« AnteriorContinuar »
erwise, the authority to perform all functions specified in Subparts B through D to the persons authorized to perform them thereunder.
(b) Nothing in this subpart shall prevent the Commission from exercising the authority delegated therein.
(c) The Commission reserves to itself the decision in any case to proceed by order, upon notice but without a hearing, to deny, suspend, condition or restrict the registration of any person pursuant to section 8a(2) of the Act.
(d) Nothing in this part shall affect the authority of the Commission to institute a proceeding pursuant to section 6(b) of the Act.
(e) The Commission may, by order of delegation, authorize a futures association registered pursuant to section 17 of the Act to perform all or any portion of the registration functions under Subparts B through D in accordance with rules or procedures adopted by such futures association and submitted to the Commission pursuant to section 17(j) of the Act and subject to the applicable provisions of the Act.
forcement of the Act and the various federal and state securities acts.
At this time, the Commission cannot anticipate all of the circumstances under which it may elect not to exercise its authority under sections 8a(2)-8a(4). Until the Commission has gained experience with these provisions of the Act, such determinations generally must be made on a case-bycase basis. Nonetheless, the Commission has identified two paragraphs of section 8a(2) of the Act which it has determined to interpret more narrowly than required.
Section 8a(2)(C). Section 8a(2) of the Act authorizes the Commission to deny, condition, suspend or restrict the registration of any person "upon notice, but without a hearing" and to revoke the registration of any person “with such hearing as may be appropriate,” if such person is subject to one or more of the disqualifications described in paragraphs (A)-(H). Section 8a(2)(C) authorizes the Commission to affect the registration of any person:
“if such person is permanently or temporarily enjoined by order, judgment, or decree of any court of competent jurisdiction . . ., including an order entered pursuant to an agreement of settlement to which the Commission or any Federal or State agency or other governmental body is a party, from (i) acting as a futures commission merchant, introducing broker, floor broker, commodity trading advisor, commodity pool operator, associated person of any registrant under the Act, securities broker, securities dealer, municipal securities broker, municipal securities dealer, transfer agent, clearing agency, securities information processor, investment advisor, investment company, or affiliated person or employee of any of the foregoing or (ii) engaging in or continuing any activity involving any transaction in or advice concerning contracts of sale of a commodity for future delivery, concerning matters subject to Commission regulation under section 4c or 19 of the Act, or concerning securities;"
The Commission believes that a person enjoined from acting in a certain capacity as described in section 8a(2)(C)(i), even if the order of injunction is entered into pursuant to an agreement of settlement, similarly should be prohibited from acting in any other capacity which requires registration with the Commission. Therefore, the Commission does not intend to limit its authority under section 8a(2)(C)(i) of the Act.
However, the Commission is also aware that it has often initiated proceedings in which the sole relief sought was an injunction from engaging in certain conduct. In such circumstances, the Commission has accepted offers of settlement which provide that the findings set forth in the settlement
(Secs. 2(a)(1), 4, 45, 40, 4d, 40, 41, 4g, 4h, 4i, 4k, 4m, 4n, 40, 4p, 6, 8, 8a, 14, 15, 17 and 19 of the Commodity Exchange Act, 7 U.S.C. 2 and 4, 6, 60, 60, 60, 6e, 68, 6g, 6h, 61, 6k, 6m, 6n, 60, 6p, 8, 9, 9a and 13b, 12, 12a, 18, 19, 21 and 23 (1982); 5 U.S.C. 552 and 552b) (49 FR 8224, Mar. 5, 1984)
APPENDIX A-INTERPRETATIVE STATEMENT WITH RESPECT TO SECTION 8a(2) (C) AND (E) AND SECTION 8a(3) (J) AND (M) OF THE COMMODITY EXCHANGE Аст
Section 8a(2) (C) and (E) The provisions of sections 8a(2)-8a(4) of the Commodity Exchange Act (“Act") establish a system of statutory disqualifications pursuant to which the Commission may find an applicant or registrant unfit for registration and vest the Commission with wide discretion to deny, condition, suspend, restrict or revoke the registration of any person subject to one or more of the disqualifications set forth therein. The Commission recognizes that the full exercise of its authority under these provisions of the Act may have unintended results. In particular, the exercise of such authority may, in certain cases, impede the efficient en
will not form the sole basis for the denial, suspension or revocation of such person's registration with the Commission. The Commission does not wish to impede the resolution by negotiated settlement of such proceedings. Therefore, the Commission has determined that it will not exercise its authority under section 8a(2)(C)(ii) of the Act with respect to any person temporarily or permanently enjoined by agreement of settlement from engaging in any conduct described in that paragraph, if the agreement of settlement clearly restricts the use of such order of injunction or any findings set forth therein in subsequent or collateral proceedings.
Thus, a provision in the agreement of settlement to the effect, inter alia, that the findings set forth in the agreement will not form the sole basis upon which the registration of such person may be affected will preclude a collateral proceeding under section 8a(2)(C)(ii) where the sole basis for such proceeding is the agreement of settlement. Unless otherwise precluded in the agreement of settlement, however, the person will be collaterally estopped from denying the findings set forth therein, whether or not admitted, in any other subsequent or collateral proceeding and such findings may, in conjunction with the findings in such subsequent or collateral proceeding, form a basis for affecting the registration of that person or imposing such other sanctions as may be deemed appropriate.
Section 8a(2)(E). Section 8a(2)(E) of the Act authorizes the Commission to affect the registration of any person:
"if such person, within ten years preceding the filing of the application or at any time thereafter, has been found by any court of competent jurisdiction, by the Commission or any Federal or State agency or other governmental body, or by agreement of settlement to which the Commission or any Federal or State agency or other governmental body is a party, (i) to have violated any provision of this Act, (the securities acts), or any similar statute of a state or foreign jurisdiction, or any rule, regulation, or order under such statutes ... where such violation involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of funds, securities or property, forgery, counterfeiting, false pretenses, burglary, or gambling, or (ii) to have willfully aided, abetted, counseled, commanded, induced, or procured such violation by any other person;"
As in section 8a(2)(C)(ii), the Commission will not exercise its authority under section 8a(2)(E) of the Act with respect to any person subject to a statutory disqualification thereunder, if the findings are part of an agreement of settlement which clearly restricts the use of such findings by inclu
sion of a provision to the effect, inter alia. that the findings set forth in the agreement will not form the sole basis upon which the registration of such person may be affected
Section 2(a)(1)(A) of the Act, inter alia codifies the legal concept of respondant superior by providing that a futures commission merchant, introducing broker, commod ity trading advisor, commodity pool operator or leverage transaction merchant may be held liable for the conduct of an associated person sponsored by such registrant. Thus, findings of the type described in paragraph (E) may be entered against a regis trant solely because such registrant is re sponsible, under section 2(a)(1)(A) of the Act, for the conduct of its associated persons. As prescribed in $ 3.57 of the Commission's regulations, however, the Commission will not exercise its authority under section 8a(2)(E) to affect the registration of such registrant, if respondant superior is the sole basis for finding that the registrant is subject to a statutory disqualification.
The Commission notes that section 8a(3)(C) and 8a(4) authorize the Commission to affect the registration of a person is it is found, after notice and opportunity for a hearing, that such person "failed reasonably to supervise another person, who is subject to such person's supervision, with a view to preventing violations of this Act or (the securities acts), or of any of the rules, regulation or orders thereunder, and the person subject to supervision committed such a violation *" In this connection, the Commission believes that any proceeding to affect the registration of a registrant against which findings have been made solely pursuant to section 2(a)(1)(A) of the Act is more appropriately initiated under the provisions of section 8a(3)(C) and 8a(4).
Section 8a(2)(E) may also be interpreted to authorize the Commission to affect the registration of any person if the findings de scribed therein are made in a proceeding ini. tiated by a private party either in a court of law or in a reparations proceeding under section 14 of the Act. At the present time, however, the Commission does not intend to exercise its authority under section 8a(2)(E) on the basis of such findings. The Commission believes that such proceedings are in
Specifically, section 2(a)(1)(A) of the Act provides in part, that the “act, omission or failure of any official, agent, or other person acting for any individual, association, partnership, corporation, or trust within the scope of his employment or office shall be deemed the act, omission, or failure of such individual, association, partnership, corporation, or trust as well as of such official, agent, or other person.” 7 U.S.C. 4 (1982).
anded primarily to provide restitution to ne customer and are not intended to be puitive in nature. Therefore, it may not be ppropriate to use findings in such proceedigs to affect the registration of any person nder section 8a(2)(E).
At the same time, however, such findings nay form the basis of a proceeding against
person under the provisions of section a(3)(M) and 8a(4), which authorize the Commission, after notice and opportunity or a hearing, to deny, condition, suspend, estrict or revoke the registration of any >erson if “there is other good cause." Simiarly, such findings may form the basis for a proceeding against a registrant under secions 8a(3)(C) and 8a(4) for the failure of such registrant "reasonably to supervise another person, who is subject to such person's supervision, with a view to preventing riolations of this Act * * * or of any of the rules, regulations or orders thereunder
Moreover, because the Commission views actions by private parties as an important adjunct to the Commission's own enforcement proceedings, the Commission intends to monitor carefully decisions in such proceedings and may amend this interpretation if deemed appropriate.
Section 8a(3) (J) and (M) Section 8a(3) authorizes the Commission to refuse to register an applicant for registration if, after notice and opportunity for a hearing, the applicant is found subject to one or more of the disqualifications described in paragraphs (A)-(M). Section 8a(4) authorizes the Commission, after notice and opportunity for a hearing, to condition, suspend, restrict, or revoke the registration of any person subject to a disqualification under section 8a(3).
Section 8a(3)()). Section 8a(3)(J) authorizes the Commission to affect the registration of any person if:
"such person is subject to an outstanding order denying, suspending, or expelling such person from membership in a contract market, a registered futures association, or any other self-regulatory organization, or barring or suspending such person from being associated with any member or members of such contract market, association, or self-regulatory organization.”
The Commission interprets the term “selfregulatory organization" to include, in addition to a contract market and a registered futures association, any self-regulatory organization as defined in section 3(a)(26) of the Securities Exchange Act of 1934. Thus, a self-regulatory organization includes any national securities exchange, any registered securities association, any registered clearing agency and the Municipal Securities Rulemaking Board.
Section 8a(3)(M). Section 8a(3)(M) authorizes the Commission to affect the registration of any person if “there is other good cause". Specifically, the Commission interprets paragraph (M) to authorize the Commission to refuse to register such person in any new capacity, if such person, or any principal of such person, is the subject of an administrative proceeding brought by the Commission to revoke the existing registration of such person in any other capacity, pending a final decision in such administrative proceeding. The Commission believes it would be inconsistent to register a person in a new capacity, thereby determining that such person is qualified to be registered, while simultaneously seeking to revoke such person's registration in a different capacity because such person's conduct disqualifies him from registration.
Good cause to affect a person's registration also exists: (1) If the operations of such person disrupt or would tend to disrupt orderly market conditions, or cause or would tend to cause sudden or unreasonable fluctuations or unwarranted changes in the price of commodities or contracts for future delivery of commodities or commodity options; (2) if such person has used or is using in its name a term such as “board of trade”, “clearing corporation” or “exchange" in a misleading context, or uses any terms in its representations to the public which may indicate that the person is a contract market or a member of a contract market when such is not the case, or has used or is using a misleading name which would tend to suggest to the public that the person is affiliated with another person when that is not the case or that the person is engaged in a commodity-related business when the person is not in fact substantially so engaged, or has failed to disclose to the public an agency relationship with another person when such failure could mislead the public; (3) if such person is subject to an outstanding order denying, suspending or revoking the license of such person by a licensing authority, such as a state real estate or insurance commission; and (4) if such person has failed to answer the inquiries or requests for further information concerning an application for registration filed with the Commission.
This listing, of course, is not exclusive. In general, the Commission interprets paragraph (M) to authorize the Commission to affect the registration of any person if, as a result of any act or pattern of conduct attributable to such person, although never the subject of formal action or proceeding before either a court or
governmental agency, such person's potential disregard of or inability to comply with the requirements of the Act or the rules, regulations or order thereunder, or such person's moral SOURCE: 46 FR 26013, May 8, 1981, unless otherwise noted.
Subpart A-General Provisions,
Definitions and Exemptions
turpitude, or lack of honesty or financial responsibility is demonstrated to the Commission.
Any inability to deal fairly with the public and consistent with just and equitable principles of trade may render an applicant or registrant unfit for registration, given the high ethical standards which must prevail in the industry. (Secs. 2(a)(1), 4, 4b, 4c, 4d, 4e, 41, 4g, 4h, 4i, 4k, 4m, 4n, 40, 4p, 6, 8, 8a, 14, 15, 17 and 19 of the Commodity Exchange Act, 7 U.S.C. 2 and 4, 6, 60, 60, 60, 6e, 6f, 6g, 6h, 6i, 6k, 6m, 6n, 60, 6p, 8, 9, 9a and 13b, 12, 12a, 18, 19, 21 and 23 (1982); 5 U.S.C. 552 and 552b) (49 FR 8224, Mar. 5, 1984)
§ 4.1 Requirements as to form.
(a) Each document distributed pur. suant to this part 4 must be:
(1) Clear and legible;
(b) Information that is required to be “prominently” disclosed under this Part 4 must be displayed in capital letters and in boldface type. (Approved by the Office of Management and Budget under control number 30380005) [46 FR 26013, May 8, 1981, as amended at 46 FR 63035, Dec. 30, 1981)
PART 4—COMMODITY POOL OPERA
TORS AND COMMODITY TRADING ADVISORS
Subpart A-General Provisions, Definitions
Sec. 4.1 Requirements as to form. 4.2 Requirements as to filing. 4.3—4.9 [Reserved) 4.10 Definitions. 4.11 Exemption from section 4n(3)(B). 4.12 Exemption from provisions of Part 4. 4.13 Exemption from registration as a com
modity pool operator. 4.14 Exemption from registration as a com
modity trading advisor. 4.15 Continued applicability of antifraud
and reparation sections. 4.16 Prohibited representations.
8 4.2 Requirements as to filing.
(a) All material filed with the Commission under this Part 4 must be filed with the Commission at its Washington, D.C. office (Att: Special Counsel, Front Office Audit Unit, Division of Trading and Markets, C.F.T.C., 2033 K Street N.W., Washington, D.C. 20581).
(b) All such material shall be considered filed when received by the Commission at the address specified in paragraph (a) of this section. (Approved by the Office of Management and Budget under control number 30380005) (46 FR 26013, May 8, 1981, as amended at 46 FR 63035, Dec. 30, 1981)
Subpart B-Commodity Pool Operators
4.20 Prohibited activities. 4.21 Disclosure to prospective pool partici
pants. 4.22 Reporting to pool participants. 4.23 Recordkeeping.
88 4.3—4.9 (Reserved)
Subpart C—Commodity Trading Advisors
4.30 Prohibited activities. 4.31 Disclosure to prospective clients. 4.32 Recordkeeping.
4.40 (Reserved) 4.41 Advertising by commodity pool opera
tors, commodity trading advisors, and
the principals thereof. AUTHORITY: Secs. 2(a)(1), 4b, 40, 41, 4m, 4n, 40, 8a and 19 of the Commodity Exchange Act, 7 U.S.C. 2, 6b, 60, 61, 6m, 6n, 60, 12a and 23, as amended, 92 Stat. 865 et seq., unless otherwise noted.
§ 4.10 Definitions.
For purposes of this part:
(1) Any contract for the purchase or sale of a commodity for future delivery; and
(2) Any contract, agreement or transaction subject to Commission reg. ulation under section 4c or 19 of the Act.
(b) “Net asset value” means total assets minus total liabilities, determined in accord with generally accepted accounting principles, with each position in a commodity interest accounted for at fair market value.
(c) “Participant” means any person the exemption is sought. The Commislat has any direct financial interest sion may grant the exemption subject a pool (e.g., a limited partner).
to such terms and conditions as it may (d) “Pool” means any investment find appropriate. ust, syndicate or similar form of enrprise operated for the purpose of § 4.13 Exemption from registration as a ading commodity interests.
ommodity pool operator. (e) “Principal," when referring to a
(a) A person is not required to regiserson that is a principal of a particu
ter under the Act as a commodity pool r entity, means:
operator if: (1) Any person including, but not
(1)(i) It does not receive any commited to, a sole proprietor, general artner, officer or director, or person
pensation or other payment, directly
or indirectly, for operating the pool, ecupying a similar status or performsimilar functions, having the
except reimbursement for the ordiig ower, directly or indirectly, through
nary administrative expenses of oper
ating the pool; greement or otherwise, to exercise a ontrolling influence over the activi
(ii) It operates only one commodity es of the entity;
pool at any time; (2) Any holder or any beneficial
(iii) It is not otherwise required to wner of ten percent or more of the
register with the Commission and is utstanding shares of any class of
not a business affiliate of any person tock of the entity; and
required to register with the Commis(3) Any person who has contributed sion; and en percent or more of the capital of (iv) Neither the person nor any he entity.
other person involved with the pool (f) “Direct,” as used in the context does any advertising in connection f trading commodity interest ac- with the pool (for purposes of this secounts, refers to agreements whereby tion, advertising includes the system· person is authorized to cause trans- atic solicitation of prospective partici.ctions to be effected for a client's pants by telephone or seminar presenommodity interest account without tation); or he client's specific authorization.
(2)(i) The total gross capital contri(g) “Trading program” refers to the butions it receives for units of participrogram pursuant to which a person pation in all of the pools that it oper1) directs a client's commodity inter- ates or that it intends to operate do ist account, or (2) guides the client's not in the aggregate exceed $200,000; :ommodity interest trading by means and of a systematic program that recom
(ii) None of the pools operated by it nends specific transactions.
has more than 15 participants at any 46 FR 26013, May 9, 1981, as amended at 49
time. For purposes of computing the FR 8225, Mar. 5, 1984)
number of participants for paragraph
(a)(2)(ii) of this section, the following * 4.11 Exemption from section 4n(3)(B). participants shall be excluded:
The provisions of section 4n(3)(B) of (A) The pool's operator, commodity the Act shall not apply to any com- trading advisor, and the principals modity pool operator or commodity thereof; and trading advisor that is registered (B) Any relative, spouse or relative under the Act as such or that is of such spouse living in the same exempt from such registration.
household as such participant.
(b)(1) No person who is exempt from § 4.12 Exemption from provisions of Part
registration as a commodity pool oper4.
ator under paragraph (a)(1) or (a)(2) The Commission may exempt any of this section and who is not regisperson or any class or classes of per- tered as such pursuant to that exempsons from any provision of this Part 4 tion may, directly or indirectly, solicit, if it finds that the exemption is not accept or receive funds, securities or contrary to the public interest and the other property from any prospective purposes of the provision from which participant in a pool that it operates