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and Exchange Commission, (A) from acting as a commodity trading advisor, commodity pool operator, futures commission merchant, floor broker, securities broker or 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 (B) from engaging in or continuing any conduct or practice in connection with any such activity or involving any transaction or advice concerning commodities 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 Investment Company Act of 1940, Investment Advisers Act of 1940, 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, or associated person, or suspending or expelling such person from membership on any contract market;

(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;

necessary, after further investigation of these facts, to institute the publi procedures for denial of registration described in paragraph (b) of this sec tion;

(4) In these circumstances, an appli cant is required to reconfirm in writ ing that he wishes to have his applica tion 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 Ex change Act that:

(1) The Division of Trading and Markets and the Division of Enforce ment 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 upor which the applicant may be found unfit for registration pursuant to Sec tion 8a(2)(B) of the Commodity Ex change Act and upon which he appli cant'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, not withstanding the truth of those allega tions, registration should nevertheles be granted;

(4) A hearing for these purpose may be obtained by filing a written re quest with the Executive Dir within thirty days after the the notice to the applicant: (5) If the applicant de request a hearing h have waived all issues and

(6) If reques

(3) Unless the applicant voluntarily withdraws his application it may be the

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, mi complaint and answ

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determine the applicant's fitness for registration and may issue an order pursuant to Section 8a(2) of the Com modity Exchange Act, granting or re fusing registration to the applicant based upon the application, the notice with proof of service, and an appropri ate showing that a hearing has not been requested.

(2) In the case of an applicant for e newal of a registration previous. granted, the Executive Director ma transmit to the Chief Administrative Law Judge a true copy of the applica tion, 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 author, hereby delegated by the Commiss.C may determine the applicants fituese for registration and may issu 21 order, pursuant to Section sa 2 ci tre Commodity Exchange Act, granting on refusing registration to the appe

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receives from others, funds, securities, or property, either directly or through capital contributions, the sale of stock or other forms of securities, or otherwise, for the purpose of trading in any commodity for future delivery on or subject to the rules of any contract market, but does not include such persons not within the intent of this definition as the Commission may specify by rule or regulation or by order.

(dd) Commission. This term means the Commodity Futures Trading Commission.

(ee) Self-regulatory organization. This term means a contract market (as defined in § 1.3(h)), or a registered futures association under section 17 of the Act.

(ff) Designated self-regulatory organization. This term means a self-regulatory organization of which a futures commission merchant is a member or, if the futures commission merchant is a member of more than one self-regulatory organization and such futures commission merchant is the subject of an approved plan under § 1.52, then a self-regulatory organization delegated the responsibility by such a plan for monitoring and auditing such futures commission merchant for compliance with the minimum financial and related reporting requirements of the selfregulatory organizations of which the futures commission merchant is a member, and for receiving the financial reports necessitated by such minimum financial and related reporting requirements from such futures commission merchant.

(Secs. 2, 4a(3), 42 Stat. 998, 49 Stat. 1492. 82 Stat. 26, 27, 88 Stat. 1413; 7 U.S.C. 2, 6a(3); 7 U.S.C. 6c, 6d, 6f, 6g, 7a, 12a, 19 and 21)

[41 FR 3194, Jan. 21, 1976; 41 FR 4255, Jan. 29, 1976, as amended at 41 FR 51814, Nov. 24, 1976; 42 FR 42750, Aug. 24, 1977; 43 FR 39967, Sept. 8, 1978]

REGISTRATION

§ 1.7 Registration required of futures commission merchants.

No person shall engage as futures commission merchant in the solicitation or acceptance of orders for the purchase or sale of any commodity for future delivery, on or subject to the rules of any contract market, unless

the Commission has registered such person as a futures commission merchant under the Act and such registration has not expired and is not under suspension or revocation: Provided however, That a person trading solely for proprietary accounts within the meaning of § 1.3(y) shall not be required to register as a futures commission merchant; such a person trading solely for proprietary accounts as defined, shall otherwise be subject to all provisions of the Act and of the rules, regulations and orders thereunder. §1.9 Registration as one type of person not included in registration as any other type of person.

Registration as one type of person (e.g. futures commission merchant) subject to regulation under the Act shall not include registration as any other type of person subject to regulation under the Act (e.g., commodity pool operator), except that an individual who is registered as a futures commission merchant or as a floor broker (and such registration is not suspended or revoked) need not also register as an associated person.

(7 U.S.C. 6f, 6k, 6n, and 12a (Supp. V. 1975).) [42 FR 23993, May 11, 1977]

§ 1.10 Application for registration and financial reports of futures commission merchants.

(a) Application for registration. (1) Application for registration as a futures commission merchant shall be filed on form 7-R in accordance with the instructions contained therein. The initial application for registration shall be accompanied by a 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 who performs similar functions, or is any other controlling person of the applicant; except that an accompanying form 8-R need not be filed by an 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.

(2) Except as provided in paragraph (a)(3) of this section, each person who files an application for registration as a futures commission merchant, and who is not so registered at the time of such filing, must, concurrently with the filing of such application file either: (i) A form 1-FR certified by an independent public accountant in accordance with § 1.16 as of a date not more than 45 days prior to the date on which such report is filed, or (ii) a form 1-FR as of a date not more than 45 days prior to the date on which such report is filed and a form 1-FR certified by an independent public accountant in accordance with § 1.16 as of a date not more than 1 year prior to the date on which such report is filed. Each such person must include with such financial report a statement describing the source of his current assets and representing that his capital has been contributed for the purpose of operating his business and will continue to be used for such purpose.

(3) The provisions of paragraph (a)(2) of this section do not apply to any person succeeding to and continuing the business of another futures commission merchant. Each such person who files an application for registration as a futures commission merchant and who is not so registered at the time of such filing must file a form 1-FR as of the first monthend following the date on which his registration is approved. Such report must be filed with the Commission and the designated self-regulatory organization, if any, not more than 45 days after the date for which the report is made.

(b) Filing of financial reports. Except as provided in paragraph (b) of this section, each person registe as a futures commission merch must file a form 1-FR for each fis quarter of each fiscal year unless t registrant elects pursuant to pa graph (e)(2) of this section to file form 1-FR for each calendar quar of each calendar year. Each form FR must be filed no later than 45 da after the date for which the report made: Provided, however, That a form 1-FR which must be certified an independent public accountant pu suant to paragraph (b)(2) of this se tion must be filed no later than days after the close of each regi trant's fiscal year. This paragrap (b)(1) will be applicable to all fisc quarters ending after the effectiv date of this section but in no ever more than 90 days after such effectiv date.

(2) The form 1-FR filed pursuant t paragraph (b)(1) of this section as the close of the registrant's fiscal yea must be certified by an independer public accountant in accordance wit § 1.16. A registrant who has elected t file its forms 1-FR for each calenda quarter of each calendar year pursu ant to paragraph (e)(2) of this section must nonetheless file a form 1-FR s certified as of the close of such regis trant's fiscal year.

(3) The provisions of paragraph (b)(1) and (b)(2) of this section may b met by any person registered as a fu tures commission merchant who is member of a designated self-regula tory organization and conforms t minimum financial standards and re lated reporting requirements set b such designated self-regulatory organ zation in its bylaws, rules, regulation: or resolutions and approved after th effective date of these regulations b the Commission pursuant to sectio 4f(2) of the Act and § 1.52: Provide however, That each such registran shall promptly file with the Commis sion a true and exact copy of each f nancial report which it files with suc designated self-regulatory organiza tion.

(4) Upon receiving written notic from any representative of the Com

mission or any self-regulatory organization of which it is a member, an applicant or registrant must, monthly or at such times as specified, furnish the Commission and the self-regulatory organization, if any, requesting such information with a form 1-FR and/or such other financial information as requested by the representative of the Commission or the self-regulatory organization. Each such form 1-FR or such other information must be furnished within the time period specified in the written notice.

(c) Where to file reports. The reports provided for in this § 1.10 will be considered filed when received by the regional office of the Commission nearest the principal place of business of the applicant or registrant and by the designated self-regulatory organization, if any; Provided, however, That information required of an applicant or registrant pursuant to paragraph (b)(4) of this section need be furnished only to the self-regulatory organization requesting such information and the Commission.

(d) Contents of financial reports. (1) Each form 1-FR filed pursuant to this § 1.10 which is not required to be certified by an independent public accountant must be completed in accordance with the instructions to the form and contain: (i) A statement of financial condition as of the date for which the report is made; (ii) a statement of changes in ownership equity for the period between the date of the most recent statement of financial condition filed with the Commission (or the beginning of the fiscal quarter immediately following the effective date of this rule but in no event more than 90 days after such effective date) and the date for which the report is made; (iii) a statement of the computation of the minimum capital requirements pursuant to § 1.17 and a schedule of segregation requirements and funds on deposit in segregation, as of the date for which the report is made; and (iv) in addition to the information expressly required, such further material information as may be necessary to make the required statements and schedules not misleading.

(2) Each form 1-FR filed pursuant to this 1.10 which is required to be certified by an independent public accountant must be completed in accordance with the instructions to the form and contain: (i) A statement of financial condition as of the date for which the report is made; (ii) statements of income (loss), changes in financial position, changes in ownership equity, and changes in liabilities subordinated to claims of general creditors, for the period between the date of the most recent certified statement of financial condition filed with the Commission (or the beginning of the fiscal year immediately following the effective date of this rule but in no event more than 1 year after such effective date) and the date for which the report is made: Provided, That for an applicant filing pursuant to paragraph (a)(2) of this section the period must be the year ending as of the date of the statement of financial condition; (iii) a statement of the computation of the minimum capital requirements pursuant to § 1.17 and a schedule of segregation requirements and funds on deposit in segregation, as of the date for which the report is made; (iv) appropriate footnote disclosures; and (v) in addition to the information expressly required, such further material information as may be necessary to make the required statements not misleading.

(3) The statements required by paragraphs (d)(2)(i) and (d)(2)(ii) of this section may be presented in accordance with generally accepted accounting principles in the certified reports filed as of the close of the registrant's fiscal year pursuant to paragraph (b)(2) of this section or accompanying the application for registration pursuant to paragraph (a)(2) of this section, rather than in the format specifically prescribed by these regulations: Provided, the statement of financial condition is presented in a format as consistent as possible with the form 1-FR and a reconciliation is provided reconciling such statement of financial condition to the statement of the computation of the minimum capital requirements pursuant to § 1.17. Such reconciliation must be certified by an inde

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