[Code of Federal Regulations]
[Title 17, Volume 1]
[Revised as of April 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR31.28]

[Page 379-380]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 31_LEVERAGE TRANSACTIONS--Table of Contents
 
Sec.  31.28  Self-regulatory organization adoption and surveillance of 
minimum financial, cover, segregation and sales practice requirements.

    (a) Each self-regulatory organization must adopt, and submit for 
Commission approval, rules prescribing minimum financial, cover, 
segregation and sales practice, and related reporting requirements for 
all its members who are registered leverage transaction merchants. Each 
self-regulatory organization shall submit for Commission approval any 
modification or other amendments to such rules. Such requirements must 
be the same as, or more stringent than, those contained in this part 31 
and the definition of adjusted net capital must be the same as that 
prescribed in Sec.  31.9(b)(4) of this part.
    (b) Each self-regulatory organization which has members who are 
registered leverage transaction merchants shall have in effect and 
enforce rules submitted to the Commission pursuant to paragraph (a) of 
this section and approved by the Commission.
    (c) Any two or more self-regulatory organizations may file with the 
Commission a plan for delegating to a designated self-regulatory 
organization, for any registered leverage transaction merchant which is 
a member of more than one such self-regulatory organization, the 
responsibility of:
    (1) Monitoring and auditing for compliance with the minimum 
financial, cover, segregation and sales practice, and related reporting 
requirements adopted by such self-regulatory organizations in accordance 
with paragraph (a) of this section; and
    (2) Receiving the reports necessitated by such minimum financial, 
cover, segregation and sales practice, and related reporting 
requirements.
    (d) Any plan filed under this section may contain provisions for the 
allocation of expenses reasonably incurred by the designated self-
regulatory organization among the self-regulatory organizations 
participating in such a plan.
    (e) A plan's designated self-regulatory organization must report to 
that plan's other self-regulatory organizations any violation of such 
other self-regulatory organizations' rules and regulations for which the 
responsibility to monitor, audit or examine has been delegated to such 
designated self-regulatory organization under this section.
    (f) The self-regulatory organizations may, among themselves, 
establish programs to provide access to any necessary information.
    (g) After appropriate notice and opportunity for comment, the 
Commission may, by written notice, approve such a plan, or any part of 
the plan, if it finds that the plan, or any part of it:
    (1) Is necessary or appropriate to serve the public interest;
    (2) Is for the protection and in the interest of leverage customers;
    (3) Reduces multiple monitoring and auditing for compliance with the 
minimum financial, cover, segregation and sales practice, and related 
reporting requirements of the self-regulatory organizations submitting 
the plan for any leverage transaction merchant which is a member of more 
than one self-regulatory organization;
    (4) Reduces multiple reporting of the information necessitated by 
such minimum financial, cover, segregation and sales practice, and 
related reporting requirements by any leverage transaction merchant 
which is a member of more than one self-regulatory organization;
    (5) Fosters cooperation and coordination among the self-regulatory 
organizations; and

[[Page 380]]

    (6) Does not hinder the development of a registered futures 
association under section 17 of the Act.
    (h) After the Commission has approved a plan or part of one under 
paragraph (g) of this section, a self-regulatory organization relieved 
of responsibility must notify each of its members which is subject to 
such a plan:
    (1) Of the limited nature of its responsibility for such a member's 
compliance with its minimum financial, cover, segregation and sales 
practice, and related reporting requirements; and
    (2) Of the identity of the designated self-regulatory organization 
which has been delegated responsibility for such a member.
    (i) The Commission may at any time, after appropriate notice and 
opportunity for hearing, withdraw its approval of any plan or part of 
one established under this section, if such plan or part of one ceases 
to effectuate adequately the purposes of section 19 of the Act or of 
this section.
    (j) Whenever a registered leverage transaction merchant holding 
membership in a self-regulatory organization ceases to be a member in 
good standing of that self-regulatory organization, such self-regulatory 
organization must, on the same day that event takes place, give 
telegraphic notice of that event to the principal office of the 
Commission in Washington, DC and send a copy of that notification to 
such leverage transaction merchant.
    (k) Nothing in this section shall preclude the Commission from 
examining any leverage transaction merchant for compliance with the 
minimum financial, cover, segregation and sales practice, and related 
reporting requirements to which such leverage transaction merchant is 
subject.
    (l) In the event a plan is not filed and/or approved for each 
registered leverage transaction merchant which is a member of more than 
one self-regulatory organization, the Commission may design and, after 
notice and opportunity for comment, approve a plan for those leverage 
transaction merchants which are not the subject of an approved plan 
(under paragraph (g) of this section), delegating to a designated self-
regulatory organization the responsibilities described in paragraph (c) 
of this section.

[54 FR 41083, Oct. 5, 1989]