2010-2821. Agency Information Collection Activities: Request for New Collection-3038-NEW, Registration Under the CEA-Proposed Questionnaire to Regulation 30.10 Relief Recipients (17 CFR Part 30)

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Notice (Correction)—Proposed Questionnaire.

SUMMARY:

Under the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq., Federal agencies are required to publish notice in the Federal Register concerning each proposed collection of information, and to allow 60 days for comment in response to the notice. The Division of Clearing and Intermediary Oversight (DCIO) of the Commodity Futures Trading Commission (CFTC) is proposing to send a questionnaire to obtain updated information on the current laws and market developments of each jurisdiction in which exemptive relief was granted by the Commission pursuant to Regulation 30.10. Please note that the designation for submission of comments has changed.

DATES:

Comments must be received by April 12, 2010.

ADDRESSES:

Interested persons should submit their views and comments to Andrew Chapin, Associate Director, or Andrea Musalem, Attorney-Advisor, Division of Clearing and Intermediary Oversight, Commodity Futures Trading Commission, 1155 21st Street, NW., Washington, DC 20581. In addition, comments may be sent by facsimile transmission to number [phone], or by electronic mail to [e-mail] or [e-mail]. Reference should be made to “Commission Regulation 30.10 Questionnaire.”

FOR FURTHER INFORMATION CONTACT:

Andrew Chapin, Associate Director, or Andrea Musalem, Attorney-Advisor, Division of Clearing and Intermediary Oversight, Commodity Futures Trading Commission, 1155 21st Street, NW., Washington, DC 20581. Telephone: [phone].

SUPPLEMENTARY INFORMATION:

I. Background

CFTC Regulation 30.10 allows persons located and doing business outside the U.S., who are subject to a comparable regulatory framework in the country in which they are located, to seek an exemption from the application of certain of the Part 30 regulations. Regulation 30.10 expressly states that, upon petition, the Commission may exempt any person from any requirement of the Part 30 regulations. If the Commission grants an exemption, persons located and doing business outside the U.S. may solicit or accept orders directly from U.S. customers for foreign futures or options transactions without registering under the Act as FCMs.

A petition for exemption pursuant to Regulation 30.10 is typically filed on behalf of persons located and doing business outside the U.S. that seek access to U.S. customers by (1) a governmental agency responsible for implementing and enforcing the foreign regulatory program, or (2) a self-regulatory organization (SRO) of which such persons are members. A petitioner who seeks an exemption pursuant to Regulation 30.10, based on substituted compliance with a non-U.S. regulatory framework that is comparable to the Act and rules thereunder, must set forth with particularity the comparable regulations applicable in the jurisdiction in which that person is located. In essence, a petitioner under Regulation 30.10 must present, with particularity, the factual basis for a finding of comparability and the reasons why the policies and purposes of the Commission's regulatory program are met, notwithstanding any differences of degree or kind in the petitioner's regulatory program.

Appendix A to Part 30 (Appendix A) articulates standards to be used by staff in assessing whether a foreign regulatory system is comparable.^[1] These standards involve inquiry into the following areas: (1) Registration, authorization or other form of licensing, fitness review or qualification of persons through which customer orders are solicited and accepted; (2) minimum financial requirements for those persons that accept customer funds; (3) protection of customer funds from misapplication; (4) recordkeeping and reporting requirements; (5) minimum sales practice standards, including disclosure of the risks of futures and options transactions and, in particular, the risk of transactions undertaken outside the jurisdiction of domestic law; (6) compliance; and (7) information-sharing.

II. The Proposed Questionnaire

Currently, there are 13 foreign entities ^[2] (two regulators and 11 futures exchanges) that have a Regulation 30.10 exemption some of which date back to the late eighties, early nineties. Consequently, the Commission's Division of Clearing and Intermediary Oversight (DCIO) would like to embark upon a program whereby each year, DCIO sends out a questionnaire to exemption recipients inquiring as to material and other relevant changes that impacted or could impact the fundamentals for which exemptive relief was granted in the first place.

The proposed 2010 Questionnaire will ask the following questions:

The following questions relate to material changes that have occurred since the original filing of the 30.10 petition. Please answer the following questions in detail.

1. Have there been any material changes with regards to the identity or organization of the original Petitioner (i.e. change in control, change in name, change in structure, etc.)?

2. Has there been a change in the role of the government, the regulator, or the self-regulatory organization(s) which has or could potentially impact their supervision of and their enforcement powers over the exchange and its members?

3. Has there been any material change in the legal framework which impacted or could impact any of the following:

a. Registration, authorization or other form of licensing, fitness review or qualification of persons through which customer orders are solicited and accepted;

b. Minimum financial requirements for those persons that accept customer funds;

c. Protection of customer funds from misapplication;

d. Recordkeeping and reporting requirements;

e. Minimum sales practice standards, including disclosure of risks of futures and options transactions and, in particular, the risk of transactions undertaken outside the jurisdiction of domestic law; and

f. Compliance (i.e. any change in oversight structure which impacted or could impact the governmental authority or the self-regulatory organization's ability to audit Part 30 firms for compliance with, or take action against persons that violate the requirements of the Part 30 program).

4. What changes, if any, have occurred in insolvency laws as they affect futures customers? If there have been changes to insolvency laws, have the changes occurred within the past two to three years? To what extent do you view any recently proposed changes to insolvency laws as resulting from the 2008-09 financial crisis?

5. Security futures products have both an equity component and a futures component. Consequently, in what accounts are security futures products held (i.e. the equity account, the futures account, or a combined account)? Are security futures products subject to separate disclosure and margin requirements than those required for plain vanilla futures products?

6. Please provide an updated list of all firms with relief under the Regulation 30.10 exemption.

7. Since the granting of the original exemption, please affirm whether 30.10 firms have been subject to arbitration and/or disciplinary proceedings arising from transactions with U.S. customers. To the best extent possible, please provide the number of times and a brief description of such proceedings.

8. Please provide the name and contact information for individuals to whom follow up questions might be directed.

III. Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (“RFA”), 5 U.S.C. 601-611, requires that agencies, in proposing rules, consider the impact of those rules on small businesses. The Commission has previously established certain definitions of “small entities” to be used by the Commission in evaluating the impact of its rules on such entities in accordance with the RFA.^[3] The proposed Questionnaire discussed herein would affect foreign futures exchanges and/or foreign securities regulators who sought and obtained Regulation 30.10 exemptive relief on behalf of its members and/or regulatees. Foreign regulators and exchanges are not included in the definition of “small entities” per 47 FR 18618 and 66 FR 42256. Therefore, the Chairman, on behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 605(b) that this proposed Questionnaire will not have an economic impact on a small entities. Nonetheless, the Commission specifically requests comment on the impact this proposed Questionnaire may have on small entities. Nonetheless, the Commission specifically requests comment on the impact this proposed Questionnaire may have on small entities—New Collection—3038.XXXX.

B. Paperwork Reduction Act

When publishing a proposed questionnaire, the Paperwork Reduction Act of 1995 ^[4] imposes certain requirements on federal agencies (including the Commission) in connection with their conducting or sponsoring any collection of information as defined by the Paperwork Reduction Act. In compliance with the Act, the Commission, through this Questionnaire proposal, solicits comments to: (1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including the validity of the methodology and assumptions used; (2) evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information including the validity of the methodology and assumptions used; (3) enhance the quality, utility, and clarity of the information to be collected; and (4) minimize the burden of the collection of the information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.

The Commission has submitted this proposed Questionnaire and its associated information collection requirements to the Office of Management and Budget. The burden associated with this entire New Collection—3038-XXXX—including this proposed Questionnaire, is as follows:

Average burden hours per response: One hour/question.

Number of questions: 13.

Number of respondents: 13.

Frequency of response: Annually.

Persons wishing to comment on the estimated paperwork burden associated with this proposed Questionnaire should contact the Desk Officer, CFTC, Office of Management and Budget, Room 10202, NEOB, Washington, DC 20503, [phone]. Copies of the information collection submission to OMB are available from the CFTC Clearance Officer, 1155 21st Street, NW., Washington DC 20581, [phone].

Dated: February 4, 2010.

David A. Stawick,

Secretary of the Commission.

Footnotes

1.  “Interpretative Statement With Respect to the Commission's Exemptive Authority Under § 30.10 of Its Rules,” 17 CFR Part 30, Appendix A.

2.  The 13 foreign entities are represented by the following jurisdictions: the United Kingdom, Australia, Brazil, Germany, Canada, France, Spain, New Zealand, Singapore, Taiwan, and Japan.

3.  47 FR 18618-18621 (April 30, 1982).

4.  Public Law 104-13 (May 13, 1995).