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charges, notify such member or person of, and give him
an opportunity to defend against, such charges, and keep
a record. A determination by the association to impose a
disciplinary sanction shall be supported by a statement
setting forth—
(1) any act or practice in which such member
or person associated with a member has been found
to have engaged, or which such member or person
has been found to have omitted;
(2) the specific provision of this Act, the rules
or regulations thereunder, or the rules of the asso-
ciation which any such act or practice, or omission
to act, is deemed to violate; and
(3) the sanction imposed and the reason there-
for.
(b) PROCEDURES PRIOR TO SANCTION.—In any pro-
ceeding by a national derivatives association to determine
whether a person shall be denied membership, barred from
becoming associated with a member, or prohibited or lim-
ited with respect to access to services offered by the asso-
ciation or a member thereof (other than a summary pro-
ceeding pursuant to subsection (c) of this section), the as-
sociation shall notify such person of and give him an op-
portunity to be heard upon, the specific grounds for de-
nial, bar, or prohibition or limitation under consideration
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and keep a record. A determination by the association to
deny membership, bar a person from becoming associated
with a member, or prohibit or limit a person with respect
to access to services offered by the association or a mem-
ber thereof shall be supported by a statement setting forth
the specific grounds on which the denial, bar, or prohibi-
tion or limitation is based.
(c) SUMMARY SUSPENSIONS.—A national derivatives
association may summarily (1) suspend a member or per-
son associated with a member who has been and is ex-
pelled or suspended from any national derivatives associa-
tion or barred or suspended from being associated with
a member of any national derivatives association, (2) sus-
pend a member who is in such financial or operating dif-
ficulty that the association determines and so notifies the
Board that the member cannot be permitted to continue
to do business as a member with safety to investors, credi-
tors, other members, or the association, or (3) limit or
prohibit any person with respect to access to services of-
fered by the association if paragraph (1) or (2) of this
subsection is applicable to such person or, in the case of
a person who is not a member, if the association deter-
mines that such person does not meet the qualification re-
quirements or other prerequisites for such access and such
person cannot be permitted to continue to have such ac-
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cess with safety to investors, creditors, members, or the
association. Any person aggrieved by any such summary
action shall be promptly afforded an opportunity for a
hearing by the association in accordance with the provi-
sions of subsection (a) or (b) of this section. The Board,
by order, may stay any such summary action on its own
motion or upon application by any person aggrieved there-
by, if the Board determines summarily or after notice and
opportunity for hearing (which hearing may consist solely
of the submission of affidavits or presentation of oral ar-
guments) that such stay is consistent with the public inter-
est and the protection of investors.
SEC. 408. ENFORCEMENT.
(a) MEMBERSHIP REQUIRED TO ENGAGE IN DE-
RIVATIVES BUSINESS..—If the Board has made a deter-
mination under section 404, it shall be unlawful, after the
effective date of this title (as determined under such sec-
tion), for any derivatives dealer to effect any transaction
in, or induce or attempt to induce the purchase or sale
of, any derivative financial instrument, unless such deriva-
tives dealer is a member of a national derivatives associa-
tion registered pursuant to section 405 of this Act.
(b) CRIMINAL PENALTY FOR VIOLATION.—Any per-
son who willfully violates any provision of this title, or any
rule or regulation thereunder the violation of which is
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made unlawful or the observance of which is required
under the terms of this title, or any person who willfully
and knowingly makes, or causes to be made, any state-
ment in any application, report, or document required to
be filed under this title or any rule or regulation there-
under or by any self-regulatory organization in connection
with an application for membership or participation there-
in or to become associated with a member thereof, which
statement was false or misleading with respect to any ma-
terial fact, shall upon conviction be fined not more than
$1,000,000, or imprisoned not more than 10 years, or
both, except that when such person is a person other than
a natural person, a fine not exceeding $2,500,000 may
be imposed; but no person shall be subject to imprison-
ment under this section for the violation of any rule or
regulation if he proves that he had no knowledge of such
rule or regulation.
(c) OBLIGATION TO ENFORCE.—
(1) IN
GENERAL.—Every national derivatives
association shall comply with the provisions of this
Act, the rules and regulations thereunder, and its
own rules, and (subject to paragraph (2) of this sub-
section, and the rules thereunder) absent reasonable
justification or excuse enforce compliance with such
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provisions by its members and persons associated
with its members.
(2) EXCEPTIONS.—The Board, by rule, consist-
ent with the public interest, the protection of inves-
tors, and the other purposes of this Act, may relieve
any national derivatives association of any respon-
sibility under this Act to enforce compliance with
any specified provision of this Act or the rules or
regulations thereunder by any member of such orga-
nization or person associated with such a member,
or any class of such members or persons associated
with a member.
(d) FILING AND APPROVAL OF RULES.—
(1) RULES
AND
CHANGES
REQUIRED
TO
BE
FILED.—Each national derivatives association shall
file with the Board, in accordance with such rules as
the Board may prescribe, copies of any proposed
rule or any proposed change in, addition to, or dele-
tion from the rules of such national derivatives asso-
ciation (hereinafter in this subsection collectively re-
ferred to as a ‘‘proposed rule change’’) accompanied
by a concise general statement of the basis and pur-
pose of such proposed rule change. The Board shall,
upon the filing of any proposed rule change, publish
notice thereof together with the terms of substance
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of the proposed rule change or a description of the
subjects and issues involved. The Board shall give
interested persons an opportunity to submit written
data, views, and arguments concerning such pro-
posed rule change. No proposed rule change shall
take effect unless approved by the Board or other-
wise permitted in accordance with the provisions of
this subsection.
(2) APPROVAL
OR
INITIATION
OF
PROCEED-
INGS.—Within thirty-five days of the date of publi-
cation of notice of the filing of a proposed rule
change in accordance with paragraph (1) of this
subsection, or within such longer period as the
Board may designate up to ninety days of such date
if it finds such longer period to be appropriate and
publishes its reasons for so finding or as to which
the national derivatives association consents, the
Board shall—
(A) by order approve such proposed rule
change, or
(B) institute proceedings to determine
whether the proposed rule change should be dis-
approved.
(2) APPROVAL
OR
DISAPPROVAL.—Such pro-
ceedings shall include notice of the grounds for dis-
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approval under consideration and opportunity for
hearing and be concluded within one hundred eighty
days of the date of publication of notice of the filing
of the proposed rule change. At the conclusion of
such proceedings the Board, by order, shall approve
or disapprove such proposed rule change. The Board
may extend the time for conclusion of such proceed-
ings for up to sixty days if it finds good cause for
such extension and publishes its reasons for so find-
ing or for such longer period as to which the na-
tional derivatives association consents.
(3) 
GROUNDS
FOR
APPROVAL
OR
DIS-
APPROVAL.—The Board shall approve a proposed
rule change of a national derivatives association if it
finds that such proposed rule change is consistent
with the requirements of this Act and the rules and
regulations thereunder applicable to such organiza-
tion. The Board shall disapprove a proposed rule
change of a national derivatives association if it does
not make such finding. The Board shall not approve
any proposed rule change prior to the thirtieth day
after the date of publication of notice of the filing
thereof, unless the Board finds good cause for so
doing and publishes its reasons for so finding.