[Federal Register: March 5, 2009 (Volume 74, Number 42)]
[Rules and Regulations]
[Page 9568-9570]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05mr09-3]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 4
RIN 3038-AC 67
Electronic Filing of Disclosure Documents
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rule.
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SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC)
is amending its regulations applicable to the filing of Disclosure
Documents by commodity pool operators (CPOs) and commodity trading
advisors (CTAs) with the National Futures Association (NFA). In
response to a petition from NFA, the CFTC is requiring that CPOs and
CTAs be required to file their Disclosure Documents electronically with
NFA (Amendments).
DATES: Effective Date: April 6, 2009.
FOR FURTHER INFORMATION CONTACT: Barbara S. Gold, Associate Director,
Compliance and Registration Section, Division of Clearing and
Intermediary Oversight, Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581,
telephone number: (202) 418-5450; facsimile number: (202) 418-5528; and
electronic mail: bgold@cftc.gov.
SUPPLEMENTARY INFORMATION:
I. Background
A. CPO and CTA Disclosure Documents
Part 4 of the Commission's regulations \1\ governs the operations
and activities of CPOs and CTAs. Regulations 4.21 and 4.31 respectively
require each CPO and CTA registered or required to be registered with
the Commission to deliver a Disclosure Document to prospective pool
participants and clients. Regulations 4.24 and 4.25 specify the
informational content of the CPO Disclosure Document, and Regulations
4.34 and 4.35 specify the informational content for the CTA Disclosure
Document. Regulations 4.26 and 4.36 respectively pertain to the use,
amendment and filing of CPO and CTA Disclosure Documents. Specifically,
under Regulations 4.26(d) and 4.36(d), the CPO or CTA must file one
copy of the Disclosure Document, and any supplements and amendments
thereto, with NFA.\2\
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\1\ 17 CFR Part 4 (2008). The Commission's regulations can be
accessed through the CFTC's Web site, www.cftc.gov.
\2\ NFA is a registered futures association pursuant to Section
17 of the Commodity Exchange Act (Act), 7 U.S.C. 21 (2000). The Act
also may be accessed through the CFTC's Web site.
The Commission previously authorized NFA to conduct reviews of
Disclosure Documents filed by CPOs and CTAs pursuant to Regulations
4.26(d) and 4.36(d). See 62 FR 52088 (Oct. 6, 1997).
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B. The Proposing Release
On November 26, 2008, the Commission proposed to amend Regulations
4.26 and 4.36 in order to require that CPOs and CTAs file Disclosure
Documents electronically through NFA's electronic Disclosure Document
filing system (Proposing Release).\3\ This action was in response to a
petition filed by NFA with the Commission (Petition).\4\
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\3\ 73 FR 71968. The Proposing Release may be accessed through
the CFTC's Web site, at http://www.cftc.gov/stellent/groups/public/
@lrfederalregister/documents/file/e8-28177a.pdf.
\4\ NFA filed the Petition with the Commission on July 21, 2008.
The Commission previously authorized NFA to accept notices of
exemptions or exclusions claimed under Part 4 and required that
these notices be filed electronically. See 62 FR 52088 and 72 FR
1658 (Jan. 16, 2007), respectively.
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In the Petition, under ``Supporting Arguments,'' NFA explained that
although it had developed a new Internet-based Disclosure Document
electronic filing system ``that will be significantly less resource
intensive while also streamlining and enhancing the filing process for
registrants,'' \5\ absent an electronic filing requirement these
proposed benefits would not be realized. In the Proposing Release, the
Commission noted also NFA's representations that the system is designed
to be easy and secure; it can be accessed through any public internet
site; and CPOs and CTAs will access the system ``using the same
designated login and password that they currently use for NFA's Online
Registration System.'' \6\ The Commission further explained that:
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\5\ 73 FR at 71968.
\6\ Id.
NFA's process for the electronic filing of Disclosure Documents
will have two components. One of those components will require CPOs
and CTAs to electronically submit their Disclosure Documents, as
well as any amendments and supplements thereto. The other of these
components will require CPOs and CTAs to enter from their Disclosure
Documents certain key information on their operations and activities
into a standardized form accessed through NFA's Web site.\7\
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\7\ The Commission noted that, among other things, this key
information concerns identification of contact persons,
relationships with futures commission merchants or introducing
brokers, and the past performance history and related data for the
offered pool or trading program. 73 FR at 71969 n. 6.
In light of the foregoing, the Commission proposed to amend
Regulations 4.26(d) and 4.36(d) to require that any documents required
to be filed thereunder be filed electronically with NFA, pursuant to
NFA's electronic filing procedures. The Commission emphasized, however,
that the proposed amendments, if adopted, would not impact the delivery
of Disclosure Documents to prospective pool participants and clients,
which CPOs and CTAs could continue to provide through hardcopy
distribution via postal mail or electronically if the intended
recipient consented thereto.\8\
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\8\ 73 FR at 71969. See Regulations 4.21(b) for CPOs and 4.31(b)
for CTAs.
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II. Final Action
A. Responses to the Comments
The Commission received one comment letter, from a committee of a
bar association whose members consist of attorneys who represent CPOs
and CTAs (Committee). The Committee expressed concern that neither the
Proposing Release nor the Petition contained detail on the information
that would be required to be filed concurrent with the filing of the
Disclosure Document or the uses to which that information would be put.
In response, the Commission notes that the Petition states ``the filing
process includes a series of questions that will assist in identifying
the type of filing as well as provide important background information
to assist NFA staff with the analysis of the document itself''--which,
the Commission believes, will be in furtherance of NFA's compliance and
enforcement programs. Moreover, as the Commission previously stated in
the Proposing Release, CPOs and CTAs will be entering information
directly from their Disclosure Documents.\9\ Further,
[[Page 9569]]
the Commission has been advised that NFA staff spoke with NFA's CPO/CTA
Advisory Committee in advance of the filing of the Petition, and the
Advisory Committee was supportive of the electronic filing system for
CPO and CTA Disclosure Documents.
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\9\ 73 FR 71969.
In anticipation of the Commission's action today, on January 22,
2009, NFA presented a web seminar on the electronic Disclosure
Document filing system--which seminar is now available for ``on
demand'' viewing on NFA's Web site, www.nfa.futures.org. Page 7 on
the ``on demand'' document confirms the Commission's previous
statement with the text that:
Before you start, you should have a copy of the disclosure
document you plan to file available since the system will require
you to enter certain information (e.g., performance data, business
relationships) directly from the document you are filing.
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In light of the foregoing, the Commission has determined to adopt
the amendments to Regulations 4.26(d) and 4.36(d) as proposed.
B. Other Action
Also in response to the Petition, and in the absence of any
comments, the Commission has added the word ``each'' before the words
``trading program'' in paragraph (d)(1) of Regulation 4.36 to make that
paragraph read parallel to the phrase ``each trading program'' in
paragraph (d)(2) of Regulation 4.36.\10\
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\10\ See 73 FR 71968 n. 3.
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III. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) \11\ requires that agencies,
in proposing rules, consider the impact of those rules on small
businesses. The Commission previously has established certain
definitions of ``small entities'' to be used by the Commission in
evaluating the impact of its rules on such entities in accordance with
the RFA.\12\ With respect to CPOs, the Commission previously has
determined that a registered CPO is not a small entity for the purpose
of the RFA.\13\ As for CTAs, the Commission previously has stated that
it would evaluate within the context of a particular rule proposal
whether all or some affected CTAs would be considered to be small
entities and, if so, the economic impact on them of the particular
rule.\14\ The Commission believes that the Amendments will not place
any significant economic burdens, whether new or additional, on CPOs
and CTAs who will be affected by them. This is because while the
Amendments will require these CPOs and CTAs to have access to and a
certain degree of technical knowledge to file Disclosure Documents
electronically and to enter the required information, they will access
the system using the same designated login and password that they
currently use for registration purposes and they will be entering the
information directly from their Disclosure Documents. The Commission
did not receive any comments relative to its analysis of the RFA in the
Proposing Release.
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\11\ 5 U.S.C. 601 et seq.
\12\ See 47 FR 18618 (Apr. 30, 1982).
\13\ Id. at 18619.
\14\ Id. at 18620.
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B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) \15\ imposes certain
requirements on federal agencies (including the Commission) in
conducting or sponsoring any collection of information as defined by
the PRA. The Amendments change the manner in which CPOs and CTAs file
Disclosure Documents with NFA; they do not affect the substance or
frequency of those filings. The Amendments do, however, authorize the
separate collection from CPOs and CTAs of certain information from the
Disclosure Documents CPOs and CTAs must now file electronically.
Accordingly, pursuant to the PRA, the Commission submitted a copy of
the PRA section of the Proposing Release to the Office of Management
and Budget (OMB) for its review.\16\
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\15\ 44 U.S.C. 3501 et seq.
\16\ See 73 FR 71969 for the PRA section of the Proposing
Release.
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The Commission received one comment on its analysis of the PRA in
the Proposing Release, from the Committee. For the reasons provided in
the Proposing Release and above in this release, the Commission
continues to believe that the Amendments change the manner, but not the
substance or frequency, of the filing of Disclosure Documents by CPOs
and CTAs.
C. Cost-Benefit Analysis
Section 15(a) of the Act \17\ requires the Commission to consider
the costs and benefits of its action before issuing a new regulation
under the Act. By its terms, Section 15(a) does not require the
Commission to quantify the costs and benefits of a new regulation or to
determine whether the benefits of the regulation outweigh its costs.
Rather, Section 15(a) simply requires the Commission to ``consider the
costs and benefits'' of its action.
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\17\ 7 U.S.C. 19(a).
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Section 15(a) further specifies that costs and benefits shall be
evaluated in light of five broad areas of market and public concern,
enumerated below. Accordingly, the Commission could in its discretion
give greater weight to any one of the five enumerated areas and could
in its discretion determine that, notwithstanding its costs, a
particular rule was necessary or appropriate to protect the public
interest or to effectuate any of the provisions or to accomplish any of
the purposes of the Act.
The Commission did not receive any comments relative to its cost-
benefit analysis in the Proposing Release.
List of Subjects in 17 CFR Part 4
Advertising, Brokers, Commodity futures, Commodity pool operators,
Commodity trading advisors, Consumer protection, Reporting and
recordkeeping requirements.
0
For the reasons presented above, the Commission hereby amends Chapter I
of Title 17 of the Code of Federal Regulations as follows:
PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS
0
1. The authority citation for part 4 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 4, 6b, 6c, 6l, 6m, 6n, 6o, 12a, and
23.
0
2. Revise paragraphs (d)(1) and (2) of Sec. 4.26 to read as follows:
Sec. 4.26 Use, amendment and filing of Disclosure Document.
* * * * *
(d) * * *
(1) The commodity pool operator must electronically file with the
National Futures Association, pursuant to the electronic filing
procedures of the National Futures Association, the Disclosure Document
and, where used, profile document for each pool that it operates or
that it intends to operate not less than 21 calendar days prior to the
date the pool operator first intends to deliver such Document or
documents to a prospective participant in the pool; and
(2) The commodity pool operator must electronically file with the
National Futures Association, pursuant to the electronic filing
procedures of the National Futures Association, the subsequent
amendments to the Disclosure Document and, where used, profile document
for each pool that it operates or that it intends to operate within 21
calendar days of the date upon which the pool operator first knows or
has reason to know of the defect requiring the amendment.
0
3. Revise paragraph (d) of Sec. 4.36 to read as follows:
Sec. 4.36 Use, amendment and filing of Disclosure Document.
* * * * *
(d)(1) The commodity trading advisor must electronically file with
the National Futures Association, pursuant to the electronic filing
procedures of the
[[Page 9570]]
National Futures Association, the Disclosure Document for each trading
program that it offers or that it intends to offer not less than 21
calendar days prior to the date the trading advisor first intends to
deliver the Document to a prospective client in the trading program;
and
(2) The commodity trading advisor must electronically file with the
National Futures Association, pursuant to the electronic filing
procedures of the National Futures Association, the subsequent
amendments to the Disclosure Document for each trading program that it
offers or that it intends to offer within 21 calendar days of the date
upon which the trading advisor first knows or has reason to know of the
defect requiring the amendment.
Issued in Washington, DC on February 27, 2009 by the Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. E9-4740 Filed 3-4-09; 8:45 am]
BILLING CODE 6351-01-P