[Federal Register Volume 75, Number 151 (Friday, August 6, 2010)]
[Notices]
[Pages 47666-47667]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19372]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62624; File No. SR-NFA-2010-02]
Self-Regulatory Organizations; National Futures Association;
Notice of Filing and Immediate Effectiveness of Proposed Changes to
Interpretive Notice Entitled ``NFA Compliance Rule 2-30(b): Risk
Disclosure Statement for Security Futures Contracts''
August 2, 2010.
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 July 8, 2010, 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 substantially prepared by the NFA. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons. NFA also has filed this proposed rule change
concurrently with the Commodity Futures Trading Commission (``CFTC'').
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(7).
\2\ 17 CFR 240.19b-7.
---------------------------------------------------------------------------
On July 8, 2010, NFA requested that the CFTC make a determination
that review of the proposed rule change of NFA is not necessary. On
July 26, 2010, the CFTC notified NFA of its determination not to review
the proposed rule change.\3\
---------------------------------------------------------------------------
\3\ See letter from William Penner, Deputy Director, CFTC to
Thomas W. Sexton, Senior Vice President and General Counsel, NFA,
dated July 26, 2010.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Description of the Proposed Rule
Change
The amendment to the Interpretive Notice entitled ``NFA Compliance
Rule 2-30(b): Risk Disclosure Statement for Security Futures
Contracts'' updates the document to reflect the treatment of dividends
for a new class of security futures contracts that did not exist at the
time the Interpretive Notice was adopted. Specifically, the amendment
indicates that price adjustments for ordinary dividends may be made for
a specified class of security futures contracts based on the rules of
the exchange and the clearing organization.
The text of the proposed rule change is available on NFA's Web site
at http://www.nfa.futures.org, at the principal office of NFA 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 included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. 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
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 under
Section 15(b)(11) of the Act.\5\ NFA Interpretive Notice entitled ``NFA
[[Page 47667]]
Compliance Rule 2-30(b): Risk Disclosure Statement for Security Futures
Contracts'' applies to all NFA Members and Associates, including those
who are registered as security futures brokers or dealers under Section
15(b)(11).
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78o-3(k).
\5\ 15 U.S.C. 78o(b)(11).
---------------------------------------------------------------------------
NFA Compliance Rule 2-30(b) requires NFA Members and Associates who
are registered as brokers or dealers under Section 15(b)(11) of the Act
to provide a Risk Disclosure statement for security futures contracts
to a customer at or before the time the Member approves the account to
trade security futures products. The Risk Disclosure statement is a
uniform statement that was jointly developed in 2002 by NFA, the
National Association of Securities Dealers, Inc. (now known as the
Financial Industry Regulatory Authority, Inc.), and a number of
securities and futures exchanges. Among other things, this Risk
Disclosure statement describes the features of a security futures
product as those features existed in 2002. Specifically, the Risk
Disclosure statement indicates that there are generally no adjustments
for dividends because the dividends are accounted for in the pricing of
the security futures.
Recently, One Chicago LLC (OCX), an exchange listing security
futures products, developed and plans to list a new class of security
futures products whose dividend feature differs from the dividend
feature described in the Risk Disclosure statement. In particular, the
new product will adjust for any declared dividends because the dividend
is not accounted for in the pricing of the security futures product. In
order to ensure that the Risk Disclosure statement accurately reflects
the dividend feature of this new product, the Interpretive Notice,
which sets forth the Risk Disclosure statement, has been amended to
indicate that price adjustments for ordinary dividends may be made for
a specified class of security futures contracts based on the rules of
the exchange and the clearing organization.
Amendments to the Interpretive Notice entitled ``NFA Compliance
Rule 2-30(b): Risk Disclosure Statement for Security Futures
Contracts'' were previously filed with the SEC in SR-NFA-2002-05, SR-
NFA-2002-06 and SR-NFA-2007-07.
2. Statutory Basis
The rule change is authorized by, and consistent with, Section
15A(k)(2)(B) of the Act.\6\ That Section requires NFA to have rules
that are designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest, which includes
rules governing sales practices of security futures products. The
proposed rule change accomplishes this by ensuring that the Risk
Disclosure Statement for Security Futures Contracts, which NFA Members
registered as a broker or dealer under Section 15(b)(1) of the Exchange
Act are required to provide to a customer at or before the time the
Member approves the account to trade security futures products,
accurately describes the dividend features of all classes of security
futures products.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78o-3(k)(2)(B).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change will have little or no impact on
competition since the amendments to the Interpretive Notice do not
impose any new requirements on Members. Rather, the amendments merely
revise the language in the Interpretive Notice to accurately reflect
the dividend feature of a class of security futures products that was
not available at the time the Interpretive Notice was adopted.
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 its 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
On July 26, 2010, the CFTC notified NFA that it had determined not
to review the proposed rule change and, therefore, NFA is permitted to
make the amendments effective as of this date.\7\ At any time 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.
---------------------------------------------------------------------------
\7\ See note 3.
---------------------------------------------------------------------------
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 [email protected]. Please include
File Number SR-NFA-2010-02 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NFA-2010-02. 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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. 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 publicly available. All
submissions should refer to File Number SR-NFA-2010-02 and should be
submitted on or before August 27, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
---------------------------------------------------------------------------
\8\ 17 CFR 200.30-3(a)(73).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19372 Filed 8-5-10; 8:45 am]
BILLING CODE 8010-01-P