[Federal Register Volume 61, Number 122 (Monday, June 24, 1996)]
[Rules and Regulations]
[Pages 32323-32327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15995]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
16 CFR Chapter I
Determination Concerning Telemarketing Rules
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of determination that existing Commodity Exchange Act
provisions, Commission Regulations, and National Futures Association
(``NFA'') rules provide protection from abusive and deceptive
telemarketing practices ``substantially similar'' to that provided by
the Federal Trade Commission's recently promulgated telemarketing rule.
-----------------------------------------------------------------------
SUMMARY: Pursuant to its obligations under section 3(e) of the
Telemarketing and Consumer Fraud and Abuse Prevention Act
(``Telemarketing Act''),1 15 U.S.C. 6102(e), and corresponding
section 6(f) of the Commodity Exchange Act (``CEA''),2 7 U.S.C.
9b, the Commodity Futures Trading Commission (``Commission'' or
``CFTC'') hereby provides notice of its determination that existing CEA
provisions, Commission Regulations under the CEA,3 and CFTC-
approved NFA rules,4 interpretations, and other requirements in
the area of telemarketing, provide protection from deceptive and
abusive telemarketing practices ``substantially similar'' to that
provided by the Federal Trade Commission's (``FTC's'') recently
promulgated Telemarketing Sales Rule, 16 CFR Part 310 (Prohibition of
Deceptive and Abusive Telemarketing Acts).5 Accordingly, the CFTC
will not promulgate additional rules under the Telemarketing Act at
this time. Background information and a discussion of the basis for the
CFTC's determination that existing provisions of its regulations and
enabling statute, together with NFA telemarketing requirements, provide
protection against deceptive and abusive telemarketing acts and
practices substantially similar to that provided by the FTC's rule are
set forth below.
\1\ 15 U.S.C. 6101-08.
\2\ Citations to the CEA in this notice refer to the Commodity
Exchange Act, codified at 7 U.S.C. 1 et seq. (1994).
\3\ Citations to ``Commission Regulations'' or ``CFTC
Regulations'' refer to the CFTC's regulations, codified at 17 CFR
1.1. et seq.
\4\ Section 17 of the CEA, 7 U.S.C. 21, requires the CFTC to
review and approve the rules of registered futures associations,
which have explicit self-regulatory obligations under the CEA and
Commission Regulations. To date, NFA, which began operations in
1982, is the only registered futures association.
\5\ 60 FR 43842 (August 23, 1995).
---------------------------------------------------------------------------
EFFECTIVE DATE: June 24, 1996.
FOR FURTHER INFORMATION CONTACT: Nancy L. Walsh, Attorney, Division of
Enforcement, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street, NW, Washington, D.C. 20581. Telephone: (202)
418-5330.
SUPPLEMENTARY INFORMATION:
I. The Telemarketing Act
The Telemarketing Act, signed into law on August 16, 1994, ``to
strengthen the authority of the Federal Trade Commission to protect
consumers in connection with sales made with a telephone, and for other
purposes,'' 6 required that the FTC adopt rules prohibiting
deceptive and abusive telemarketing practices. As discussed below, the
Telemarketing Act also added a new Section 6(f) to the CEA, 7 U.S.C.
9b, which requires, subject to certain exceptions, that the CFTC
``promulgate, or require each registered futures association to
promulgate, rules substantially similar'' to the FTC's telemarketing
rules within six months of the effective date of the FTC rules.7
---------------------------------------------------------------------------
\6\ H.R. Rep. No. 20, 103d Cong., 1st Sess. at 1 (1993).
\7\ See Section 6(f) of the CEA, 7 U.S.C. 9b. The Telemarketing
Act similarly requires the Securities and Exchange Commission
(``SEC'') to promulgate telemarketing rules within the same time
frame unless it determines: (1) that federal securities laws or SEC
rules provide substantially similar protection; or (2) that SEC
telemarketing rules would not be necessary or appropriate in the
public interest, or would be inconsistent with the maintenance of
fair and orderly markets. See Section 3(d) of the Telemarketing Act,
15 U.S.C. 6102(d).
---------------------------------------------------------------------------
A. Congressional Findings
In imposing rulemaking and other obligations on the FTC, the CFTC,
and the SEC, the Telemarketing Act lists the following Congressional
findings: (1) That telemarketing differs from other sales activities
given sellers' mobility and ability to make sales across state lines
without direct contact with consumers; (2) that interstate
telemarketing fraud is a problem of such magnitude that FTC resources
are
[[Page 32324]]
insufficient to protect consumers; (3) that telemarketing fraud results
in approximately $40 billion/year in losses; and (4) that consumers are
victims of other forms of telemarketing deception and abuse as
well.8 Consequently, Congress found that it should enact
legislation to offer customers necessary protection from telemarketing
deception and abuse.9
---------------------------------------------------------------------------
\8\ See Section 2 of the Telemarketing Act, 15 U.S.C. 6101.
\9\ See Section 2(5) of the Telemarketing Act, 15 U.S.C.
6101(5).
---------------------------------------------------------------------------
B. Rulemaking Obligations
1. Imposed on the FTC 10
---------------------------------------------------------------------------
\10\ See Sections 3(a)-(c) of the Telemarketing Act, 15 U.S.C.
6102(a)-(c).
---------------------------------------------------------------------------
The Telemarketing Act required the FTC, within 365 days of the
statute's enactment, to ``prescribe rules prohibiting deceptive
telemarketing acts or practices and other abusive telemarketing acts or
practices.'' 11 Those rules, the statute provides, must define
deceptive telemarketing acts or practices and must include: a
prohibition of any pattern of unsolicited telephone calls; restrictions
on calling times for unsolicited calls; and a requirement that
telemarketers ``promptly and clearly'' disclose the purpose of calls
and make other appropriate disclosures. Under the Telemarketing Act,
telemarketing rules promulgated by the FTC shall not apply to any
person ``registered or exempt from registration'' under the CEA as a
futures commission merchant (``FCM''), introducing broker (``IB''),
commodity trading advisor (``CTA''), commodity pool operator (``CPO''),
leverage transaction merchant, floor broker, or floor trader, or any
person associated with such firms, entities or persons.12
---------------------------------------------------------------------------
\11\ The statute was enacted on August 16, 1994, and, as noted
above, see supra n. 5, the FTC issued its final Telemarketing Sales
Rule on August 23, 1995.
\12\ See Section 3(e)(1) of Telemarketing Act, 15 U.S.C.
6102(e)(1), and section 6(f)(1) of Commodity Exchange Act, 7 U.S.C.
9b(1). See also 60 FR at 43843, n. 18 (FTC statement of basis and
purpose for final FTC telemarketing rule confirming that such
persons--as well as certain securities professionals regulated by
the SEC--are excluded from coverage of the FTC's rule).
---------------------------------------------------------------------------
2. Imposed on the CFTC
As noted above, the Telemarketing Act requires the CFTC to
promulgate, or require each registered futures association to
promulgate, rules ``substantially similar'' to those of the FTC, within
six months of the effective date of the FTC's rules, absent certain
exceptions discussed below.13 Any CFTC telemarketing rules
promulgated would apply to any person registered or exempt from
registration under the CEA in connection with such person's business as
an FCM, IB, CTA, CPO, leverage transaction merchant, floor broker, or
floor trader, and to any person associated with such firms, entities,
or persons.14
---------------------------------------------------------------------------
\13\ The FTC's Telemarketing Sales Rule became effective
December 31, 1995. 60 FR 43842. Accordingly, the CFTC, by June 30,
1996, must promulgate rules or publish a notice of its determination
that one of the listed exceptions applies.
\14\ Section 6(f)(1) of the CEA, 7 U.S.C. 9b(1). These persons
(as well as certain securities professionals) are specifically
excluded from coverage by the FTC's telemarketing rule. See supra n.
12.
---------------------------------------------------------------------------
The CFTC, however, is not required to promulgate rules if it
determines either: (1) That CFTC rules provide ``substantially
similar'' protection from deceptive and abusive telemarketing practices
by certain persons registered or exempt from registration under the CEA
as the FTC's telemarketing rule;15 or (2) that CFTC telemarketing
rules are not necessary or appropriate in the public interest, or for
the protection of customers in the futures and options markets, or
would be inconsistent with ``the maintenance of fair and orderly
markets.'' If the CFTC determines that one of these exceptions applies,
it must publish the reasons for its determination in the Federal
Register.
---------------------------------------------------------------------------
\15\ The CFTC has properly considered NFA rules and other
requirements, as well as CFTC Regulations and provisions of the CEA,
in analyzing whether this exception applies. Because the
Telemarketing Act requires either the CFTC or ``a registered futures
association'' to promulgate rules, see section 6(f)(1) of the CEA, 7
U.S.C. 9b(1), consideration of CFTC-approved NFA rules is necessary
to evaluate whether existing protection is ``substantially similar''
to that provided by the FTC's rule. NFA, as noted above, is the only
registered futures association. See supra n. 4. In addition,
Commission Regulation 170.15 and NFA By-Law 1101 essentially work to
require that all commodity professionals who deal with customers be
members of NFA, thus assuring that NFA rules apply to the listed
categories of professionals, except for floor traders and floor
brokers who are exchange members and generally not engaged in
telemarketing.
---------------------------------------------------------------------------
II. The FTC's Final Rule
The FTC's Telemarketing Sales Rule, 16 CFR Part 310, became
effective December 31, 1995.16 Most of the substantive provisions
of the rule appear in sections 310.3 and 310.4. Section 310.3 makes it
a deceptive telemarketing act or practice and a violation of the FTC's
rule for telemarketers or sellers to engage in certain prohibited
deceptive acts or practices, including, in particular, failing to
disclose or misrepresenting specified material information. Section
310.4 identifies certain ``abusive'' conduct (for example, engaging in
threats or using profane language), establishes ``pattern of call'' and
calling time restrictions, and requires sellers and telemarketers to
make specific oral disclosures (including the identity of the seller,
the purpose of the call, the nature of the goods or services being
sold, and, if a prize promotion is offered, that no purchase or payment
is necessary to participate in the promotion).
---------------------------------------------------------------------------
\16\ 60 FR 43842 (August 23, 1995).
---------------------------------------------------------------------------
III. CFTC's Existing Protection Against Deceptive and Abusive
Telemarketing Acts and Practices Is ``Substantially Similar'' to
Protection Under the FTC Rule
A. Generally
As stated above, the CFTC has determined that existing statutory
provisions, regulations, and NFA rules governing telemarketing
practices of registered commodity professionals provide protection from
deceptive and abusive telemarketing that is ``substantially similar''
to the protection provided by the FTC's Telemarketing Sales Rule. To
reach that determination, the CFTC carefully analyzed and compared the
FTC's Telemarketing Sales Rule and analogous provisions of the CEA,
Commission Regulations, and NFA rules. The Commission also considered
information from NFA on the scope and application of its telemarketing
and sales practice rules. Given the substantially similar protection
provided by existing CEA provisions, Commission Regulations, and NFA
rules, and the fact that the FTC's rule addresses some areas not within
the Commission's jurisdiction, the Commission has determined, pursuant
to Section 6(f)(2) of the CEA, 7 U.S.C. 9b(2), not to promulgate
additional telemarketing rules at this time.
Since it began operations in 1975, the CFTC has attacked fraudulent
telemarketing schemes within its jurisdiction consistently and
vigorously, and with considerable success. In doing so, the CFTC brings
federal court injunctive actions and administrative actions; it assists
the United States' Attorneys in criminal prosecutions; and it files
joint actions with states.
While, as reflected by the chart below, certain CEA provisions,
Commission Regulations, and NFA rules address and prohibit the same
acts and practices targeted by the FTC's Telemarketing Sales Rule,
those provisions are part of a comprehensive regulatory scheme
developed specifically for the futures and commodity options markets.
The FTC's Telemarketing Rule, on the other hand, defines the terms,
``telemarketer'' and ``goods or services'' broadly without
[[Page 32325]]
regard to the subject matter of particular solicitations.17 In
light of the agencies' different regulatory missions, the FTC's
Telemarketing Sales Rule addresses the telemarketing of certain goods
and services that are not within the CFTC's jurisdiction or expertise,
such as prize promotions and awards. Accordingly, not every provision
of the FTC's Telemarketing Sales Rule has a precisely equivalent
analogue in the CEA, Commission Regulations, or NFA Rules.
---------------------------------------------------------------------------
\17\ Section 310.2(t) of the FTC's Telemarketing Sales Rule, for
example, defines ``telemarketer'' as ``any person who, in connection
with telemarketing, initiates or receives telephone calls to or from
a customer.'' The FTC similarly defines the phrase, ``goods or
services'' broadly to cover ``any tangible and intangible goods or
services including, but not limited to, leases, licenses, or
memberships,'' as well as prizes and awards. See Statement of Basis
and Purpose, 60 FR at 43844.
---------------------------------------------------------------------------
B. Comparison Chart: FTC Telemarketing Sales Rule and Existing CEA
Provisions, Commission Regulations, and NFA Rules
The following chart provides a side-by-side description and
comparison of substantive provisions of the FTC's Telemarketing Sales
Rule and certain analogous provisions of the CEA, Commission
Regulations, and NFA rules.18 Given the CFTC's and the FTC's
different regulatory missions and the fact that the FTC's rule
addresses certain subjects and products outside the CFTC's
jurisdiction, not every subject addressed by the FTC's Telemarketing
Sales Rule is governed or addressed by a corresponding provision of the
CEA, Commission Regulations, or NFA Rules. The chart is intended to
provide an overview and concise summary of the FTC's rule and relevant
provisions of the CEA, Commission Regulations, and NFA Rules. The chart
is not intended to be an exhaustive list of every CEA provision,
Commission rule, and NFA rule or requirement relating to each provision
of the FTC's rule.
\18\ Provisions of the FTC's rule are listed and described on
the left, and analogous provisions of the CEA, Commission
Regulations or NFA rules are listed and described on the right.
Section 310.3: Deceptive Telemarketing Acts or Practices
(a): Prohibited Deceptive Acts/ Antifraud provisions of the CEA and Commission Regulations require
Practices. It is a deceptive act or disclosure of material information.
practice to:
(1) Fail to disclose the following Reg. 1.55 requires FCMs and IBs, before opening accounts, to furnish
``material information'' in clear and customers with standard written risk disclosure statement disclosing
conspicuous manner before customer the substantial risk of loss from trading commodity futures contracts
pays: total costs; all material and secure signed acknowledgement. See Reg. 30.6 (disclosure
limits, restrictions, conditions to requirements for FCMs and IBs opening foreign futures or option
purchasing, receiving or using goods account); Part 4 of Regs. (CPOs and CTAs, before soliciting,
or services; any refund, cancellation, accepting, or receiving funds, must furnish disclosure document and
exchange policy; (for prize promotion) risk disclosure statement, disclosing, among other things, break-even
odds of receiving prize; and all point, the pool or trading advisor's business background, principal
material costs/conditions to redeeming risk factors, fees and expenses, and performance information); Reg.
prize;. 4.21 et seq. (for CPOs); Reg. 4.31 et seq. (for CTAs). Reg. 32.5
requires options disclosure statement, including description of
transaction, costs, effect of foreign currency fluctuations, and
disclosure of volatile nature of commodities markets, risk of loss,
and other information. Reg. 31.11 (leverage transaction merchants must
furnish disclosure document and secure signed acknowledgement).
(2) Misrepresent, directly or by CEA, 4b(a)(i), 7 U.S.C. 6b(a)(i), makes it unlawful, in connection with
implication, listed material certain commodity futures transactions, to cheat or defraud or attempt
information. to cheat or defraud another person.
CEA, 4o, 7 U.S.C. 6o, among other things, makes it unlawful for CPOs
and CTAs to employ a device, scheme, or artifice to defraud or to
engage in any transaction, practice or course of business which
operates as a fraud or deceit.
Regs. 32.9 and 33.10 make it unlawful, among other things, to cheat or
defraud or attempt to cheat or defraud any other person, make or cause
to be made any false report or statement, or deceive or attempt to
deceive any other person, in connection with commodity option
transactions.
NFA Rule 2-2(a) provides that no member or associate shall cheat,
defraud, deceive or attempt to cheat, defraud, or deceive any
commodity futures customer.
See also CEA, 4b(a)(ii), 7 U.S.C. 6b(a)(ii) (unlawful willfully to make
or cause to be made any false report or statement); CEA, 4b(a)(iii), 7
U.S.C. 6b(a)(iii) (unlawful willfully to deceive or attempt to deceive
another person).
(3) Fail to obtain or submit verifiable Signed risk disclosure requirements (discussed above). Reg. 166.2
authorization before submitting check, (prohibits FCMs and IBs from trading for customer account without
draft or other negotiable paper drawn prior specific authorization or written authorization allowing trading
on person's account for payment; or without separate authorization for each individual transaction).
Segregation requirements for handling customer funds also provide
protection. CEA, 4d(2), 7 U.S.C. 6d(2), Regs. 1.20-1.30, 1.32, and
1.36.
(4) Make false/misleading statement to Compare to discussion of Section 310.3 above.
induce payment.
(b): Assisting/Facilitating deceptive CEA, 13(a), 7 U.S.C. 13c(a) (Aiding and Abetting): person who commits,
act/practice to provide substantial or willfully aids, abets, counsels, commands, induces or procures
assistance or support to seller or commission of a violation of CEA, may be held responsible as
telemarketer when person knows or principal. CEA, 13(b), 7 U.S.C. 13c(b) (Controlling Person): person
avoids knowing seller or telemarketer who directly or indirectly controls any person who has violated CEA or
is engaged in act/practice that Commission rules may be liable for violation to the same extent as
violates Rule. controlled person. CEA, 2(a)(1)(A)(iii), 7 U.S.C. 4 (Vicarious
Liability): corporations, partnerships, associations, and individuals
liable for acts and omissions of employees and agents. Reg. 166.3
(Supervision): registrants must supervise diligently their employees
and agents in all aspects of their futures activities.
(c): Credit Card Laundering............ To the extent credit card laundering is part of a scheme to violate the
CEA or Commission Regulations, CEA, 13, 7 U.S.C. 13c (Aiding and
Abetting) could be used to address conduct.
Section 310.4: Abusive Telemarketing Acts or Practices
(a): Abusive Conduct Generally--It is
abusive conduct to:
[[Page 32326]]
(1) Engage in threats, intimidation NFA Compliance Rule 2-29(a)(2) prohibits high pressure sales practices,
or use profane or obscene including threatening or intimidating solicitations and the use of
language;. profane or obscene language. See NFA's recent Notice to Members 19
(confirming that NFA Compliance Rule 2-29(a)(2) prohibits threats and
intimidation, calling at irregular hours, and the use of profane or
obscene language).20
NFA Compliance Rule 2-9 requires each NFA member to supervise
diligently its employees and agents in all aspects of their futures
activities. Interpretive Notice to NFA Compliance Rule 2-9 imposes
enhanced telemarketing supervisory requirements, including tape-
recording certain sales solicitations, on a member firm if a certain
threshold number or percentage of its APs formerly were employed by
firms disciplined by NFA or the CFTC for sales practice fraud.
(2) Request/receive payment to See Comparison with 310.3(c).
remove derogatory information from
credit history unless listed
conditions met;.
(3) Request/receive payment for See Comparison with 310.3(c).
recovering money or any item of
value paid in previous telephone
transaction; or.
(4) Request/receive payment before See Comparison with 310.3(c).
securing loan and indicating high
chance of getting loan.
(b): Pattern of Calls Abusive act/ See Comparison with 310.4(a) (NFA Compliance Rule 2-29(a)(2), NFA
practice to: (i) make calls Notice to Members, and NFA Compliance Rule 2-9). NFA considers pattern
repeatedly or continuously with of calls in initiating complaints under NFA Compliance Rule 2-
intent to annoy, abuse or harass; 29(a)(2).21
or (ii) initiate call when person
has stated that he/she does not
want to receive call.
(c): Calling Time Restrictions See Comparison with 310.4(a) (NFA Compliance Rule 2-29(a)(2), NFA
Calls must be between 8:00 a.m. Notice to Members).22
and 9:00 p.m.
(d) Required Oral Disclosures...... See Comparison with 310.4(a) (NFA Compliance Rule 2-29(a)(2) and NFA
Compliance Rule 2-9).
Abusive telemarketing act NOT General antifraud provisions apply to oral statements, and additional
to disclose: seller's requirements govern promotional materials and advertisements (Reg.
identity; call's purpose; 4.41 for CPOs/CTAs; NFA Compliance Rule 2-9 and Interpretive Notice).
nature of goods/services; and NFA Rules on disclosure and promotional materials also require certain
that no purchase necessary to information concerning a customer's ``break-even'' point as well as
win prize or participate in balanced presentation.
promotion.
In addition, prior to trading, extensive written disclosure and
acknowledgement requirements must be met. See Regs. 1.55, 4.13, 4.21,
4.24, 4.25, 4.31, 4.34, 4.35, 33.7, 32.5, 30.6, 31.11. Regs. 1.55 and
33.7 require FCMs and IBs to furnish ``Risk Disclosure Statement'' and
receive acknowledgement.23 Reg. 4.21 requires CPOs to provide
disclosure document before soliciting, accepting, or receiving funds.
Reg. 4.13 applies to exempt CPOs. Reg. 4.31 requires CTAs to provide
disclosure document before soliciting or entering into agreement with
prospective client.
Section 310.5: Recordkeeping
(a) Seller/telemarketer must keep the Recordkeeping Requirements under CEA and Commission Regulations. See
following for 24 months from date CEA, 4g, 4n, 7 U.S.C. 6g, 6n; Regs. 1.12, 1.18, 1.31, 1.33, 1.34,
produced: advertisements, brochures, 1.35, 1.37, 1.55, 3.12, 4.23, and 4.32.24 Generally, Reg. 1.31
scripts, promotional materials; name/ requires all required books and records be kept for 5 years, and be
address of prize recipients and prizes readily accessible for CFTC and Department of Justice inspection for
of $25 or more awarded; name/address the first 2 years.
of customers and goods purchased; name/
address/telephone and job titles of
sales employees; and verification
authorizations.
Registration requirements for APs, see Reg. 3.12, cover certain
information required by FTC rule. NFA Compliance Rule 2-29 and
accompanying Interpretive Notice impose recordkeeping and other
requirements for brochures, scripts, and promotional material. NFA
Rule 2-10 requires members to maintain all books and records
appropriate to the conduct of their business. See also Reg. 1.40 (FCMs
and contract markets must furnish CFTC, upon request, copies of
letters, circulars, telegrams or reports published or given general
circulation on crop or market information or conditions affecting the
price of any commodity).
(b) Keep records as in manner seller/ See Comparison for 310.5(a).
telemarketer keeps records in ordinary
course of business.
[[Page 32327]]
(c) Seller and telemarketer may, by See Comparison for 310.5(a).
written agreement, allocate
recordkeeping obligations.
(d) Governs recordkeeping upon See Comparison for 310.5(a).
dissolution or sale of business.
Section 310.7: Actions by States and Private Persons
(a): Requires Attorney General, other CEA, 6d, 7 U.S.C. 13a-2, authorizes states to prosecute violations of
State officers authorized to bring CEA in federal court; notice of filing and copy of pleading must be
suit, and any private person who given to the CFTC.
brings an action under Telemarketing
Act to serve written notice of action
on FTC.
CEA, 14, 7 U.S.C. 18 (Reparations Procedure) authorizes reparations
actions by any person complaining of violation of CEA, Commission
Regulations, or Commission order by a registrant. See also Part 12 of
Regs. (Rules Relating to Reparations Proceedings).
CEA, 17(b)(10), 7 U.S.C. 21(b)(10), requires NFA to provide procedure
through arbitration or otherwise to settle customer claims and
grievances against its members. NFA Code of Arbitration, Section 2
provides generally that members must submit to arbitration for any
dispute filed with NFA by a customer. See also Reg. 170.8 (Settlement
of Customer Disputes).
(b): Nothing in this section prohibits CEA, 6d(8), 7 U.S.C. 13a-2(8), allows states to proceed in state court
Attorney General or other authorized against certain registrants for violations of antifraud provisions.
State officials from proceeding in CEA, 12(e), 7 U.S.C. 16(e), authorizes states to proceed in state
State court for violations of any court for illegal ``off-exchange'' transactions.
civil or criminal state statute.
19 See NFA Notice to Members (June 19, 1996).
20 Of the thirty-eight complaints that NFA has issued alleging a violation of NFA Compliance Rule 2-29(a)(2),
NFA considered a pattern of inappropriate calling (i.e., calling at irregular hours or making excessive calls)
as a factor in initiating eighteen cases and the use of profane language as a factor in three cases.
21 As confirmed by NFA's recent Notice to Members, repeated or continuous calls made with an intent to annoy,
abuse, or harass are specifically prohibited by Rule 2-29(a)(2).
22 NFA considers the time when calls were placed when issuing complaints under NFA Compliance Rule 2-29(a)(2).
See supra n. 20.
23 Neither Reg. 1.55 nor Reg. 33.7 relieves FCMs and IBs from otherwise applicable disclosure and other
requirements. See Reg. 1.55(f) (FCMs and IBs not relieved from any other disclosure obligation under
applicable law); Reg. 33.7(f) (FCMs and IBs not relieved from any other obligation under CEA or CFTC
regulations, including obligation to disclose all material information).
24 Regs. 1.10, 1.12, 1.18, 1.31, 1.32, 1.35 govern recordkeeping and reporting obligations for FCMs and IBs.
Reg. 1.33 requires FCMs to furnish monthly and confirmation statements. Reg. 1.34 requires FCMs to keep
``point balance'' and monthly listings of open option positions carried for option customers marked to market.
CEA, 4n, 7 U.S.C. 6n, requires CPOs and CTAs to keep books and records for at least 3 years, but is superseded
by the general five-year requirement of Reg. 1.31. Regs. 4.23 and 4.33 also govern recordkeeping by CPOs and
CTAs.
D. Conclusion
As the chart and discussion above reflect, existing provisions of
the CEA, Commission Regulations, and NFA rules address and prohibit
many of the same categories of telemarketing abuse targeted by the
FTC's recently promulgated Telemarketing Sales Rule. Accordingly, the
CFTC has determined that existing rules provide protection from
deceptive and abusive telemarketing acts and practices that is
``substantially similar'' to the protection provided by the FTC's rule.
Given its determination, the CFTC has also determined that it is
unnecessary for it to promulgate additional telemarketing rules under
the Telemarketing Act at this time.
To ensure that it remains apprised of developments in the area of
telemarketing, however, the CFTC has asked NFA to continue to focus, in
the course of performing member audits,25 on telemarketing acts
and practices that it believes may fall outside the scope of existing
rules and to inform the Commission of the results of those
audits.26 Should the information provided by NFA indicate a need
for additional telemarketing rules, advisories, or other guidance, the
Commission will work with NFA to undertake rulemaking or other
activities necessary to provide appropriate protection. Through such
ongoing monitoring and evaluation of telemarketing acts and practices,
the CFTC will ensure that its rules continue to provide protection from
deceptive and abusive telemarketing acts and practices as those
practices may arise in the future.
\25\ As part of its audit and compliance functions, NFA conducts
``front-office audits,'' which address sales practices, including
telemarketing.
\26\ NFA's obligation to report on any such telemarketing acts
and practices is separate from, and additional to, its existing
reporting and auditing obligations under the CEA and Commission
Regulations.
---------------------------------------------------------------------------
Issued in Washington, DC, on June 18, 1996.
Jean A. Webb,
Secretary to the Commission.
[FR Doc. 96-15995 Filed 6-21-96; 8:45 am]
BILLING CODE 6351-01-P
