1.17 Minimum financial requirements fu- 1.18 Records for and relating to financial reporting and monthly computation. PROHIBITED TRADING IN COMMODITY OPTIONS 1.19 Prohibited trading in "puts" and CUSTOMERS' MONEY, SECURITIES, AND 1.20 Customers' money, securities, and property to be segregated and separate- 1.21 Care of money and equities accruing 1.22 Use of money, securities, or property 1.23 Interest of futures commission mer- 1.26 Deposit of obligations pu 1.32 Segregated account; daily 1.34 Monthly record, "point bala 1.36 Record of securities and p 1.41a Delegation of authority t 1.42 Delivery notice; filing of cop depositories, and other simila 1.45 Delivery of commodities c 1.46 Application and closing out ting long and short positions. 1.47 Requirements for classificati § 1.3(z)(3) of the regulations. 1.48 Requirements for classifi § 1.1 Words in singular and plural form. Words used in the singular form in the rules and regulations in this Part shall be deemed to import the plural, and vice versa, as the case may require. § 1.2 Liability of principal for act of agent. 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. (Sec. 2, 42 Stat. 998; 7 U.S.C. 4) § 1.3 Definitions. The following terms, as used in the Commodity Exchange Act, or in the rules and regulations in this chapter, shall have the meanings hereby assigned to them, unless the context otherwise requires: (a) Board of Trade. This term means any exchange or association, whether incorporated or unincorporated, of persons who shall be engaged in the business of buying or selling any commodity or receiving the same for sale on consignment. (b) Business day. This term means any day other than a Sunday or holiday. In all notices required by the act or by the rules and regulations in this chapter to be given in terms of business days the rule for computing time shall be to exclude the day on which notice is given and include the day on which shall take place the act of which notice is given. (c) Clearing member. This term means any person who is a member of, or enjoys the privilege of clearing trades in his own name through, the clearing organization of a contract market. (d) Clearing organization. This term means the person or organization which acts as a medium for clearing transactions in commodities for future delivery, or for effecting settlements of contracts for future delivery, for and between members of any board of trade. (e) Commodity. This term means and includes wheat, cotton, rice, corn, oats, barley, rye, flaxseed, grain sorghums, millfeeds, butter, eggs, Irish potatoes, wool, wool tops, fats and oils (including lard, tallow, cottonseed oil, peanut oil, soybean oil, and all other fats and oils), cottonseed meal, cottonseed, peanuts, soybeans, soybean meal, livestock, livestock products, and frozen concentrated orange juice, and all other goods and articles, except onions as provided in Pub. L. 85-839, and all services, rights and interests in which contracts for future delivery are presently or in the future dealt in. (Sec. 2(a)(1), 88 Stat. 1395; 7 U.S.C. 2(1)) (f) Commodity Exchange Act; the Act. These terms mean the Commodity Exchange Act, as amended, 7 U.S.C. 1 et seq. (g) [Reserved] (h) Contract Market. This term means a board of trade designated by the Commission as a contract market under the Commodity Exchange Act. (i) Contract of sale. This term includes sales, purchases, agreements of sale or purchase and agreements to sell or purchase. drawn or denied. Any natural person (other than a floor broker or associated person) who subsequently becomes a general partner, officer, director or branch officer manager of the registrant, or performs similar functions, or becomes any other controlling person of the registrant, shall promptly execute and file a Form 8-R. Each Form 8-R shall be filed in accordance with the instructions contained therein. Individuals who were previously required to submit biographical information on Form 94 or who have filed a Form 8-R as required by this section shall file a current Form 8-R, upon request by the Commission. (7 U.S.C. 6f, 6k, 6n, and 12a (Supp. V. 1975).) [42 FR 23993, May 11, 1977] § 1.10d Applications for registration of commodity pool operators. Application for registration as a commodity pool operator shall be filed on Form 7-R in accordance with the instructions contained therein. The initial application for registration shall be accompanied by Form 8-R executed and filed by each sole proprietor and by each natural person who is a general partner, officer, director or branch office manager of the applicant, or performs similar functions, or is any other controlling person of the applicant; except that an accompanying Form 8-R need not be filed by any individual who is registered as a floor broker or an associated person or has applied for registration as a floor broker or an associated person and such application has not been withdrawn or denied. Any natural person (other than a floor broker or associated person) who subsequently becomes a general partner, officer, director or branch office manager of the registrant, or performs similar functions, or becomes any other controlling person of the registrant, shall promptly execute and file a Form 8-R. Each Form 8-R shall be filed in accordance with the instructions contained therein. Individuals who were previously required to submit biographical information on Form 94 or who have filed a Form 8-R as required by this section shall file a current Form 8-R, upon request by the Commission. (7 U.S.C. 61, 6k, 6n, and 12a (Supp. V. 1975).) [42 FR 23994, May 11, 1977] § 1.10e Delegation of authority to deny registration. (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 per cent 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 transactions or advice concerning any commodity or security; (B) arises out of conduct of the business of a futures commission merchant, floor broker, commodity trading advisor, commodity pool operator, securities broker, securities dealer, municipal securities dealer, transfer agent, clearing agency, investment adviser, investment company, or as an associated or affiliated person or employee of any of the foregoing; or (C) involves embezzlement, fraudulent conversion, misappropriation of funds, securities or other property, counterfeiting, 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 (2) which is partially or jointly owned by one of the following persons: (1) Such individual himself, or such partnership, corporation or association itself; (ii) In the case of a partnership, a general partner in such partnership; (iii) In the case of a limited partnership, a limited or special partner in such partnership whose duties include: (A) The management of the partnership business or any part thereof, (B) The handling of trades and/or funds of customers of such partnership, (C) The keeping of records pertaining to trades and/or funds of customers of such partnership, or (D) The signing or co-signing of checks or drafts on behalf of such partnership; or (iv) In the case of a corporation or association, an officer, director owner of ten percent or more of the capital stock, of such organization; (v) An employee of such individual, partnership, corporation or association whose duties include: (A) The management of the business of such individual, partnership, corporation or association or any part thereof, (B) The handling of trades and/or funds of customers of such individual, partnership, corporation or association. (C) The keeping of records pertaining to trades and/or funds of customers of such individual, partnership, corporation or association, or (D) The signing or co-signing of checks or drafts on behalf of such individual, partnership, corporation or association; (vi) A spouse or minor dependent living in the same household of any of the foregoing persons; (vii) A business affiliate that directly or indirectly controls such individual, partnership, corporation or association. (viii) A business affiliate that, directly or indirectly is controlled by or is under common control with, such individual, partnership, corporation or association. Provided, however, That an account owned by any shareholder or member of a cooperative association of producers, within the meaning of sections 5(e) and 6(a) of the Act, which association is registered as a futures commission merchant and carries such account on its records, shall be deemed to be a customer's account and not a proprietary account of such association, unless the shareholder or member is an officer, director or manager of the association. (z) Bona fide hedging transactions and positions-(1) General definition. Bona fide hedging transactions and positions shall mean transactions or positions in a contract for future delivery on any contract market, where such transactions or positions normally represent a substitute for transactions to be made or positions to be taken at a later time in a physical marketing channel, and where they are economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise, and where they arise from: (i) The potential change in the value of assets which a person owns, produces, manufactures, processes, or merchandises or anticipates owning, producing, manufacturing, processing, or merchandising, (ii) The potential change in the value of liabilities which a person owns or anticipates incurring, or (iii) The potential change in the value of services which a person provides, purchases or anticipates providing or purchasing. Notwithstanding the foregoing, no transactions or positions shall be classified as bona fide hedging for purposes of section 4a of the Act unless their purpose is to offset price risks incidental to commercial cash or spot operations and such positions are established and liquidated in an orderly manner in accordance with sound commercial practices and unless the provisions of paragraphs (z) (2) and (3) of this section and sections 1.47 and 1.48 of the regulations have been satisfied. (2) Enumerated hedging transactions. The definitions of bona fide hedging transactions and positions in paragraph (z)(1) of this section includes, but is not limited to, the following specific transactions and positions: ministrative Law Judge (acting pursuant to authority delegated under paragraph (d) of this section) may thereafter 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 concluded 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 that proceeding, the notice given in accordance with paragraph (b) of this section shall be treated as a duly authorized complaint by the Division of Enforcement seeking, as relief, denial of the application for registration, and the request for hearing shall be treated as an answer which generally denies every allegation contained in the notice upon which a hearing has been requested: Provided, however, That (1) the Division of Enforcement may thereafter amend the complaint to seek such other and further relief as may be appropriate in view of the matters charged and, with leave of the Commission, may allege further grounds as a basis for denial of registration; and (2) the applicant may supplement his answer to set forth any affirmative defenses he may wish to assert and the alleged facts upon which those defenses are based. The provisions of §§ 10.22 and 10.23 of the rules of practice, concerning a complaint and answer, shall otherwise be inapplicable. (d) If no request for a hearing is received by the Executive Director within thirty days after a notice has been given in accordance with paragraph (b) of this section, the Executive Director may proceed as follows: (1) In the case of an applicant for an initial registration, pursuant to authority hereby delegated by the Commission, the Executive Director may determine the applicant's fitness for registration and may issue an order. pursuant to Section 8a(2) of the Commodity Exchange Act, granting or refusing registration to the applicant based upon the application, the notice with proof of service, and an appropriate showing that a hearing has not been requested. (2) In the case of an applicant for renewal of a registration previously granted, the Executive Director may transmit 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(2) of the refusing registration to the applicant. Commodity Exchange Act, granting or (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. |