[Federal Register Volume 69, Number 191 (Monday, October 4, 2004)]
[Notices]
[Pages 59286-59287]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2467]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-50461; File No. SR-NFA-2004-01]
Self-Regulatory Organizations; National Futures Association;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
and Amendment No. 1 Thereto Adopting Bylaw 1508 Regarding Security
Futures Agreements
September 28, 2004
Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-7 thereunder,\2\ notice is hereby given that
on September 7, 2004, the National Futures Association (``NFA'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as 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, as amended,
from interested persons. On September 3, 2004, the NFA filed the
proposed rule change with the Commodity Futures Trading Commission
(``CFTC'') for approval and invoked the ``ten-day'' provision of
Section 21(j) of the Commodity Exchange Act \3\ (``CEA''). On September
17, 2004, the CFTC determined not to review the proposed rule change
and permitted NFA to make the proposed rule change effective on
September 17, 2004.\4\ On September 27, 2004, NFA filed Amendment No. 1
to the proposed rule change.\5\
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\1\ 15 U.S.C. 78s(b)(7).
\2\ 17 CFR 240.19b-7.
\3\ 7 U.S.C. 21(j).
\4\ See letter from Lawrence B. Patent, Deputy Director,
Compliance and Registration Section, Division of Clearing and
Intermediary Oversight, CFTC to Thomas W. Sexton, III, General
Counsel, NFA, dated September 17, 2004.
\5\ See letter from Kathryn Page Camp, Associate General
Counsel, NFA, to John C. Roeser, Assistant Director, Division of
Market Regulation (``Division''), Commission, dated September 27,
2004. Amendment No. 1 clarifies the proposal. Amendment No. 1 is
incorporated into this notice.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NFA proposes to adopt NFA Bylaw 1508 regarding securities futures
agreements. The text of the proposed rule change appears below. New
language is in italics.
* * * * *
Bylaws
* * * * *
Bylaw 1508. Security Futures Agreements.
Staff may, with the approval of the Executive Committee, enter into
one or more agreements with one or more designated contract markets to
provide regulatory services to NFA to assist NFA in discharging its
obligations under Sections 15A(k) and 19(g) of the Securities Exchange
Act of 1934. Any action taken by a designated contract market, or its
employees or authorized agents, acting on behalf of NFA pursuant to a
regulatory services agreement shall be deemed to be an action taken by
NFA; provided, however, that nothing in this provision shall affect the
oversight of the designated contract market by the Commodity Futures
Trading
[[Page 59287]]
Commission. Notwithstanding the fact that NFA may enter into one or
more regulatory services agreements regarding security futures, NFA
shall retain ultimate legal responsibility for, and control of, its
self-regulatory responsibilities under the Securities Exchange Act of
1934, and any such regulatory services agreement shall so provide.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
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
Under the Act, NFA is required, as a limited purpose national
securities association, to adopt and enforce SFP sales practice rules
for notice-registered broker-dealers. Pursuant to CFTC Regulation
1.52(b),\6\ NFA and the futures exchanges have entered into a plan that
delegates auditing responsibilities for joint members to a designated
futures self-regulatory organization (``DSRO''). NFA is not the DSRO
for twenty-one exchange-member FCMs that are notice-registered as
broker-dealers and, therefore, NFA is not responsible for auditing the
futures activities of these firms.
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\6\ 17 CFR 1.52(b).
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NFA is, however, responsible under the Act for auditing the
security futures activities of these notice-registered broker-dealers.
In order to minimize the number of audits these firms are subject to,
NFA Bylaw 1508 authorizes the NFA to enter into a regulatory services
agreement with the futures exchanges that audit them. The bylaw also
provides that NFA retains full responsibility for its obligations under
the Exchange Act. If the futures exchanges do not conduct the
appropriate audit steps or report potential violations to NFA, then NFA
will be responsible to the Commission for those failures.
2. Statutory Basis
The rule change is authorized by, and consistent with Section
15A(k) of the Act.\7\
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\7\ 15 U.S.C. 78o-3(k).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NFA believes that the proposed rule change will not impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act and the CEA. In fact, NFA
believes that the rule change will lessen the burdens on competition by
avoiding duplicative examinations of notice-registered broker-dealers.
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
The proposed rule change became effective on September 17, 2004.
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.\8\
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\8\ 15 U.S.C. 78s(b)(1). For purposes of calculating the 60-day
abrogation period, the Commission considers the period to commence
on September 27, 2004, the date NFA filed Amendment No. 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);
Send an e-mail to [email protected]. Please include
File Number SR-NFA-2004-01 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-NFA-2004-01. 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 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 available publicly. All submissions should refer to File Number
SR-NFA-2004-01 and should be submitted on or before October 25, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(75).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-2467 Filed 10-1-04; 8:45 am]
BILLING CODE 8010-01-P