The Code of Federal Regulations of the United States of America

for registration and may issue order, pursuant to Section 8a(2) 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(2)(A) 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prior registration of such person has been suspended (and the period of such suspension shall not have expired) or has been revoked.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) 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 direct reconsideration of the order on such basis and in accordance with such procedures as it may determine.

(h)(1) The Director or Deputy Director of the Division of Trading and Markets shall give notice under paragraph (a) of this section only with the concurrence of the Director of the Division of Enforcement or his designee. The Executive Director shall give notice under paragraph (b) of this sec

tion only with the concurrence of the Director of the Division of Trading and Markets, the Director of the Division of Enforcement and the Deputy General Counsel, or their designees.

(2) For purposes of this section, notice to and service upon the applicant shall be sufficient if mailed first class properly addressed to the applicant at the address shown on his application or any amendinent thereto, and shall be complete upon mailing; a record showing the date upon which a document was duly mailed, and by whom, prepared and retained in the normal course of Commission business, shall be adequate proof of service of the document. Documents submitted to the Executive Director or the Director of the Division of Trading and Markets shall be considered filed only upon actual receipt.

(i) The Commission reserves to itself the decision in any case whether to institute a proceeding to determine whether to refuse an applicant's registration for reasons other than the existence of circumstances described in paragraph (a)(1) of this section.

(Secs. 2a(11) and 8a(5) of the Commodity Exchange Act, as amended, 7 U.S.C. 4(a)(j) and 12a(5)(1976))

[43 FR 59341, Dec. 20, 1978]

§ 1.11 Registration fees; form of remittance.

Each application for registration, or renewal thereof, as a futures commission merchant shall be accompanied by a fee of $200, plus a fee of $6 for each domestic branch office and for each correspondent or agent, operating within the United States authorized to solicit or accept orders for the purchase or sale of any commodity for future delivery on behalf of the applicant. Each application for registration or renewal thereof as a floor broker or as an associated person shall be accompanied by a fee of $20, except that with respect to any application for registration, or renewal thereof, as an associated person filed on Form 4-Ra, no fee is required. Each application for registration or renewal thereof, as a commodity trading advisor or commodity pool operator shall be accom

'Form 4-Ra filed with original documents.

panied by a fee of $50. Fees shall be remitted by money order, bank draft, or check, payable to the Commodity Futures Trading Commission. The fees shall be nonrefundable, unless the applicant withdraws his application before any processing of that application has occurred.

(Sec. 2a(11), Pub. L. 93-463, 88 Stat. 1391 (7 U.S.C. 4a(j)); sec. 8a(4), Pub. L. 74-675, 49 Stat. 1500 (7 U.S.C. 12a(4)), as amended, Pub. L. 84-248, 69 Stat. 535, Pub. L. 90-258, 82 Stat. 33, Pub. L. 93-463, 88 Stat. 1392; sec. 8a(5), Pub. L. 74-675, 49 Stat. 1501 (7 U.S.C. 12a(5)), as amended, Pub. L. 90-258, 82 Stat. 33, Pub. L. 93-463, 88 Stat. 1392)

[41 FR 28947, July 14, 1976, as amended at 44 FR 37202, June 26, 1979]

§ 1.12 Maintenance of minimum financial requirements by futures commission merchants.

(a) Each person registered as a futures commission merchant, or who files an application for registration as a futures commission merchant, who knows or should have known that its adjusted net capital at any time is less than the minimum required by § 1.17 or by the capital rule or any self-regulatory organization to which such person is subject, if any, must:

(1) Give telegraphic notice as set forth in paragraph (g) of this section that such applicant's or registrant's adjusted net capital is less than is required by § 1.17 or by such other capital rule, identifying the applicable capital rule. This notice must be given within 24 hours after such applicant or registrant knows or should have known that its adjusted net capital is less than required by any of the aforesaid rules to which such applicant or registrant is subject; and (2) within 24 hours after giving such notice file a statement of financial condition, a statement of the computation of the minimum capital requirements pursuant to § 1.17 (computed in accordance with the applicable capital rules), and a schedule of segregation requirements and funds on deposit in segregation, all as of the date such applicant's or registrant's adjusted net capital is less than the minimum required.

(b) Each person registered as a futures commission merchant, or who files an application for registration as

a futures commission merchant, who knows or should have known that its adjusted net capital at any time is less than: (1) The greater of 150 percent of the appropriate minimum dollar amount required by § 1.17 or 8% percent of aggregate indebtedness or (2) if the applicant or registrant is operating pursuant to § 1.17(g), the greatest of 150 percent of the appropriate minimum dollar amount required by § 1.17(g), or 6 percent of the funds required to be segregated pursuant to section 4d(2) of the Act and these regulations, or for securities brokers or dealers, 6 percent of aggregate debit items computed in accordance with the formula for determination of reserve requirements (§ 240.15c3-3 of this title); such applicant or registrant must file written notice to that effect as set forth in paragraph (g) of this section within five (5) business days of such event. Such applicant or registrant must also file a Form 1-FR (or, if such applicant or registrant is registered with the Securities and Exchange Commission as a securities broker or dealer, it may file (in accordance with § 1.10(h)) a copy of its Financial and Operational Combined Uniform Single Report under the Securities Exchange Act of 1934, Part II, in lieu of Form 1-FR) or such other financial statement designated by the Commission and/or the designated self-regulatory organization, if any, as of the close of business for the month during which such event takes place and as of the close of business for each month thereafter until three (3) successive months have elapsed during which the applicant's or registrant's adjusted net capital is at all times equal to or in excess of the minimums set forth in this paragraph (b) which are applicable to such applicant or registrant. Each financial statement required by this paragraph (b) must be filed within 30 calendar days after the end of the month for which such report is being made.

(c) If an applicant or registrant at any time fails to make or keep current the books and records required by these regulations, such applicant or registrant must, on the same day such event occurs, give telegraphic notice of such fact, specifying the books and

records which have not been made or which are not current, and within 5 business days after giving such notice file a written report stating what steps have been and are being taken to correct the situation.

(d) Whenever any applicant or registrant discovers or is notified by an independent public accountant, pursuant to § 1.16(e)(2) of these regulations, of the existence of any material inadequacy, as specified in § 1.16(d)(2) of these regulations, such applicant or registrant must give telegraphic notice of such material inadequacy within 3 business days, and within 5 business days after giving such notice file a written report stating what steps have been and are being taken to correct the material inadequacy.

(e) Whenever any self-regulatory organization learns that a member registrant has failed to file a notice or written report as required by this § 1.12, such self-regulatory organization must immediately report such failure as provided in paragraph (g) of this section.

(f)(1) Whenever a clearing organization determines that any position it carries for one of its clearing members which is registered as a futures commission merchant must be liquidated immediately, transferred immediately or that the trading of any account of such futures commission merchant shall be only for the purposes of liquidation, because that clearing member has failed to meet a all for margin or to make other required deposits, the clearing organization must give telegraphic notice of such a determination to the principal office of the Commission at Washington, D.C. within 24 hours.

(2) Whenever a registered futures commission merchant determines that any position it carries for another registered futures commission merchant must be liquidated immediately, transferred immediately or that the trading of any account of such futures commission merchant shall be only for purposes of liquidation, because the other futures commission merchant has failed to meet a call for margin or to make other required deposits, the carrying futures commission merchant must give telegraphic notice of such a

determination to the principal office of the Commission at Washington, D.C. within 24 hours.

(g) Every notice and written report required to be given or filed by this section (except for notices required by paragraph (f) of this section) must be filed with the regional office of the Commission for the region in which the applicant or registrant has its principal place of business, with the designated self-regulatory organization, if any, and with the Securities and Exchange Commission, if such applicant or registrant is a securities broker or dealer. In addition, every notice required to be given by this section must also be filed with the principal office of the Commission in Washington, D.C. Each statement of financial condition, each statement of the computation of the minimum capital requirements pursuant to § 1.17, and each schedule of segregation requirements and funds on deposit in segregation required by this section must be filed in accordance with the provisions of § 1.10(d) of these regulations, unless otherwise indicated.

(h) The Commission hereby delegates to the Director, each Deputy Director and the Chief Accountant of the Division of Trading and Markets, the authority, pursuant to section 8a(6) of the Act, to communicate information obtained by the Commission pursuant to paragraph (f) of this section to the proper committee or officer of any contract market including, for purposes of this paragraph, the clearing organization of such contract market, when, in the judgment of the Director, a Deputy Director, or the Chief Accountant, the information concerns any transaction or market operation which would disrupt or tend to disrupt any market or is otherwise harmful or against the best interests of producers and consumers. The Commission also hereby delegates to the Director, each Deputy Director and the Chief Accountant of the Division of Trading and Markets, the authority, pursuant to section 8(e) of the Act, to furnish information obtained by the Commission pursuant to paragraph (f) of this section, upon request, to the Securities and Exchange Commission, acting within the scope of its

jurisdiction, if such information concerns a futures commission merchant registered with the Securities and Exchange Commission as a broker-dealer. This delegation shall not affect any other delegation which the Commission has made or may make, which authorizes any other officer or employee of the Commission to furnish information on the Commission's behalf. Notwithstanding this paragraph, in any case in which it is deemed appropriate, the Director, a Deputy Director or the Chief Accountant of the Division of Trading and Markets may submit the matter to the Commission for its consideration. In addition, the Commissicn reserves to itself the authority to determine whether to communicate such information or to grant a request for such information in any particular

case.

(7 U.S.C. 6c, 6d, 6f, 6g, 7a, 12a, 19 and 21; 5 U.S.C. 552, 5 U.S.C. 552b, and secs. 2(a)(11), 4b, 4f, 4g, 5a, 8a, 15, and 17 of the Commodity Exchange Act, 7 U.S.C. 4a(j), 6b, 6f, 6g, 7a, 12a, 19, and 21, as amended, 92 Stat. 865 et seq.)

[43 FR 39969, Sept. 8, 1978, as amended at 45 FR 2022, Jan. 10, 1980; 45 FR 6539, Jan. 29, 1980]

§1.13 Notification of registration.

Upon receipt of an application for registration (or renewal thereof) the Commission will, if registration is granted, notify the registrant that he has been registered under the Act.

§ 1.14 Deficiencies, inaccuracies, and changes to be reported.

(a) Each applicant or registrant as a futures commission merchant, commodity trading advisor or commodity pool operator shall file promptly with the Commission a statement on Form 3-R to correct any deficiency or inaccuracy in its application for registration, or any schedule or supplemental statement thereto, and to report any

change which no longer renders accu rate and current in the information contained in any of the items on Form 7-R of such application or supplemental statement; or contained in any of the following items on Schedules A, B or C of Form 7-R:

(1) With respect to a futures commission merchant. The following items on Schedule A, "Application for Registration as Futures Commission Merchant:"

Item 3-Correspondents and agents (excluding employees and associated persons) operating within the United States, authorized to solicit or accept orders in the name of the registrant.

Item 4-Commodity exchanges in the United States in which the registrant has membership privileges; and Item 5-Participation in commodity option transactions by the registrant.

New domestic branch offices and new correspondents and agents who are operating within the United States and are authorized to solicit or accept orders on behalf of the futures commission merchant shall be reported promptly and fees shall be remitted as provided in § 1.11.

(2) With respect to a commodity trading advisor. The following items on Schedule B, "Application for Registration as Commodity Trading Advisor:"

Item 4 (a)--Manner of furnishing advisory services; and

Item 6-Ownership in, control or management authority over, or reciprocal business arrangements with futures commission merchants, agents of futures commission merchants, commodity pools, commodity pool operators, floor brokers, associated persons or other commodity trading advisors by the registrant or any persons named in Item 5 Form 7-R.

trant or any persons named in Item 5 of Form 7-R.

(b) Each applicant or registrant as a floor broker or associated person and all individuals who have filed Form 8R pursuant to § 1.10a, § 1.10c or § 1.10d shall file promptly with the Commission a statement on Form 3-R to correct any deficiency or inaccuracy in the Form 8-R, or Schedule A thereof, or any supplemental statement thereto, and to report any change which no longer renders accurate and current the information contained in any of the following items on Form 8-R, or Schedule A thereof, or any supplemental statement thereto:

Item 1-Name of floor broker, associated person or other individual;

Item 2-Any other names by which individual has been known;

Item 4-Home address and telephone number (applicable only to associated persons);

Item 5-Business address (applicable only to floor brokers);

Items 11 and 12-Adverse actions as specified in the form;

Schedule A, Item 3-Name of each clearing member through whom the registrant clears commodity futures transactions for his own account and for accounts which he controls or in which he has a financial interest; and

Schedule A, Item 4-Name of each clearing member for whom the registrant is currently engaged as floor broker.

(d) Each futures commission merchant shall promptly file with the Commission a report stating the name of each associated person newly employed in such capacity by it or its agents, and shall promptly file with the Commission a report of the termination of employment, and the reasons therefor, of any person who acted as an associated person for the futures commission merchant or its agents.

(7 U.S.C. 6f, 6k, 6n, and 12a (Supp. V. 1975)) [42 FR 23994, May 11, 1977]

NOTE: Form 3-R revised at 43 FR 1325, Jan. 9. 1978.

§ 1.15 Changes requiring new registration. A new registration shall be required in the event of a change:

(a) In the name of the registrant; (b) In the form of organization of the registrant;

(d) In the personnel of a partnership resulting from the death, withdrawal, or addition of a partner: Provided, That if such change does not, as a matter of law, create a new partnership, it may be reported by the registrant the Commission on Form 3-R within 10 days of the date of such change, and if so reported a new registration shall not be required.

§ 1.16 Qualifications and reports of ac

countants.

Definitions—(1)

(a) Accountant's report. The term "accountant's report," when used in regard to financial statements and schedules, means a document in which an independent licensed or certified public accountant indicates the scope of the audit (or examination) which he has made and sets forth his opinion regarding the financial statements and schedules taken as a whole or an assertion to the fact that an overall opinion cannot be expressed. When an overall opinion cannot be expressed, the reasons therefore must be stated.

(2) Audit or examination. The terms "audit” and “examination," when used in regard to financial statements and schedules, mean an examination of the statements and schedules by an accountant in accordance with generally accepted auditing standards for the purposes of expressing an opinion thereon.

(3) Certified. The term "certified," when used in regard to financial statements and schedules, means audited and reported upon with an opinion expressed by an independent certified public accountant or independent licensed public accountant.

(b) Qualifications of accountants. (1) The Commission will recognize any person as a certified public accountant who is duly registered and in good standing as such under the laws of the place of his residence or principal

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