Document ID: SEC-2010-1190-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Futures Association
Posted Date: 2010-08-06T04:00Z

[Federal Register: August 6, 2010 (Volume 75, Number 151)]
[Notices]               
[Page 47666-47667]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06au10-146]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62624; File No. SR-NFA-2010-02]

 
Self-Regulatory Organizations; National Futures Association; 
Notice of Filing and Immediate Effectiveness of Proposed Changes to 
Interpretive Notice Entitled ``NFA Compliance Rule 2-30(b): Risk 
Disclosure Statement for Security Futures Contracts''

August 2, 2010.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-7 under the Act,\2\ notice is hereby given 
that on July 8, 2010, National Futures Association (``NFA'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change described in Items I, II, and III below, which 
Items have been substantially prepared by the NFA. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons. NFA also has filed this proposed rule change 
concurrently 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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    On July 8, 2010, NFA requested that the CFTC make a determination 
that review of the proposed rule change of NFA is not necessary. On 
July 26, 2010, the CFTC notified NFA of its determination not to review 
the proposed rule change.\3\
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    \3\ See letter from William Penner, Deputy Director, CFTC to 
Thomas W. Sexton, Senior Vice President and General Counsel, NFA, 
dated July 26, 2010.
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I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    The amendment to the Interpretive Notice entitled ``NFA Compliance 
Rule 2-30(b): Risk Disclosure Statement for Security Futures 
Contracts'' updates the document to reflect the treatment of dividends 
for a new class of security futures contracts that did not exist at the 
time the Interpretive Notice was adopted. Specifically, the amendment 
indicates that price adjustments for ordinary dividends may be made for 
a specified class of security futures contracts based on the rules of 
the exchange and the clearing organization.
    The text of the proposed rule change is available on NFA's Web site 
at http: //www.nfa.futures.org, at the principal office of NFA 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 Act \4\ makes NFA a national securities 
association for the limited purpose of regulating the activities of NFA 
Members (``Members'') who are registered as brokers or dealers under 
Section 15(b)(11) of the Act.\5\ NFA Interpretive Notice entitled ``NFA

[[Page 47667]]

Compliance Rule 2-30(b): Risk Disclosure Statement for Security Futures 
Contracts'' applies to all NFA Members and Associates, including those 
who are registered as security futures brokers or dealers under Section 
15(b)(11).
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    \4\ 15 U.S.C. 78o-3(k).
    \5\ 15 U.S.C. 78o(b)(11).
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    NFA Compliance Rule 2-30(b) requires NFA Members and Associates who 
are registered as brokers or dealers under Section 15(b)(11) of the Act 
to provide a Risk Disclosure statement for security futures contracts 
to a customer at or before the time the Member approves the account to 
trade security futures products. The Risk Disclosure statement is a 
uniform statement that was jointly developed in 2002 by NFA, the 
National Association of Securities Dealers, Inc. (now known as the 
Financial Industry Regulatory Authority, Inc.), and a number of 
securities and futures exchanges. Among other things, this Risk 
Disclosure statement describes the features of a security futures 
product as those features existed in 2002. Specifically, the Risk 
Disclosure statement indicates that there are generally no adjustments 
for dividends because the dividends are accounted for in the pricing of 
the security futures.
    Recently, One Chicago LLC (OCX), an exchange listing security 
futures products, developed and plans to list a new class of security 
futures products whose dividend feature differs from the dividend 
feature described in the Risk Disclosure statement. In particular, the 
new product will adjust for any declared dividends because the dividend 
is not accounted for in the pricing of the security futures product. In 
order to ensure that the Risk Disclosure statement accurately reflects 
the dividend feature of this new product, the Interpretive Notice, 
which sets forth the Risk Disclosure statement, has been amended to 
indicate that price adjustments for ordinary dividends may be made for 
a specified class of security futures contracts based on the rules of 
the exchange and the clearing organization.
    Amendments to the Interpretive Notice entitled ``NFA Compliance 
Rule 2-30(b): Risk Disclosure Statement for Security Futures 
Contracts'' were previously filed with the SEC in SR-NFA-2002-05, SR-
NFA-2002-06 and SR-NFA-2007-07.
2. Statutory Basis
    The rule change is authorized by, and consistent with, Section 
15A(k)(2)(B) of the Act.\6\ That Section requires NFA to have rules 
that are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, and, in 
general, to protect investors and the public interest, which includes 
rules governing sales practices of security futures products. The 
proposed rule change accomplishes this by ensuring that the Risk 
Disclosure Statement for Security Futures Contracts, which NFA Members 
registered as a broker or dealer under Section 15(b)(1) of the Exchange 
Act are required to provide to a customer at or before the time the 
Member approves the account to trade security futures products, 
accurately describes the dividend features of all classes of security 
futures products.
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    \6\ 15 U.S.C. 78o-3(k)(2)(B).
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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 since the amendments to the Interpretive Notice do not 
impose any new requirements on Members. Rather, the amendments merely 
revise the language in the Interpretive Notice to accurately reflect 
the dividend feature of a class of security futures products that was 
not available at the time the Interpretive Notice was adopted.

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 its 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

    On July 26, 2010, the CFTC notified NFA that it had determined not 
to review the proposed rule change and, therefore, NFA is permitted to 
make the amendments effective as of this date.\7\ At any time within 60 
days of the date of effectiveness 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.
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    \7\ See note 3.
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NFA-2010-02 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NFA-2010-02. This file 
number should be included on the subject line if e-mail 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office 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 publicly available. All 
submissions should refer to File Number SR-NFA-2010-02 and should be 
submitted on or before August 27, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(73).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19372 Filed 8-5-10; 8:45 am]
BILLING CODE 8010-01-P