[Federal Register: July 9, 2004 (Volume 69, Number 131)]
[Rules and Regulations]
[Page 41424-41427]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09jy04-24]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Parts 1, 4, 31, 140, 145 and 190
Corrections to Regional Office Information, References to Section
4d(2) and Criteria for CPO Registration Exemption
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rule.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is
amending its regulations to make a series of technical corrections, as
follows: To delete references to the Western Regional Office, which was
closed in 2003; to update addresses for other regional offices; to
correct references to section 4d(2) of the Commodity Exchange Act to
read section 4d(a)(2) instead; and to clarify that the participant
criteria for exemption from commodity pool operator (``CPO'')
registration under Rule 4.13(a)(3) include persons who meet the
participant criteria of Rule 4.13(a)(4).
DATES: Effective: July 9, 2004.
FOR FURTHER INFORMATION CONTACT: Thelma Diaz, Special Counsel, at (202)
418-5137, Division of Clearing and Intermediary Oversight, Commodity
Futures Trading Commission, Three Lafayette Centre, 1155 21st St., NW.,
Washington DC 20581; electronic mail at tdiaz@cftc.gov.
SUPPLEMENTARY INFORMATION:
I. Amendments To Update Regional Office Information
Commission Rule 140.2 describes the organization of four regional
offices for the Commission (the Eastern, Central, Southwestern and
Western Regional offices). Among other things, Rule 140.2 specifies for
each regional office a list of states for which the office is
``responsible for enforcement of the [Commodity Exchange Act] and
administration of programs of the Commission''.\1\ In 2002, the Eastern
and Central Regional Offices moved to new locations, and the Western
Regional Office was closed in 2003. The Commission is therefore
amending Rule 140.2 to update the address information for the Eastern
and Central Regional Offices, and to delete the reference to the
Western Regional Office. Rule 140.2 is also amended to add to the list
of states for the Southwestern Regional Office those states that are
currently in the list for the Western Regional Office (Alaska, Arizona,
California, Hawaii, Idaho, Montana, Nevada, Oregon, Utah, Washington,
and Wyoming).\2\
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\1\ The Commodity Exchange Act may be found at 7 U.S.C. 1 et
seq. (2000).
\2\ The Commission is also making a technical correction to Rule
140.99, which currently includes two different paragraphs that are
both designated as paragraph (d)(2). In 2002, the Commission adopted
amendments to Rule 140.99 that added the text in the first paragraph
designated as (d)(2) and deleted the text found in the second
paragraph. See 67 FR 62350, 62353-4 (October 7, 2002). The publisher
of the Code of Federal Regulations, however, incorrectly included
the text of both paragraphs, and this final rule adopts a technical
correction to delete the second of the two paragraphs designated as
(d)(2).
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Commission Rules 1.10, 1.12, 1.17 and 31.13 must also be revised to
reflect the closing of the Western Regional Office. These rules specify
various reports or notices that are to be filed with the Commission,
and state further that such reports and notices are considered filed
when received by the regional office that is the nearest to a firm's
principal place of business, with the proviso that firms under the
jurisdiction of the Western Regional Office should file with the
Southwestern Regional Office instead. The proviso is no longer
necessary, and the Commission is accordingly amending each of these
regulations to delete the proviso.
The Commission is also amending the list of addresses provided in
Rule 145.6 for requests for public records directed to regional
offices. As amended, the rule will no longer include the address of the
closed Division of Enforcement office in the Western Region.
II. Amendments To Update References to Section 4d
Several Commission regulations include references to section 4d(2)
of the Commodity Exchange Act. With the enactment of Commodity Futures
Modernization Act of 2000 (``CFMA''), section 4d(2) has now been
redesignated as section 4d(a)(2).\3\ The Commission is therefore
amending Rules 1.16, 1.17, 1.23, 1.30, 31.13, and 190.07 to change the
references to section 4d(2) to read section 4d(a)(2).
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\3\ Sec. 1(a)(5) of Pub. L. 106-554 (title II, Sec. 251(f)).
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[[Page 41425]]
III. Amendments To Clarify That the Participant Criteria for Exemption
From CPO Registration Under Rule 4.13(a)(3) Include Persons Who Meet
the Criteria of Rule 4.13(a)(4)
In August 2003, the Commission adopted rules that provide for
additional exemptions from registration as a CPO.\4\ To be eligible for
exemption from CPO registration under Rule 4.13(a)(3), the CPO seeking
exemption must operate pools whose participants meet certain
sophistication criteria \5\ and that abide by restrictions on the
amount of the pool's commodity interest trading. To be eligible for
exemption under Rule 4.13(a)(4), the CPO must operate pools whose
participants meet significantly higher sophistication criteria.\6\ The
latter rule does not restrict the amount of the pool's commodity
interest trading. The Commission is amending Rule 4.13(a)(3) to make
clear that participants who meet the higher sophistication criteria of
Rule 4.13(a)(4) may also participate in a pool for which the operator
claims exemption from CPO registration under Rule 4.13(a)(3).\7\
Related Matters
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\4\ See 68 FR 47221 (August 8, 2003).
\5\ Each participant must be an ``accredited investor'' or
``knowledgeable employee'' under the Federal securities laws, a
trust formed by an accredited investor for a family member, or a
``qualified eligible person'' under Rule 4.7(a)(2)(viii)(A). 17 CFR
4.7(a)(2)(viii)(A) (2003).
\6\ Each natural person participant must be a ``qualified
eligible person'' under Rule 4.7(a)(2) and each non-natural person
must be a ``qualified eligible person'' under Rule 4.7 or an
``accredited investor'' under sub-paragraphs (a)(1) through (a)(3),
(a)(7) or (a)(8) of Rule 501 under the Securities Act of 1933. 17
CFR 230.501(a)(1)-(3), (a)(7) or (a)(8) (2003).
\7\ In this regard, by letter dated April 14, 2004, Commission
staff confirmed that persons who meet the participant criteria of
Rule 4.13(a)(4) may also participate in a pool operated pursuant to
Rule 4.13(a)(3). See CFTC Interpretative Letter No. 04-13, available
on the Commission's Web site at http://www.cftc.gov/tm/letters/04letters/tm04-13.htm
.
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A. Administrative Procedure Act
The Administrative Procedure Act (``APA'') generally requires
notice of proposed agency rulemaking and procedures for public comment
prior to the adoption of final rules.\8\ The APA provides for an
exception from this process for ``interpretative rules, general
statements of policy, or rules of agency organization, procedure, or
practice,'' or whenever the agency for good cause finds that such
notice and comment opportunity are ``impracticable, unnecessary, or
contrary to the public interest.'' \9\ The APA also provides that the
required publication of a substantive rule shall be made not less than
30 days before its effective date, but provides several express
exceptions to this requirement, including where the rule ``grants or
recognizes an exemption or relieves a restriction.'' \10\
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\8\ 5 U.S.C. 551 et. seq.
\9\ 5 U.S.C. 553(b).
\10\ 5 U.S.C. 553(d).
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The amendments to revise office address information in Rules 1.10,
1.12, 1.17, 31.13, 140.2, and 145.6 relate to the agency's internal
organization, and will also benefit the public by providing correct
information for the filing of required documents with the
Commission.\11\ Moreover, when adopting amendments to Rules 4.13(a)(3)
and (4) last year to provide exemptive relief from CPO registration,
the Commission determined that such amendments would be effective
immediately because they granted or recognized an exemption or relieved
a restriction.\12\ The amendments to Rule 4.13(a) hereby adopted
clarify and further confirm for industry participants the availability
of exemptive relief under the rule amendments adopted in August of
2003. Accordingly, the Commission has determined to make the amendments
adopted in this final rulemaking effective immediately upon publication
in the Federal Register.
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\11\ The public will also benefit from the correction of
obsolete references to section 4d(2) in Rules 1.16, 1.17, 1.23,
1.30, 31.13, 140.99, and 190.07.
\12\ 68 FR at 47230.
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B. Cost-Benefit Analysis
Section 15 of the Commodity Exchange Act, as amended by the CFMA,
requires the Commission to consider the costs and benefits of its
action before promulgating a new regulation under the Act.\13\ The
Commission undertook such an analysis last year when adopting
amendments to Rules 4.13(a)(3) and (a)(4) to provide exemptive relief
from CPO registration.\14\ The amendments to Rule 4.13(a) adopted in
this final rulemaking do not affect nor alter the Commission's prior
analysis, and the Commission has further determined that its prior
analysis supports the adoption of such amendments to Rule 4.13(a).
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\13\ Section 15(a)(2) specifies that such costs and benefits
shall be evaluated in light of five broad areas of market and public
concern: Protection of market participants and the public;
efficiency, competitiveness, and financial integrity of futures
markets; price discovery; sound risk management practices; and other
public interest considerations. Because the amendments that update
address information relate to internal agency organization, the
Commission has determined that none of the considerations enumerated
in section 15(a) are applicable to such amendments. Furthermore, the
amendments that update references to the Commodity Exhange Act in
the Commission's rules do not revise any existing regulatory
requirement, and therefore do not change any existing cost or
benefit associated with such regulation.
\14\ 68 FR at 47230.
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C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (``PRA'') imposes certain
requirements on federal agencies (including the Commission) in
connection with their conducting or sponsoring any collection of
information as defined by the PRA.\15\ The rule amendments do not
require a new collection of information on the part of any entities
subject to such rule amendments. Accordingly, for purposes of the PRA,
the Commission certifies that these rule amendments will not impose any
new reporting or recordkeeping requirements.
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\15\ 44 U.S.C. 3501 et seq.
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Lists of Subjects
17 CFR Part 1
Brokers, Commodity futures, Reporting and recordkeeping
requirements.
17 CFR Part 4
Advertising, Commodity pool operators, Commodity trading advisors,
Commodity futures, Commodity options, Customer protection, Reporting
and Recordkeeping.
17 CFR Part 31
Leverage transactions; Reporting and recordkeeping requirements.
17 CFR Part 140
Authority delegations (Government agencies), Organization and
functions (Government agencies).
17 CFR Part 145
Confidential business information, Freedom of information.
17 CFR Part 190
Bankruptcy.
0
Accordingly, 17 CFR parts 1, 4, 31, 140, 145 and 190 are amended as
follows:
PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT
0
1. The authority citation for part 1 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 6h,
6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c, 13a,
13a-1, 16, 16a, 19, 21, 23, and 24, as amended by the Commodity
Futures Modernization Act of 2000, Appendix E of Pub. L. 106-554,
114 Stat. 2763 (2000).
Sec. 1.10 [Amended]
0
2. Section 1.10 is amended by:
[[Page 41426]]
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a. Removing from paragraph (c) the two parenthenticals that currently
read ``(except that a registrant under the jurisdiction of the
Commission's Western Regional Office must file such reports with the
Southwestern Regional Office)'' and ``(except that an applicant under
the jurisdiction of the Commission's Western Regional Office must file
such reports with the Southwestern Regional Office)'', and
0
b. Removing from paragraphs (e)(1), (e)(2), and (f)(2) the
parenthenticals that currently read ``(except that an applicant under
the jurisdiction of the Commission's Western Regional Office must file
such a notice with the Southwestern Regional Office)''.
Sec. 1.12 [Amended]
0
3. Section 1.12 is amended by removing from paragraph (i)(1) the
parenthentical that currently reads ``(except that an applicant,
registrant or self regulatory organization under the jurisdiction of
the Commission's Western Regional Office must file such notices and
reports with the Southwestern Regional Office)''.
Sec. 1.16 [Amended]
0
4. Section 1.16 is amended by removing from paragraph (d)(1) the words
``section 4d(2)'' wherever they appear in the paragraph and adding in
their place the words ``section 4d(a)(2)''.
Sec. 1.17 [Amended]
0
5. Section 1.17 is amended by removing from paragraph (h)(3)(vi) the
parenthentical that currently reads ``(except that a registrant under
the jurisdiction of the Commission's Western Regional Office shall file
such copies with the Southwestern Regional Office)''.
Sec. 1.23 [Amended]
0
6. Section 1.23 is amended by removing the words ``section 4d(2)'' and
adding in their place the words ``section 4d(a)(2)''.
Sec. 1.30 [Amended]
0
7. Section 1.30 is amended by removing the words ``section 4d(2)'' and
adding in their place the words ``section 4d(a)(2)''.
PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS
0
8. The authority citation for part 4 continues to read as follows:
Authority: 7 U.S.C. 1a, 2,4, 6(c), 6b, 6c, 6l, 6m, 6n, 6o, 12a
and 23.
0
9. Section 4.13 is amended by:
0
a. Revising paragraph (a)(3)(iii)(C) and paragraph (a)(3)(iii)(D), and
0
b. Adding new paragraph (a)(3)(iii)(E), to read as follows:
Sec. 4.13 Exemption from registration as a commodity pool operator.
(a) * * *
(3) * * *
(iii) * * *
(C) A ``knowledgeable employee,'' as that term is defined in Sec.
270.3c-5 of this title;
(D) A ``qualified eligible person,'' as that term is defined in
Sec. 4.7(a)(2)(viii)(A) of this chapter; or
(E) A person eligible to participate in a pool for which the pool
operator can claim exemption from registration under paragraph (a)(4)
of this section; and
* * * * *
PART 31--LEVERAGE TRANSACTIONS
0
10. The authority citation for part 31 continues to read as follows:
Authority: 7 U.S.C. 12a and 23, unless otherwise noted.
Sec. 31.13 [Amended]
0
11. Section 31.13 is amended by:
0
a. Removing from paragraph (c) the words ``section 4d(2)'' and adding
in their place the words ``section 4d(a)(2)'', and
0
b. Removing from paragraph (e) all of the text following the colon
until the end of the paragraph, and by removing the colon and adding a
period instead.
PART 140--ORGANIZATION, FUNCTIONS, AND PROCEDURES OF THE COMMISSION
0
12. The authority citation for part 140 continues to read as follows:
Authority: 7 U.S.C. 2 and 12a.
0
13. Section 140.2 is revised read as follows:
Sec. 140.2 Regional Offices--Regional Directors.
Each of the Regional offices described herein functions as set
forth in this section under the direction of a Regional Director, who
is delegated authority and responsibility for the enforcement of the
Act and administration of the programs of the Commission in the
particular Region.
(a) The Eastern Regional Office is located at 140 Broadway, New
York, New York, 10005 and is responsible for enforcement of the Act and
administration of programs of the Commission in the States of Alabama,
Connecticut, Delaware, Florida, Georgia, Kentucky, Maine, Maryland,
Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North
Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee,
Vermont, Virginia, and West Virginia.
(b) The Central Regional Office is located at 525 West Monroe
Street, Suite 1100, Chicago, Illinois 60661 and is responsible for
enforcement of the Act and administration of programs of the Commission
in the States of Illinois, Indiana, Michigan, Ohio and Wisconsin.
(c) The Southwestern Regional office is located at 4900 Main
Street, Suite 721, Kansas City, Missouri 64112, with a sub-office at
Room 510, Grain Exchange Building, Fourth Street and Fourth Avenue,
South, Minneapolis, Minnesota 55415, and is responsible for enforcement
of the Act and administration of the programs of the Commission in the
States of Alaska, Arizona, Arkansas, California, Colorado, Hawaii,
Idaho, Iowa, Kansas, Louisiana, Minnesota, Missouri, Montana, Nebraska,
Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota,
Texas, Utah, Washington, and Wyoming.
Sec. 140.99 [Amended]
0
14. Section 140.99 is amended by removing the second of the two
paragraphs that are currently both designated (d)(2).
PART 145--COMMISSION RECORDS AND INFORMATION
0
15. The authority citation for Part 145 continues to read as follows:
Authority: Pub. L. 99-570, 100 Stat. 3207; Pub. L. 89-554, 80
Stat. 383; Pub. L. 90-23, 81 Stat. 54; Pub. L. 98-502, 88 Stat.
1561-1564 (5 U.S.C. 552); Sec. 101(a), Pub. L. 93-463, 88 Stat. 1389
(5 U.S.C. 4a(j)); unless otherwise noted.
0
16. Section 145.6 is amended by revising paragraph (a) to read as
follows:
Sec. 145.6 Commission offices to contact for assistance; registration
records available.
(a) Whenever this part directs that a request be directed to the
FOI, Privacy and Sunshine Acts compliance staff at the principal office
of the Commission in Washington, DC, the request shall be made in
writing and shall be addressed or otherwise directed to the Assistant
Secretary for FOI, Privacy and Sunshine Acts Compliance, Office of the
Secretariat, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street, NW., Washington, DC 20581. Requests for
public records directed to a regional office of the Commission pursuant
to Sec. Sec. 145.0(c) and 145.2 should be sent to:
[[Page 41427]]
Commodity Futures Trading Commission, 140 Broadway, New York, New
York 10005, Telephone: (646) 746-9700
Commodity Futures Trading Commission, 525 West Monroe Street, Suite
1100 North, Chicago, Illinois 60661, Telephone: (312) 596-0700
Commodity Futures Trading Commission, 510 Grain Exchange Building,
Minneapolis, Minnesota 55415, Telephone: (612) 370-3255
Commodity Futures Trading Commission, 4900 Main Street, Suite 721,
Kansas City, Missouri 64112, Telephone: (816) 931-7600
* * * * *
PART 190--BANKRUPTCY
0
17. The authority citation for part 190 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 4a, 6c, 6d, 6g, 7a, 12, 19, and 24,
and 11 U.S.C. 362, 546, 548, 556, and 761-766, unless otherwise
noted.
Sec. 190.07 [Amended]
0
18. Section 190.07 is amended by removing from paragraph (b)(3)(v) the
words ``section 4d(2)'' and adding in their place the words ``section
4d(a)(2)''.
Issued in Washington, DC, on July 1, 2004, by the Commission.
Catherine D. Dixon,
Assistant Secretary of the Commission.
[FR Doc. 04-15523 Filed 7-8-04; 8:45 am]
BILLING CODE 6351-01-P