Document ID: SEC-2006-1680-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Futures Association
Posted Date: 2006-12-26T05:00Z

[Federal Register: December 26, 2006 (Volume 71, Number 247)]
[Notices]               
[Page 77431-77432]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26de06-78]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54956; File No. SR-NFA-2006-03]

 
Self-Regulatory Organization; National Futures Association; 
Notice of Filing and Immediate Effectiveness of a Proposed Amendment 
Relating to the Interpretive Notice to Compliance Rule 2-9 Regarding 
FCM and IB AML Program Requirements

December 18, 2006.

    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 November 27, 2006, 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 prepared by NFA. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons. In addition, on November 6, 2006, NFA filed the proposed rule 
change with the Commodity Futures Trading Commission (``CFTC''). The 
CFTC approved the proposed rule change on November 16, 2006.\3\
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
    \3\ See Letter from Eileen Donovan, Acting Secretary, CFTC, to 
Thomas W. Sexton, III, Esq., General Counsel, NFA (Nov. 16, 2006) 
(``Letter'').
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I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    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 in 
security futures products under Section 15(b)(11) of the Act.\5\ NFA's 
Interpretive Notice entitled ``Compliance Rule 2-9: FCM and IB Anti-
Money Laundering Program'' (``Interpretive Notice'') applies to all 
futures commission merchant (``FCM'') and introducing broker (``IB'') 
Members of NFA, including Members registered 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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    The text of the proposed rule change is available on NFA's Web site 
(http://www.nfa.futures.org), at the NFA's principal 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 has prepared statements 
concerning the purpose of, and basis for, the proposed rule change, 
burdens on competition, and comments received from members, 
participants, and others. 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
    Since NFA adopted its Interpretive Notice to NFA Compliance Rule 2-
9: FCM and IB Anti-Money Laundering Program in early 2002, there have 
been a number of additional anti-money laundering requirements 
applicable to NFA FCM and IB Members.\6\ The proposed rule change would 
amend the Interpretive Notice to include all requirements currently 
applicable to FCMs and IBs.
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    \6\ See, e.g., Treasury Department Rule 31 CFR 103.123 governing 
Customer Identification Programs, discussed in Section A of the 
revised Interpretive Notice.
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    The revised Interpretive Notice includes changes in the following 
areas:
     The addition of Customer Identification Program 
requirements and guidance issued on these requirements; \7\
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    \7\ See Section A of the revised Interpretive Notice.
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     The deletion of the Customer Identification and 
Verification section because it was replaced with the Customer 
Identification Program requirements; \8\
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    \8\ Id.
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     The addition of Suspicious Activity Reporting requirements 
and guidance that was issued regarding these requirements; \9\
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    \9\ See Section B of the revised Interpretive Notice.
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     The addition of Information Request requirements and 
guidance with which FCMs are required to comply. This section includes 
the requirement that FCMs designate a point of contact for these 
requests and that any changes to the point of contact information be 
immediately reported to NFA; \10\
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    \10\ See Section C of the revised Interpretive Notice.
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     The addition of the Private Banking and Correspondent 
Account requirements and the guidance that was issued regarding these 
requirements; \11\
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    \11\ See Section D of the revised Interpretive Notice.
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     A revision to the independent audit function requirement 
that would permit FCMs and IBs that do only proprietary business or 
that are inactive to conduct their independent audit on a 2-year, 
rather than 1-year, cycle; \12\ and
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    \12\ This change is consistent with a similar NASD amendment 
made earlier this year. See the ``Independent Audit Function'' 
Section of the revised Interpretive Notice.
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     A relocation of the Allocation of Compliance Program 
Responsibilities section.\13\
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    \13\ This information was previously included in the ``Customer 
Identification and Verification'' Section of the 2002 Interpretive 
Notice. Because the requirements of this section apply to other 
program requirements, NFA believes it is appropriate to set it out 
in a separate section. See the ``Allocation of Compliance Program 
Responsibilities'' Section of the revised Interpretive Notice.
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2. Statutory Basis
    The rule change is authorized by, and consistent with, Section 
15A(k) of the Act.\14\
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    \14\ 15 U.S.C. 78o-3(k).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In the filing, NFA stated that it believes that the rule change 
will not

[[Page 77432]]

impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act and the Commodities Exchange 
Act. NFA further stated that the proposed rule change primarily updates 
the Interpretive Notice to include the requirements imposed by CFTC and 
Treasury Department rulemakings.

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

    NFA worked with the Futures Industry Association, National 
Introducing Brokers Association, Financial Crimes Enforcement Network 
(``FinCEN'') and the CFTC in developing the rule change. NFA did not 
solicit or receive comment concerning the proposed rule change.

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

    The proposed rule change became effective on November 16, 2006, 
upon approval by the CFTC.\15\ 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 refilled in 
accordance with the provisions of Section 19(b)(1) of the Act.\16\
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    \15\ See Letter, supra, note 3.
    \16\ 15 U.S.C. 78s(b)(1).
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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-2006-03 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NFA-2006-03. 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 inspection and 
copying in the Commission's Public Reference Room. Copies of the filing 
also will be available for inspection and copying at the principal 
office of the 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 submissions should refer to File number SR-NFA-
2006-03 and should be submitted on or before January 16, 2007.
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    \17\ 17 CFR 200.30-3(a)(75).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E6-22004 Filed 12-22-06; 8:45 am]

BILLING CODE 8011-01-P