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12, 12a and 23 (1982); 5 U.S.C. 552 and 552b)) (49 FR 5523, Feb. 13, 1984, as amended at 49 FR 39532, Oct. 9, 1984)

§ 3.18 Registration of associated persons

of leverage transaction merchants. (a) Registration required. It shall be unlawful for any person to be associated with a leverage transaction merchant as an associated person unless that person shall have registered under the Act as an associated person of that sponsoring leverage transaction merchant in accordance with the procedures in paragraph (c) or (d) of this section.

(b) Duration of registration. A person registered in accordance with paragraph (c) or (d) of this section and whose registration has neither been suspended nor revoked will continue to be so registered until the cessation of the association of the registrant with, or the revocation, suspension, lapse, or withdrawal of the registration of, the associated person's sponsor.

(c) Application for registration. Except as otherwise provided in paragraphs (d) and (f) of this section, application for registration as an associated person of a leverage transaction merchant must be on Form 8-R, completed and filed in accordance with the instructions thereto.

(1) No person will be registered as an associated person in accordance with this paragraph (c) unless an officer, if the sponsor is a corporation, a general partner, if a partnership, or the sole proprietor, if a sole proprietorship, of such sponsor has signed and dated a certification in writing, stating that:

(i) It is the intention of the sponsor to hire or otherwise employ the applicant as an associated person and that it will do so within thirty days after the receipt of the notification provided in accordance with paragraph (c)(4) of this section and that the applicant will not be permitted to engage in any activity requiring registration as an associated person until the applicant is registered as such in accordance with this section;

(ii) The sponsor has verified the information supplied by the applicant in response to the questions on Form 8-R

which relate to the applicant's education and employment history during the preceding five years;

(iii) To the best of the sponsor's knowledge, information, and belief, all of the publicly available information supplied by the applicant on Form 8-R is accurate and complete: Provided, That it is unlawful for the sponsor to make the certification required by this paragraph (c)(1)(iii) if the sponsor knew or should have known that any of that information is not accurate and complete; and

(iv) The sponsor has taken, and will take, such measures as are necessary to prevent the unwarranted dissemination of any of the information contained in that Form 8-R, or in the records and documents obtained in support of the certifications required by this section.

(2) The certification required by paragraph (c)(1) of this section must be submitted concurrently with the Form 8-R.

(3) Each Form 8-R filed in accordance with the requirements of paragraph (c) of this section must be accompanied by the fingerprints of the applicant on a fingerprint card provided for that purpose by the Commission.

(4) When the Commission determines that an applicant for registration as an associated person is not unfit for such registration, it will provide notification in writing to the sponsor which has made the certifications required by paragraph (c)(1) of this section that the applicant's registration as an associated person is granted contingent upon the sponsor hiring or otherwise employing the applicant as such within thirty days.

(d) Special registration procedures for certain persons. (1) Except as provided in paragraph (f) of this section, any person whose registration as an associated person in another capacity is still in effect, whose registration as an associated person in the same capacity or in another capacity has terminated within the preceding sixty days, and who becomes associated with a sponsoring leverage transaction merchant which makes the certification provided by paragraph (d)(1)(i) of this section will be registered as, and in the capacity of, an associated person of such sponsor upon the mailing by that sponsor to the Commission of written certifications stating:

(i) That such person has been hired or is otherwise employed by that sponsor;

(ii) That such person's registration as an associated person in any capacity is not suspended or revoked;

(iii) That such person is eligible to be registered in accordance with this paragraph (d);

(iv) Whether there is a pending proceeding under sections 6(b) or sa of the Act or $ 3.52, $ 3.55 or $ 3.60, or $ 3.20 or former § 1.10e, to deny, suspend, revoke, condition or restrict such person's registration in any capacity or if, within the preceding twelve months, the Commission has permitted the withdrawal of an application for registration in any capacity after instituting the procedures provided in § 3.51 or $ 3.20 and, if so, that the sponsor has been given a copy of the complaint or letter issued by the Commission in connection therewith; and

(v) That the sponsor has received a copy of the complaint or letter issued by the Commission if the applicant for registration has certified, in accordance with paragraph (d)(1)(iv) of this section, that there is a proceeding pending against him as described in that paragraph or that the Commission has permitted the withdrawal of an application for registration as described in that paragraph.

(2) The certifications permitted by paragraphs (d)(1)(i) and (d)(1)(v) of this section must be signed and dated by an officer, if the sponsor is a corporation, a general partner, if a partnership or the sole proprietor, if a sole proprietorship. The certifications permitted by paragraphs (d)(1) (ii)-(iv) of this section must be signed and dated by the Applicant for registration as an associated person.

(3) Within sixty days of mailing the certifications permitted by paragraph (d)(1) of this section, the associated person and the sponsor must complete and the sponsor must file with the Commission a Form 8-R in accordance with the instructions thereto. The Form 8-R must contain the certifica

tions required by paragraphs (c)(1) (ii) through (iv) of this section and must be accompanied by the fingerprint card provided by the Commission for that purpose.

(e) Retention of records. The sponsor must retain in accordance with $ 1.31 of this chapter such records as are necessary to support the certifications required by this section.

(f) Certain dual and multiple associations prohibited. (1) No person may be simultaneously associated as an associated person with:

(i) More than one leverage transaction merchant;

(ii) A leverage transaction merchant and a futures commission merchant;

(iii) A leverage transaction merchant and an introducing broker;

(iv) A leverage transaction merchant and a commodity trading advisor; or

(v) A leverage transaction merchant and a commodity pool operator.

(2) No person may be registered as an associated person of a leverage transaction merchant and registered as a floor broker.

(g) Petitions for exemption. (1) Any person adversely affected by the oper. ation of this section may file a petition with the Secretary of the Commission, which petition must set forth with particularity the reasons why that person believes that an applicant should be exempted from the require ments of this section and why such an exemption would not be contrary to the public interest and the purposes of the provision from which exemption is sought. The petition will be granted or denied by the Commission on the basis of the papers filed. The Commission may grant such a petition if it finds that the exemption is not contrary to the public interest and the purposes of the provision from which exemption is sought. The petition may be granted subject to such terms and conditions as the Commission may find appropriate.

(2)(i) Until such time as the Commission orders otherwise, the Commis. sion hereby delegates to the Director of the Division of Trading and Mar. kets or the Director's designee the authority to grant or deny petitions filed pursuant to this paragraph (g).

(ii) The Director of the Division of Trading and Markets may submit to the Commission for its consideration any matter which has been delegated to the Director pursuant to paragraph (g)(2)(i) of this section. (Secs. 2(a)(1), 4, 4b, 4c, 40, 4e, 4f, 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, 66, 60, 60, 6e, 61, 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 5523, Feb. 13, 1984, as amended at 49 FR 8218, Mar. 5, 1984)

8 3.19 (Reserved)

8 3.20 Delegation of authority to deny reg

istration. (a) The Director or Deputy Director of the Division of Trading and Markets may at any time give written notice to any applicant for registration in any capacity under the Commodity Exchange Act, stating that:

(1) Information has come to his attention which tends to show that one or more of the following circumstances exist: That the applicant or any general partner, officer, director, person performing similar functions, controlling person, or holder of more than ten percent of the stock of the applicant:

(i) Was convicted of any felony in any State or Federal court, or was debarred by any agency of the United States from contracting with the United States, or the applicant willfully made a false or misleading material statement in his application or willfully omitted to state a material fact in connection with the application; or

(ii) Within ten years preceding the filing of the application has been convicted of a misdemeanor which:

(A) Involves any transaction advice concerning any commodity, contract for future delivery of a commodity, commodity option, leverage transaction, or security;

(B) Arises out of the conduct of the business of a futures commission merchant, associated person, floor broker, commodity trading advisor, commodity pool operator, leverage transaction merchant, securities broker, securities dealer, municipal securities dealer, transfer agent, clearing agency, securi

ties information processor, investment adviser, investment company, or employee or affiliated person of any of the foregoing; or

(C) Involves embezzlement, defalcation, fraudulent conversion, misappropriation of funds, securities or other property, forgery, counterfeiting, false pretenses, gambling, or similar crimes reflecting upon the ability of the applicant, if registered, faithfully to discharge the fiduciary duties imposed by the Act; or

(iii) At the time of the application, is permanently or temporarily enjoined by order, judgment or decree of any court of competent jurisdiction, or is prohibited by agreement or settlement with the Commission or the Securities and Exchange Commission, or any State agency or governmental body: (A) From acting as a commodity trading advisor, commodity pool operator, futures commission merchant, floor broker, leverage transaction merchant, securities broker or dealer, municipal securities dealer, transfer agent, clearing agency, securities information processor, investment adviser, investment company, or as an associated or affiliated person or employee of any of the foregoing; or (B) from engaging in or continuing any conduct or practice in connection with any such activity or involving any transaction or advice concerning commodities, contracts for future delivery of commodities, commodity options, leverage transactions, or securities; or

(iv) Within ten years preceding the filing of the application, has been found by any court of competent jurisdiction, by the Commission or the Securities and Exchange Commission, or has admitted by agreement or settlement to which the Commission or the Securities and Exchange Commission is a party:

(A) To have violated any provision of the Commodity Exchange Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility Holding Company Act of 1935, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Securities Investors Protection Act of 1970, the Foreign Corrupt Practices Act of 1977, or any similar statute of a

or

State or foreign jurisdiction, or any rule or regulation under any such statutes;

(B) To have aided, abetted, counseled, commanded, induced, or procured the violation by any other person of such statutes or rules or regulations; or

(C) To have failed reasonably to supervise, with a view to preventing violations of such statutes, rules or regulations, another person who commits such a violation, if such person is subject to his supervision; or

(v) Is subject to an outstanding order of the Commission denying trading privileges on any contract market to such person, or suspending or revoking the registration of such person as a commodity trading advisor, commodity pool operator, futures commission merchant, floor broker, leverage transaction merchant, or associated person, or suspending or expelling such person from membership on any contract market or futures association registered under the Act, or refusing such person registration in any capacity;

(2) This information, if true, is a basis upon which the applicant may be found unfit for registration and upon which the applicant's registration may be denied;

(3) Unless the applicant voluntarily withdraws his application it may be necessary, after further investigation of these facts, to institute the public procedures for denial of registration described in paragraph (b) of this section;

(4) In these circumstances, an applicant is required to reconfirm in writing that he wishes to have his application given further consideration; and

(5) Unless the applicant files with the Director or Deputy Director of the Division of Trading and Markets a notification in writing, within thirty days of the date of the notice that the applicant wishes to have his application for registration given further consideration, his application will be deemed to have been withdrawn and will be given no further consideration.

(b) On the basis of apparently credible evidence, the Executive Director may at any time give written notice to any applicant for registration in any

capacity under the Commodity Exchange Act that:

(1) The Division of Trading and Markets and the Division of Enforcement allege and are prepared to prove that one or more of the circumstances set forth in paragraph (a)(1) of this section exist;

(2) The allegations set forth in the notice, if true, constitute a basis upon which the applicant may be found unfit for registration pursuant to section 8a or, if the applicant is applying for registration as a leverage transaction merchant or associated person thereof, section 19 of the Commodity Exchange Act, and upon which the applicant's registration may be denied;

(3) The applicant is entitled to a hearing at which he may challenge the truth of the allegations set forth in the notice or show cause why, notwithstanding the truth of those allegations, registration should nevertheless be granted;

(4) A hearing for these purposes may be obtained by filing a written request with the Executive Director within thirty days after the date of the notice to the applicant;

(5) If the applicant does not timely request a hearing he will be deemed to have waived his right to a hearing on ! all issues concerning his application, and

(6) If the applicant does not timely request a hearing the Commission or the Executive Director or Chief Administrative Law Judge (acting pursuant to authority delegated under paragraph (d) of this section) may thereaf. ter decide whether to grant or deny his registration based upon the facts stated in the notice, which will not have been disputed and which may be deemed to be true for that purpose.

(c) If an applicant should request a hearing in accordance with paragraph (b)(4) of this section, an adjudicatory proceeding on the question of the applicant's fitness for registration shall thereafter be conducted and conclud. ed in accordance with the Commission's Rules of Practice, 17 CFR Part 10; the matter shall be referred to the Chief Administrative Law Judge who shall set a date for hearing and assign an Administrative Law Judge to conduct the proceeding. For purposes of

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at proceeding, the notice given in acrdance with paragraph (b) of this ition shall be treated as a duly auorized complaint by the Division of iforcement seeking, as relief, denial the application for registration, and e request for hearing shall be treat

answer which generally nies every allegation contained in e notice upon which a hearing has en requested: Provided, however, iat (1) the Division of Enforcement ay thereafter amend the complaint seek such other and further relief may be appropriate in view of the atters charged and, with leave of the ommission, may

allege further ounds as a basis for denial of regisation; and (2) the applicant may supement his answer to set forth any afrmative defenses he may wish to sert and the alleged facts upon hich those defenses are based. The rovisions of $ $ 10.22 and 10.23 of the ules of Practice, concerning a comlaint and answer, shall otherwise be applicable. (d) If no request for a hearing is reeived by the Executive Director ithin thirty days after a notice has een given in accordance with pararaph (b) of this section, the Execuive Director may proceed as follows: (1) In the case of an applicant for an nitial registration, pursuant to auhority hereby delegated by the Commission, the Executive Director may etermine the applicant's fitness for egistration and may issue an order, ursuant to section 8a or, if the appliant is applying for registration as a everage transaction merchant or assoiated person thereof, section 19 of the Commodity Exchange Act, granting or efusing registration to the applicant ased upon the application, the notice vith proof of service, and an approprite showing that a hearing has not een requested.

(2) In the case of an applicant for relewal of a registration previously granted, the Executive Director may ransmit to the Chief Administrative Law Judge a true copy of the application, the notice with proof of service, and an appropriate showing that a hearing has not been requested, and, based thereon, the Chief Administrative Law Judge, pursuant to authority

hereby delegated by the Commission, may determine the applicant's fitness for registration and may issue an order, pursuant to section 8a or, if the applicant is applying for registration as a leverage transaction merchant or associated person thereof, section 19 of the Commodity Exchange Act, granting or refusing registration to the applicant.

(e) Notwithstanding any other provision contained in this section, the Executive Director is hereby delegated authority pursuant to section 8a or, if the applicant is applying for registration as a leverage transaction merchant or associated person thereof, section 19 of the Commodity Exchange Act, to enter an order refusing to register any person if the prior registration of such person has been suspended (and the period of such suspension shall not have expired) or has been revoked.

(f) A copy of any order issued pursuant to paragraph (d) or (e) of this section shall promptly be served upon the applicant and the Division of Enforcement and provided to each member of the Commission. Within fifteen days after service upon an applicant of an order granting or refusing registration issued pursuant to paragraph (d) or (e) of this section, the applicant or the Division of Enforcement may file with the Commission's Secretariat a petition for reconsideration setting forth the grounds in support thereof. The petition of an applicant shall not be based upon any matter of which the applicant had notice and opportunity for hearing under paragraph (b) of this section unless it be claimed, and supported by affidavit, that notice under paragraph (b) of this section was not timely received by the applicant.

(g) An order granting or refusing registration issued pursuant to paragraph (d) or (e) of this section shall be effective as a final order of the Commission thirty days after the date it was served upon the applicant. Within that period the Commission, on its own motion, or based upon a petition filed pursuant to paragraph (f) of this section, may stay the effectiveness of the order and then or thereafter may reverse, affirm or modify the order or

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