Act.\6\ NFA's Notice entitled: ``NFA Compliance Rules 2-7 and 
2-24 and Registration Rule 401: Proficiency Requirements for Security 
Futures Products'' applies to all Members who meet the criteria in the 
Interpretive Notice and could apply to Members registered under Section 
15(b)(11) of the Exchange Act.
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    \5\ 15 U.S.C. 78o-3(k).
    \6\ 15 U.S.C. 78o(b)(11).
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    The Commodity Futures Modernization Act of 2000 amended the 
Securities Exchange Act of 1934 to require NFA to ``have rules that 
ensure that members and natural persons associated with members meet 
such standards of training, experience and competence necessary to 
effect transactions in security futures products and are tested for 
their knowledge of securities and securities futures products.'' \7\ In 
2001 NFA and FINRA (then NASD) adopted temporary relief allowing 
registrants to qualify to engage in security futures activities by 
completing a training program rather than by taking an exam, which NFA 
codified in the Notice. The relief was extended three times and was set 
to expire on December 31, 2012.
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    \7\ Section 15A(k)(2)(D) of the Exchange Act.
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    NFA and FINRA proposed the three prior extensions, and the CFTC and 
SEC agreed to them,\8\ because of the low trading volume in SFPs and 
the relatively few registrants engaging in security futures activities. 
These characteristics continue to make the imposition of a 
qualifications exam an inefficient option, and the same reasons are 
equally compelling today. Accordingly, the proposal revises the 
Interpretive Notice to extend the relief from having to take an exam 
from December 31, 2012 to December 31, 2015.\9\
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    \8\ The Commission notes that the filings referred to by NFA 
were filed with the Commission pursuant to Section 19(b)(7) of the 
Exchange Act and thus were effective on filing by the NFA.
    \9\ FINRA staff has informed NFA that FINRA will amend its rules 
to incorporate the same three-year extension.
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    Amendments to the Interpretive Notice regarding NFA Compliance 
Rules 2-7 and 2-24 and Registration Rule 401: Proficiency Requirements 
for Security Futures Products were previously filed with the SEC in SR-
NFA-2002-04, Exchange Act Release No. 34-46502 (Sep. 16, 2002), 67 FR 
59587 (Sep. 23, 2002); SR-NFA-2003-03, Exchange Act Release No. 34-
47825 (May 9, 2003), 68 FR 27128 (Mar. 19, 2002); SR-NFA-2003-04, 
Exchange Act Release No. 34-49054 (Jan. 12, 2004), 69 FR 2806, (Jan. 
20, 2004); SR-NFA-2007-07, Exchange Act Release 34-57142 (Jan. 14, 
2008), 73 FR 3502 (Jan. 18, 2008) and SR-NFA-2009-02, Exchange Act 
Release 34-61284 (Jan. 4, 2010), 75 FR 1431 (Jan. 11, 2010).
2. Statutory Basis
    The rule change is authorized by, and consistent with, Section 
15A(k)(2)(D) of the Exchange Act.\10\ That Section requires NFA to 
``have rules that ensure that members and natural persons associated 
with members meet such standards of training, experience, and 
competence necessary to effect transactions in SFPs and are tested for 
their knowledge of securities and securities futures products.'' 
Although the proposal extends relief from having to take an exam to 
engage in security futures activities, it still requires that training 
be completed before entering into such activities.
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    \10\ 15 U.S.C. 78o-3(k)(2)(D).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change will have little or no impact on 
competition. The proposed Interpretive Notice does not impose new 
requirements on Members, but rather extends the relief allowing 
registrants to qualify to engage in security futures activities by 
completing a training program rather than by taking an exam until 
December 31, 2015.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    NFA did not publish the rule change to the membership for comment. 
NFA did not receive comment letters concerning the rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    NFA filed the proposed rule change with the CFTC on November 20, 
2012, and the proposed rule change became effective with the CFTC on 
February 21, 2013. NFA did not file the proposed rule change concurrent 
with the SEC. Instead, NFA filed the proposed rule change with the SEC 
on April 7, 2014.\11\
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    \11\ Section 19(b)(7)(B) of the Act provides that a proposed 
rule change filed with the SEC pursuant to section 19(b)(7)(A) of 
the Act shall be filed concurrently with the CFTC.
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    At any time within 60 days of the date of effectiveness \12\ of the 
proposed rule change, the Commission, after consultation with the CFTC, 
may summarily abrogate the proposed rule change and require that the 
proposed rule change be refiled in accordance with the provisions of 
Section 19(b)(1) of the Act.\13\
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    \12\ Section 19(b)(7)(C) of the Act provides, inter alia, that 
``[a]ny proposed rule change of a self-regulatory organization that 
has taken effect pursuant to [Section 19(b)(7)(B) of the Act] may be 
enforced by such self-regulatory organization to the extent such 
rule is not inconsistent with the provisions of this title, the 
rules and regulations thereunder, and applicable Federal law.''
    \13\ 15 U.S.C. 78s(b)(7)(C).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NFA-2014-01 on the subject line.

Paper Comments:

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NFA-2014-01. This file 
number should be included on the subject line if email is used.

    To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml.) Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room on 
official business days between the hours of 10:00 a.m. and 3:00 p.m. 
Copies of such filing also will be available for inspection and copying 
at the principal offices of NFA. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All

[[Page 23030]]

submissions should refer to File Number SR-NFA-2014-01, and should be 
submitted on or before May 16, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-09391 Filed 4-24-14; 8:45 am]
BILLING CODE 8011-01-P