[Federal Register Volume 60, Number 239 (Wednesday, December 13, 1995)]
[Rules and Regulations]
[Pages 63907-63913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30358]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 3
Ethics Training for Registrants
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rule.
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SUMMARY: On July 22, 1994, the Commodity Futures Trading Commission
(Commission) published for comment proposed amendments to Rule 3.34,
which governs ethics training for Commission registrants. 59 FR 37446.
Based upon its review of the comments received and its own
reconsideration of the proposed amendments, the Commission has
determined to adopt the rule amendments as proposed, with certain
modifications discussed herein.
EFFECTIVE DATE: These rule amendments will become effective January 12,
1996. However, with respect to existing ethics training providers, the
provision of Sec. 3.34(b)(5) relating to promotional and instructional
materials, including videotape and computer presentations, will become
applicable March 12, 1996.
FOR FURTHER INFORMATION CONTACT: Lawrence B. Patent, Associate Chief
Counsel, or Myra R. Silberstein,
[[Page 63908]]
Attorney-Advisor, Division of Trading and Markets, Commodity Futures
Trading Commission, 1155 21st Street, N.W., Washington, D.C. 20581.
Telephone (202) 418-5450.
SUPPLEMENTARY INFORMATION:
I. Background
Section 210 of the Futures Trading Practices Act of 1992 added a
new paragraph (b) to Section 4p of the Commodity Exchange Act (Act),
mandating ethics training for all persons registered under the Act.\1\
On April 15, 1993, the Commission adopted Rule 3.34 to implement this
Congressional mandate.\2\ By Federal Register release issued on
September 13, 1993, the Commission provided further guidance with
respect to the contents of applications to be submitted by persons
seeking to provide ethics training to registrants.\3\
\1\ This provision of the Act is codified at 7 U.S.C.
6p(b)(1994) and states that:
The Commission shall issue regulations to require new
registrants, within 6 months after receiving such registration, to
attend a training session, and all other registrants to attend
periodic training sessions, to ensure that registrants understand
their responsibilities to the public under this Act, including
responsibilities to observe just and equitable principles of trade,
any rule or regulation of the Commission, any rule of any
appropriate contract market, registered futures association, or
other self-regulatory organization, or any other applicable Federal
or state law, rule or regulation.
\2\ 58 FR 19575, 19584-19587, 19593-19594 (April 15, 1993).
\3\ 58 FR 47890 (September 13, 1993). The Commission has
reviewed applications from more than twenty-five persons seeking to
provide ethics training to registrants.
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Proposed amendments to Rule 3.34, published in July 1994, would:
(1) require a certification by persons seeking to provide ethics
training that they would not be disqualified from registration under
the Act; (2) limit certain representations that ethics training
providers may make concerning their status as such; (3) facilitate the
use of videotape and electronic presentations; and (4) enhance the
ability of a registered futures association to track the ethics
training attendance dates of registrants. The Commission received four
comment letters on the proposed rule amendments. The commenters
included a registered futures association, a computer-based ethics
training provider and two other ethics training providers. The
commenters generally supported, or acknowledged their understanding of,
the objectives of the proposed rule amendments. Some commenters,
however, criticized the scope of the proposed rule amendments. Further,
one of the ethics training providers who submitted comments requested
additional time to update its program materials to comply with the
changes that would be required by the rule amendments. Comments
addressed to specific provisions of the proposed rule amendments and
the Commission's resolution of the issues raised therein are discussed
below in the context of the relevant rule provision.
Based upon its review of the comments received on the proposed
amendments and in light of its experience in administering this
program, the Commission has adopted amendments to Rule 3.34 regarding
ethics training providers. The provisions of Rule 3.34 relating to the
topics to be covered in ethics training and the minimum requirements
for attendance at such training remain unchanged. The amendments
adopted herein will, subject to proposed amendments to Rule 3.34
published in this edition of the Federal Register, permit a person to
be included by a registered futures association on a list of authorized
providers of such training upon filing of a notice with a registered
futures association certifying that: (1) he is not subject to a
statutory disqualification from registration under the Act; \4\ (2)
barred from service on self-regulatory organization (SRO) governing
boards or committees pursuant to Commission Rule 1.63 or SRO rules; or
(3) subject to a pending proceeding with respect to possible violations
of the Act or rules or orders promulgated thereunder. These amendments
will also prohibit certain representations with respect to a person's
status as an ethics training provider; allow wider use of ethics
training presentations by videotape and computer; and require ethics
training providers to furnish records of attendees to a registered
futures association upon request.
\4\ Sections 8a (2) and (3) of the Act, 7 U.S.C. 12a (2) and (3)
(1994).
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By separate release published in this edition of the Federal
Register, the Commission is proposing several additional amendments to
Rule 3.34 to address certain further issues relating to ethics training
providers. These amendments would require ethics training providers
other than SROs: (1) To satisfy the same proficiency testing
requirements as registrants; and (2) have at least three years of
pedagogical or relevant industry experience.
II. Amendments to Commission Rule 3.34
A. Required Certifications by Applicants to Become Ethics Training
Providers
Currently, three categories of persons may provide ethics training
to Commission registrants pursuant to Rule 3.34: (1) SROs; (2) entities
accredited to conduct continuing education programs by a state
professional licensing authority in the fields of law, finance,
accounting or economics; or (3) any other person whose program ``is
approved by the Commission for this purpose.'' \5\ The amendments to
Rule 3.34 proposed in July 1994 would have continued to permit SROs and
state-accredited continuing education providers to act as ethics
training providers without compliance with any additional requirements.
With respect to persons other than SROs or state-accredited entities,
the proposed amendments would permit such persons to provide ethics
training upon filing of a notice with a registered futures association
certifying that the person, all principals thereof (as defined in
Commission Rule 3.1(a)) \6\ and any individuals who, on behalf of such
person, conduct in-person ethics training sessions or prepare ethics
training videotape or electronic presentations,\7\ are not subject to:
(1) any statutory disqualification from registration under Sections
8a(2) or (3) of the Act; \8\ (2) a bar from service on SRO governing
boards or committees arising from relevant disciplinary history, as
specified in Commission Rule 1.63 \9\ or any SRO rule adopted
thereunder; or (3) a pending adjudicatory proceeding under Sections
6(c), 6(d), 6c, 6d, 8a or 9 of the Act or
[[Page 63909]]
Commission Rules 3.55, 3.56 or 3.60.\10\ This certification procedure
will replace the existing application procedure for entities that are
not SROs or state-accredited providers of continuing education in the
fields of law, finance, accounting or economics.
\5\ 17 CFR 3.34(b)(3)(1995).
\6\ 17 CFR 3.1(a)(1995).
\7\ Thus, if an entity organizes a corporation to offer ethics
training and hires an instructor to conduct the lectures, the notice
must include within its coverage the entity, the corporation and the
instructor. Such notice must also be amended as necessary to cover
any additional instructors required to handle the number of persons
enrolling in the ethics training program.
\8\ 7 U.S.C. 12a(2) or (3)(1994). The Act specifies several
grounds for disqualification from registration including, among
others, a prior revocation of registration, felony conviction, and
an injunction relating to futures or securities activities.
\9\ Pursuant to Rule 1.63, each SRO must maintain in effect
rules which render a person ineligible to serve on its governing
boards, disciplinary committees, or arbitration panels who, among
other things, has been found within the prior three years to have
committed a disciplinary offense or entered into a settlement
agreement where the charge involved a ``disciplinary offense,'' is
currently suspended from trading on any contract market, is
suspended or expelled from membership in any SRO, or is currently
subject to an agreement with the Commission or an SRO not to apply
for registration or membership. A ``disciplinary offense'' for these
purposes means any violation of the Act or the rules promulgated
thereunder or SRO rules other than those relating to (1) decorum or
attire, (2) financial requirements, or (3) reporting or
recordkeeping, unless resulting in fines aggregating more than
$5,000 in a calendar year, provided such SRO rule violations did not
involve fraud, deceit or conversion, or result in a suspension or
expulsion. 17 CFR 1.63 (1995).
\10\ A pending proceeding is a basis to bar a person whose
registration has expired within the preceding sixty days from
obtaining a temporary license upon mailing a new registration
application (see 17 CFR 3.11(c)(1)(i)(B), 3.11(c)(1)(ii)(B),
3.12(d)(1)(iv), and 3.12(i)(1)(iv)(1995)), to bar a person from
serving as a sponsor or special supervisor of a conditioned or
restricted registrant (see 17 CFR 3.60(b)(2)(i)(A)(1995)), and to
prevent withdrawal from registration (see 17 CFR 3.33(f)(1) (1995)).
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The Commission believes that it is appropriate to require persons
seeking to act as ethics trainers to provide a certification of the
nature outlined above in order to assure a minimum level of fitness to
act as ethics trainers.\11\ The statutory requirement for ethics
training is intended ``to ensure that registrants understand their
responsibilities to the public under [the] Act, including
responsibilities to observe just and equitable principles of trade, any
rule or regulation of the Commission, any rules of any appropriate
contract market, registered futures association, or other self-
regulatory organization or any other applicable Federal or State law,
rule or regulation.'' \12\ The Commission believes that, generally, it
would be inconsistent with this Congressional mandate and contrary to
the public interest for a person to instruct others about their
responsibilities under the Act and other applicable requirements if
such person has a disciplinary history that reflects a failure to
comply with such provisions.
\11\ The requirements discussed above apply to a certification
from any ethics training provider. As discussed below, if the ethics
training provider will offer training by means of videotape or
electronic presentation, the provider's certification would also be
required to include a statement with respect to verification of
registrants' attendance.
\12\ Section 4p(b) of the Act.
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The Commission has used several objective, established benchmarks
to identify persons with disciplinary histories that call into question
their suitability to provide ethics training. Disqualifying
disciplinary histories for this purpose would be those which constitute
disqualifications from registration under the Act or bars from service
on SRO governing boards or committees, pending adjudicatory
proceedings, including disqualification proceedings relating to
possible violations of the Act or Commission rules. The Commission has
also provided in the final rules, as in the proposed rules, that the
certification requirement imposes a continuing duty; consequently, if
the certification becomes inaccurate, the provider must so inform the
registered futures association, which shall then refuse to include such
person on, or remove such person from, the list of ethics training
providers.13
\13\ However, if a firm is subject to a pending adjudicatory
proceeding as described above, the firm may submit a certification
to a registered futures association with an explanation describing
the circumstances of the proceeding, particularly with respect to
the scope and nature of the proceeding in relation to the size of
the firm. For example, a proceeding that is limited to a single
branch office of a firm and that does not involve fraud or failure
to supervise might be treated differently than a proceeding
involving allegations extending to the overall operations of the
firm or making claims of fraud. The Commission would expect the
registered futures association to consult the Commission concerning
specific certifications in cases involving an ethics provider that
is or becomes subject to a proceeding.
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One effect of these amendments is to permit the National Futures
Association (NFA), currently the only registered futures association,
to maintain a list of eligible ethics training providers for purposes
of Commission Rule 3.34. In its comment letter on the proposed
amendments, NFA recommended that the rule amendments provide procedural
protection for ethics training providers who are either rejected or
removed from the list by NFA. In particular, NFA recommended that
providers rejected or removed from the list be afforded a hearing
before NFA with an opportunity to appeal to the Commission. The
Commission believes such a procedure to be appropriate and,
accordingly, has incorporated it in the final rules as subparagraph
3.34(b)(3)(v). The Commission contemplates that the hearing before NFA
in these circumstances could be limited to written submissions and that
any subsequent appeal to the Commission would be based on the record
before NFA.
NFA also stated in its comment letter that it was uncertain how
information regarding statutory disqualifications could be verified,
particularly if it could not require that fingerprints be provided and
thus would be unable to access the Federal Bureau of Investigations
criminal records database. Although cognizant of this limitation, the
Commission believes that, in the first instance, NFA should employ the
other existing databases that it uses to verify applications of
registrants, including the Clearinghouse of Disciplinary Information
which NFA maintains with respect to futures industry data and the
Securities and Exchange Commission database on securities industry
violations.
Another commenter stated that all ethics training providers,
including state-accredited continuing education entities and SROs,
should be subject to prior approval by the Commission. The Commission's
ethics training rule has not previously required state-accredited
entities and SROs to file an application before providing ethics
training to registrants. When the Commission originally adopted Rule
3.34(b), it did not require applications for authorization to provide
ethics training by SROs and state-accredited entities because SROs are
subject to the Commission's regulatory framework and oversight, while
state-accredited entities are subject to certification and review by
the relevant state. However, in the proposed rule amendments published
elsewhere in this edition of the Federal Register, the Commission is
now proposing that state-accredited entities be subject to
certification and monitoring applicable to other ethics training
providers, as discussed above. The Commission believes that in the
absence of such compliance, given the lack of uniformity in state
continuing education accreditation requirements, it will not have
sufficient assurance that such providers have a minimum level of
knowledge of relevant statutory and regulatory requirements or of
fitness to provide ethics training.14
\14\ In the proposing release, the Commission also is inviting
comments concerning the continued appropriateness of permitting SROs
to offer ethics training without qualifying to do so in the same
manner as other providers.
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One commenter stated that those ethics training providers whose
applications to provide ethics training have already been granted by
the Commission should be exempt from the certification process set
forth in the proposed amendments to Rule 3.34. The Commission agrees
with this view and will provide NFA with the current list of authorized
ethics training providers for inclusion in the list of authorized
providers. However, NFA will be expected to monitor existing providers
as well as new providers and may remove any provider for cause as
contemplated by subparagraph (b)(3)(iv). As noted above, if
circumstances change such that an ethics provider's certification
becomes inaccurate, the provider must so inform the NFA. Upon such
notice from the provider (or otherwise), NFA shall refuse to include
such person on or remove such person from the list of authorized
providers.
B. Delegation of Authority
The purposes of subparagraphs (b)(3)(iii) through (b)(3)(v) of Rule
3.34 are to permit NFA to maintain a list of eligible ethics training
providers.
[[Page 63910]]
Therefore, the Commission hereby delegates authority to NFA: (1) To
maintain the list of eligible ethics training providers for purposes of
Commission Rule 3.34, including the authority to refuse to include
persons on such list pursuant to the criteria set forth in Rule
3.34(b)(3)(iii) or criteria established by NFA and approved by the
Commission; (2) to establish guidelines as to the required proficiency
and experience of ethics training providers; (3) to receive and
evaluate complaints concerning such providers and conduct other
appropriate reviews of providers' operations, subject to Commission
oversight; (4) to develop appropriate procedures to verify
certifications filed by potential ethics training providers; and (5) to
require that such certifications be updated periodically. NFA's
procedures must be submitted to the Commission for review pursuant to
Section 17(j) of the Act,15 which governs Commission review and
approval of registered futures association rules.
\15\ 7 U.S.C. 21(j)(1994).
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In its comment letter on the proposed amendments to Rule 3.34, NFA
supported the Commission's proposal to delegate responsibility to NFA
for the processing and review of applications of prospective ethics
training providers and confirmed its willingness to assume this
responsibility. However, NFA suggested that the Commission establish
objective standards for NFA to follow in discharging these
responsibilities. NFA expressed the view that ethics training providers
should satisfy a proficiency standard that is objective, readily
measurable and would assure that providers possess a working knowledge
of the industry and its regulations.
As noted above, the Commission is proposing, by separate Federal
Register release, certain minimum requirements with respect to
proficiency testing and experience to be applicable to ethics training
providers other than SROs. These proposals include a requirement that
ethics training providers be subject to the same proficiency testing
requirements as the registrants they propose to instruct. This
proficiency test will generally be the National Commodity Futures
Examination (Series 3 Exam).
The Commission is also proposing to require that ethics training
providers other than SROs demonstrate that they have at least three
years of pedagogical or relevant industry experience. The Commission's
delegation of authority to NFA includes authority to establish
guidelines concerning the specific types of pro-ficiency tests and
experience necessary to satisfy these requirements.16 Of course,
NFA may submit to the Commission for decision any specific matters
which have been delegated to it and Commission staff will be available
to discuss with NFA staff issues relating to the implementation of
these rules, including the review of operations of ethics training
providers.
\16\ In comparable areas, such as registration and review of
promotional material, the Commission has delegated authority to NFA
to develop and implement specific standards and, in those instances,
NFA has established standards above the minimum levels previously
established by the Commission or set forth in the Act. See, e.g.,
NFA Rule 2-8(d) (minimum experience requirements for an associated
person to exercise discretion over an account).
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C. Permissible Representations
To date, in granting the applications of persons seeking to provide
ethics training, the Commission has made clear that it is not approving
the specific content of the proposed ethics training program or
expressing any opinion as to the program's quality or accuracy. The
Commission believes that it is appropriate to clarify by rule the
effect of authorization to provide ethics training under Rule 3.34 for
all providers. Accordingly, the Commission proposed in Rule 3.34(b)(5)
to prohibit any representation or implication that an ethics training
provider has been sponsored, recommended or approved, or the provider's
abilities or qualifications or the content, quality or accuracy of the
training program provided, has in any respect been passed upon or
endorsed by the Commission, a registered futures association, or any
representative thereof.
The commenters voiced no objections to this proposed provision.
However, one commenter requested that the effective date of these rule
amendments be delayed for ninety days for existing ethics training
providers to enable them to modify their presentations and materials to
comply with the adopted changes. The Commission believes that all
providers should be given ninety days in which to comply with the
requirement to include the specified statement in promotional and
instructional material. Therefore, the effective date of Rule
3.34(b)(5) will be ninety days following publication, rather than
thirty days following publication, which is the effective date for all
other provisions.
Accordingly, the Commission has adopted Rule 3.34(b)(5) to provide
that no SRO, state-accredited continuing education entity or other
person included on a list of ethics training providers ``may represent
or imply in any manner whatsoever that such person has been sponsored,
recommended or approved, or that such person's abilities or
qualifications, the content, quality or accuracy of his training
program, or the positions taken in the course of resolving any actual
or hypothetical situations presenting ethical or legal issues,17
have in any respect been passed upon or endorsed, by the Commission or
a registered futures association.'' Rule 3.34(b)(5) further provides
that any promotional or instructional material used in connection with
ethics training ``must prominently state that the Commission and any
registered futures association have not reviewed or approved the
specific content of the training program and do not recommend the
provider of such training.'' 18
\17\ This additional language has been added to clarify the
proposal and is consistent with the intent of Rule 3.34.
\18\ Rule 3.34(b)(5) also contains a proviso that it ``shall not
be construed to prohibit a statement that a person is included on a
list of ethics training providers maintained by a registered futures
association if such statement is true in fact and if the effect of
such a listing is not misrepresented.''
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In the July 1994 release, the Commission also proposed to limit the
use an ethics training provider may make of that status in certain
adjudicatory proceedings. As stated in the proposing release, the
Commission did not believe that a person should be able to use his or
her status as an ethics training provider to qualify as an expert
witness or to present expert testimony in an adjudicatory proceeding
before the Commission or to which the Commission is a party. While the
commenters voiced no objections to this provision, the Commission, upon
reconsideration of this issue, has determined that the prohibitions of
the representations specified in paragraph (b)(5) should suffice to bar
inappropriate use of status as an ethics training provider. Therefore,
the Commission has not adopted proposed paragraphs (b)(5)(ii) and
(b)(5)(iii) of Rule 3.34, which would have limited certain uses of
status as an ethics training provider. However, the Commission
emphasizes that inclusion on the list of authorized ethics training
providers should not be viewed as a warranty of expertise and that in
its view such status should not be accorded weight in determinations of
the provider's qualifications as an expert witness.
D. Videotape and Electronic Presentations
Commission Rule 3.34(b)(3) provides that a program of ethics
training may be
[[Page 63911]]
offered by videotape or electronic presentation. In adopting Rule 3.34,
the Commission initially provided that videotape or computer training,
in lieu of in-person ethics training, should only be available when
geographical inconven-ience or other factors made in-person training
impracticable.19 However, in proposing amendments to Rule 3.34 in
July 1994, the Commission indicated that any registrant may meet his
ethics training requirement through in-person courses or through the
use of videotape or computer presentations regardless of
circumstances.20
\19\ 58 FR 19575, 19586-19587.
\20\ 59 FR 37446, 37448.
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The Commission also wishes to make clear, however, that if
videotape or electronic training is offered, the provider must be able
to verify that the video has been viewed or the electronic training
completed by the registrant before the provider issues a certificate of
attendance to the registrant.21 Therefore, Rule
3.34(b)(3)(iii)(B), as revised by the amendments adopted herein,
requires that, if a provider will conduct training by means of
videotape or electronic presentations, either exclusively or in
addition to in-person training, the provider's certification required
under Rule 3.34(b)(3)(iii) must be supplemented to include a
representation that the provider will maintain documentation reasonably
designed to verify that registrants have properly completed ethics
training for the minimum time required (one, two or four hours).
\21\ 58 FR 19575, 19586-19587.
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The Commission envisages that an appropriate verification regime
for a provider would include procedures such as the following. The
provider would maintain a list of the computer-based ethics program
purchasers and match each completed program with a record of purchase.
Registrants would be required to enter identifying information, such as
name, firm's name, business address, telephone number, date of birth,
NFA and/or Social Security number, on the control disk and return a
signed statement with the completed computer disk certifying that he
did in fact complete the ethics training course in the manner set out
in the instructions.
With respect to the fulfillment of the minimum time requirements
and verification of the registrants' participation in the program, the
ethics training provider could use a computer-based test to assure that
the registrant has attained a minimum level of understanding of the
materials covered, drawing upon matters covered in video and written
materials, as well as the computer program, to the extent applicable.
To assure that each section of the program is completed, registrants
would be required to pass each section of the test prior to answering
questions in later sections of the test. While those who fail the test
would be required to retake it until it is successfully completed, only
the time spent on the first test could be credited toward the ethics
training time required by Rule 3.34. Registrants answering quickly
would be given additional questions to answer, and the program would
cease recording elapsed time for those slow to answer questions. Thus,
registrants would be monitored both as to time spent and material
covered. If a provider wished to follow a different verification
regime, he could do so if such steps had been submitted to and not
found objectionable by a registered futures association.
The Commission contemplates that an ethics training provider would
be able to document that a registrant had undertaken the various steps
required for the provider to verify completion. The provider would be
required under revised Rule 3.34(b)(4) to maintain documentation
substantiating its determination that ethics training has been properly
completed by a registrant and to support its issuance of a certificate
of attendance.22
\22\ Revised Rule 3.34(b)(4) also requires that records of
trainer evaluations be maintained.
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As noted above with respect to the limitations upon representations
concerning authorization to provide ethics training, certain commenters
requested that the effective date of the rule amendments be delayed for
ninety days for existing ethics training providers to enable the
providers to modify their video or electronic presentations and
materials to comply with the rule amendments. Since new paragraph
(b)(5) of Rule 3.34 concerning permissible representations applies to
all promotional or instructional materials, that provision encompasses
videotape and electronic presentations. Accordingly, the deferred
effective date for the provision discussed above should accommodate any
concerns of these commenters with respect to videotape or electronic
presentations and materials.
E. Recordkeeping
Rule 3.34(b)(4), which governs recordkeeping by an ethics training
provider, requires ethics training providers to maintain records of
materials used in and attendees at such training in accordance with
Commission Rule 1.31, i.e., for a five-year period.23 The
Commission proposed to add a provision to these recordkeeping
requirements to require providers of ethics training to furnish records
of attendees at such training to a registered futures association in
such format as the registered futures association may request. As noted
in the proposing release, NFA is willing to compile information on
ethics training attendance for inclusion in the registration database
and believes that ethics training providers should cooperate with NFA
requests for the information which providers are already required to
maintain. In its comment letter, NFA stated that it was confident that
the Commission's amendment to Rule 3.34(b), requiring providers to
furnish a list of ethics training attendees to NFA, will streamline the
recordkeeping needed in this area. Further, NFA believes that this
requirement will reduce the burden borne by registrant firms in
determining whether a prospective employee has satisfied his ethics
training requirement. The Commission believes compilation of ethics
training attendance data by NFA (or other registered futures
associations) will produce a central repository of such information,
which should benefit all registrants and facilitate oversight of
compliance with the ethics training requirement. To facilitate NFA's
incorporation of this data in the registration database, ethics
training providers should include appropriate identifiers of
registrants, such as NFA identification number, and follow other format
conventions requested by NFA.
\23\ 17 CFR 1.31 (1995). When the Commission adopted Rule 3.34,
it stated that it would monitor the effectiveness of the requirement
for maintaining a record of ethics training attendance and might
reconsider the issue at a later date if appropriate. 58 FR 19575,
19587.
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One commenter requested that ethics training providers be permitted
to use identifiers other than NFA identification numbers, e.g., name,
date of birth or social security number, in reporting attendees to NFA.
While this comment may have merit, the final rule amendments require
providers to respond to NFA requests for information and to furnish to
NFA the information that providers are already required to maintain.
The specific data needed by NFA to maintain and compile its database
may be decided by NFA. The Commission does not believe that it should
be unduly burdensome for ethics training providers to obtain NFA
identification numbers from attendees, unless such persons have not yet
registered or filed an application for
[[Page 63912]]
registration.24 However, NFA should arrange with providers to
accomplish this task by the most efficient means for all concerned.
\24\ Ethics training may be taken up to six months prior to the
date of application for registration. See 58 FR 19575, 19585.
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III. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601-611 (1988),
requires that agencies, in proposing rules, consider the impact of
those rules on small businesses. The rule amendments discussed herein
will affect only those ethics training providers that are not SROs or
entities accredited to conduct continuing education programs by a state
professional licensing authority in the fields of law, finance,
accounting or economics. The Commission believes that the impact of
these rule amendments on other providers of ethics training or persons
seeking to become providers of ethics training should be minimal. The
procedure for becoming an ethics training provider will be simplified.
The restrictions upon permissible representations by ethics training
providers concerning their status as such essentially codify conditions
already imposed by the Commission to date in granting applications of
individual ethics training providers. Finally, since ethics training
providers are already required to maintain records of attendees,
furnishing such information to NFA upon request should not be unduly
burdensome. Therefore, these rules will not have significant economic
impact on a substantial number of small entities.
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1980 (PRA), 44 U.S.C. 3501 et seq.,
imposes certain requirements on federal agencies (including the
Commission) in connection with their conducting or sponsoring any
collection of information as defined by the PRA. In compliance with the
PRA, the Commission has previously submitted this rule and its
associated information collection requirements to the Office of
Management and Budget. While the amendments adopted herein have no
burden, Rule 3.34 is a part of a group of rules which has the following
burden:
Rules 3.16, 3.32 and 3.34 (3038-0023, approved June 2, 1993):
Average Burden Hours Per Response--1.13
Number of Respondents--60,980
Frequency of Response--On Occasion and Triennially
Persons wishing to comment on the information which will be
required by these rules as amended should contact Jeff Hill, Office of
Management and Budget, room 3228, NEOB, Washington, D.C. 20503, (202)
395-7340. Copies of the information collection submission to OMB are
available from Joe F. Mink, CFTC Clearance Officer, 1155 21st St. N.W.,
Washington, D.C. 20581, (202) 418-5170.
List of Subjects in 17 CFR Part 3
Registration, Ethics training
Accordingly, the Commission, pursuant to the authority contained in
the Commodity Exchange Act and, in particular, Sections 1a, 4d, 4e, 4g,
4m, 4p, 8a and 17 thereof (7 U.S.C. 1a, 6d, 6e, 6g, 6m, 6p, 12a and 21
(1994)), hereby amends Part 3 of Chapter I of Title 17 of the Code of
Federal Regulations as follows:
PART 3--REGISTRATION
1. The authority citation for Part 3 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 4, 4a, 6, 6b, 6d, 6e, 6f, 6g, 6h, 6i,
6k, 6m, 6o, 6p, 8, 9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 21 and 23;
5 U.S.C. 552, 552b.
2. Section 3.34 is amended by revising paragraphs (b)(3) and (b)(4)
and by adding paragraph (b)(5) to read as follows:
Sec. 3.34 Mandatory ethics training for registrants.
* * * * *
(b) * * *
(3) The training required by this section must be provided by or
pursuant to a program of training (including videotape or electronic
presentation) sponsored by:
(i) A self-regulatory organization;
(ii) An entity accredited to conduct continuing education programs
by a state professional licensing authority in the fields of law,
finance, accounting or economics; or,
(iii) A person included on a list maintained by a registered
futures association who has filed a notice with the registered futures
association certifying that:
(A) Such person, any principals thereof (as defined in Sec. 3.1(a))
and any individuals, on behalf of such person, who present ethics
training or who prepare an ethics training videotape or electronic
presentation are not subject to:
(1) Statutory disqualification from registration under Sections
8a(2) or (3) of the Act;
(2) A bar from service on self-regulatory organization governing
boards or committees based on disciplinary histories pursuant to
Sec. 1.63 of this chapter or any self-regulatory organization rule
adopted thereunder; or
(3) A pending adjudicatory proceeding under Sections 6(c), 6(d),
6c, 6d, 8a or 9 of the Act, or Secs. 3.55, 3.56 or 3.60; and
(B) If the person will conduct training via videotape or electronic
presentation, either exclusively or in addition to in-person training,
he will maintain documentation reasonably designed to verify the
attendance of registrants at such videotape or electronic presentation
for the minimum time required.
(iv) The certification required by paragraph (b)(3)(iii) of this
section is continuous and if circumstances change which result in the
certification becoming inaccurate, the person must promptly so inform
the registered futures association. Upon notice of such inaccuracy, the
registered futures association shall refuse to include such person on
or remove such person from the list referred to in paragraph
(b)(3)(iii) of this section.
(v) The registered futures association shall develop and submit to
the Commission in accordance with Section 17(j) of the Act rules to
provide reasonable procedures for making determinations not to include
or to remove persons from the list referred to in paragraph (b)(3)(iii)
of this section. Such rules shall permit a hearing before the
registered futures association with an opportunity for appeal to the
Commission. Such appeal shall consist solely of consideration of the
record before the registered futures association and the opportunity
for the presentation of supporting reasons to affirm, modify, or set
aside the decision of the registered futures association.
(4) Any person providing ethics training under this section must
maintain records of the materials used in such training, and of the
attendees at such training, documentation to verify completion by a
registrant of training through videotape or electronic presentation and
evaluations of trainers in accordance with Sec. 1.31 of this chapter.
All such books and records shall be open to inspection by any
representative of the Commission or the U.S. Department of Justice and
persons providing ethics training shall be subject to audit by any
representative of the Commission. Records of attendees at such training
shall be provided upon request to a registered futures association in
such format as specified by the registered futures association.
(5) No person referred to in paragraph (b)(3) of this section may
represent or
[[Page 63913]]
imply in any manner whatsoever that such person has been sponsored,
recommended or approved, or that such person's abilities or
qualifications, the content, quality or accuracy of his training
program, or the positions taken in the course of resolving any actual
or hypothetical situations presenting ethical or legal issues, have in
any respect been passed upon or endorsed, by the Commission, a
registered futures association, or any representative thereof. Any
promotional or instructional material used in connection with the
training required by this section must prominently state that the
Commission and any registered futures association have not reviewed or
approved the specific content of the training program and do not
recommend the provider of such training: Provided, however, that this
paragraph shall not be construed to prohibit a statement that a person
is included on a list of ethics training providers maintained by a
registered futures association if such statement is true in fact and if
the effect of such a listing is not misrepresented.
* * * * *
Issued in Washington, D.C. on December 7, 1995, by the
Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 95-30358 Filed 12-12-95; 8:45 am]
BILLING CODE 6351-01-P
