2020-13465. Adoption of Revised Registration Form 8-R

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Notice.

SUMMARY:

The Commodity Futures Trading Commission (the “Commission” or “CFTC”) is revising its Form 8-R, the application form that individuals must use to register with the Commission as an associated person of a registrant, floor broker, or floor trader, or to be listed as a principal of a registrant (collectively, “applicants”). These revisions, which are essentially technical and non-substantive in nature, have been adopted to assist the National Futures Association (“NFA”) in the performance of the registration functions authorized by the Commission, and in the implementation and operation of NFA's program to register and regulate directly the associated persons sponsored by members of NFA.

DATES:

The new, revised version of Form 8-R shall come into effect (and the prior version shall cease to be in effect) when the NFA makes the new, revised version of the Form 8-R available on the NFA website for use by individual applicants.

FOR FURTHER INFORMATION CONTACT:

Joshua Sterling, Director, [phone], [e-mail]; Amanda Olear, Deputy Director, [phone], [e-mail]; or Christopher Cummings, Special Counsel, [phone], [e-mail], Division of Swap Dealer and Intermediary Oversight, Commodity Futures Trading Commission, 1155 21st Street NW, Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

Form 8-R requests information about the applicant that can be used to assess the applicant's fitness to engage in business as a derivatives professional. Form 8-R is a Commission form administered and used by NFA. Individuals acting in certain capacities in the markets regulated by the Commission must file a completed Form 8-R with NFA.^[1] These applicants include: associated persons of futures commission merchants, retail foreign exchange dealers, introducing brokers, commodity trading advisors, commodity pool operators, and leverage transaction merchants; floor brokers; and floor traders.^[2] Additionally, any individual acting in the capacity as principal of a futures commission merchant, retail foreign exchange dealer, introducing broker, commodity trading advisor, commodity pool operator, swap dealer, major swap participant, floor trader or leverage transaction merchant also must file a completed Form 8-R.^[3] Lastly, individuals that enter orders for floor trader firms must file the Form 8-R as well.^[4] Individual applicants have been required to use Form 8-R since 1977.^[5]

NFA is currently the only registered futures association authorized by the Commission in accordance with Section 17 of the Commodity Exchange Act (“Act”).^[6] Pursuant to Section 17(o) of the Act,^[7] Regulation 3.2,^[8] and a series of orders, the Commission delegated to NFA certain registration functions including, among other things, the processing of all Form 8-R filings.^[9] Since the first delegation to NFA in 1984, NFA has developed substantial expertise in registration matters, including reviewing and processing completed Forms 8-R. In 2002, with the approval of the Commission, NFA replaced its paper-based registration system with an online registration system that utilizes, among other things, an electronic version of Form 8-R.^[10]

II. Revisions to Commission Form 8-R

NFA has requested that the Commission make several changes to Form 8-R.^[11] Upon consideration, the Commission is making all of the changes requested by NFA and revising and updating Form 8-R accordingly. In addition, the Commission is updating the Form 8-R Privacy Act and Paperwork Reduction Act Statements. The Form 8-R revisions are described below.

In the “Completing the Proficiency Requirements Section” of the Form 8-R, the Commission is adding a paragraph that describes the obligation of an individual seeking approval as a swap associated person or as a sole-proprietor swap firm to satisfy the Swaps Proficiency Requirements, and what constitutes satisfaction of those requirements. In the application itself, the Commission is adding a question that asks whether the applicant has completed the Swaps Proficiency Requirements within the past two years.^[12] The Commission is making these changes to conform Form 8-R to the Swaps Proficiency Requirements in NFA Bylaw 301 and Compliance Rule 2-24,^[13] recently implemented by NFA pursuant to CEA section 17(j).^[14] The Commission believes that this question is a necessary addition to the form, as Form 8-R is a screening instrument assessing fitness of a swaps associated person, so this question only effectuates this new requirement, ensuring that it has been met.^[15]

The revised Form 8-R also replaces the Federal Bureau of Investigation (“FBI”)-mandated disclosure for persons whose fingerprints are taken for purposes other than criminal justice with an updated version of that disclosure. In 2018, the FBI updated its Privacy Rights notice ^[16] and Privacy Act disclosure;^[17] therefore, the Commission is making conforming changes to Form 8-R.^[18]

In the “Definition of Terms” section, the Commission is revising the definition of “adversary action” to conform the definition to the way the term is used in the form's “Disciplinary Information Section.” The Commission is revising this definition to make the use of the term “adversary action” in Form 8-R internally consistent.

Finally, the words “entity” and “person” are underlined where they occur in the text to indicate that they are terms that are defined in the “Definition of Terms” section.

A revised version of Form 8-R that incorporates the changes discussed above is attached as Appendix A to this Notice.

III. Related Matters

Paperwork Reduction Act. Recordkeeping or information collection requirements under the Paperwork Reduction Act (“PRA”) related to Form 8-R exist under current law. The titles for the existing information collections are “Registration Under the Commodity Exchange Act,” OMB control number 3038-0023, and “Registration of Swap Dealers and Major Swap Participants,” OMB control number 3038-0072. The preliminary view of the Commission is that the revisions to Form 8-R may modify the existing recordkeeping or information collection requirements under the PRA. To ensure compliance with the PRA, the Commission will publish in the Federal Register a separate notice and request for comment on the amended PRA burden associated with the revised Form 8-R.^[19] The Commission also will submit to OMB an information collection request to amend the information collection, in accordance with 44 U.S.C. 3506(c)(2)(A) and 5 CFR 1320.8(d).

Issued by the Commission on June 18, 2020, in Washington, DC

Robert Sidman,

Deputy Secretary of the Commission.

Note:

The following appendices will not appear in the Code of Federal Regulations.

Appendices to Adoption of Revised Registration Form 8-R—Form 8-R and Commission Voting Summary

Appendix 1—Commission Voting Summary

On this matter, Chairman Tarbert and Commissioners Quintenz, Behnam, Stump, and Berkovitz voted in the affirmative. No Commissioner voted in the negative.

Footnotes

1.  17 CFR 3.10(a)(2), 3.11(a), and 3.12(c).

2.  17 CFR 3.11(a); 3.12(c).

3.  17 CFR 3.1(a); 3.10(a)(2); 3.11(a)(1). While “principal” is not technically a registration class and principals do not apply for registration, for purposes of this Notice, the Form 8-R filings by principals will be referred to with the other Form 8-R filings as “registration applications.”

4.  17 CFR 3.11(a)(1).

5.  Revision of Registration Forms and Amendment of Related Rules, 42 FR 23988 (May 11, 1977) (Form 8-R replaced Forms 2-R, 4-R and 94).

6.  7 U.S.C. 21 (2012).

7.  7 U.S.C. 21(o) (2012).

8.  17 CFR 3.2.

9.  See, e.g., Introducing Brokers and Associated Persons of Introducing Brokers; Authorization of National Futures Association to Perform Commission Registration Functions, 48 FR 35158 (Aug. 3, 1983); Performance of Registration Functions by National Futures Association, 49 FR 39593 (Oct. 9, 1984) (futures commission merchants, commodity pool operators, commodity trading advisors, and associated persons thereof); Performance of Registration Functions by National Futures Association; Delegation of Authority, 51 FR 34490 (Sept. 29, 1986) (floor brokers); Performance of Registration Functions by National Futures Association with Respect to Floor Traders and Floor Brokers, 58 FR 19657 (Apr. 15, 1993); and Performance of Registration Functions by National Futures Association with Respect to Swap Dealers and Major Swap Participants, 77 FR 2708 (Jan. 19, 2012).

10.  Registration of Intermediaries, 67 FR 38869 (June 6, 2002). The transition to an online registration system has permitted greater efficiencies, including allowing individuals to update their existing Forms 8-R instead of completing a separate Form 3-R. To that end, in 2012, the Commission eliminated the requirement that registrants and individuals use Form 3-R to update information in their existing Form 7-R or 8-R, and provided that an update to a registrant's online Form 7-R or 8-R would automatically create a record of changes equivalent to a completed Form 3-R. Registration of Intermediaries, 77 FR 51898 (Aug. 28, 2012); see also, Registration of Intermediaries, 76 FR 12888, 12891 (proposed Mar. 9, 2011).

11.  Request from NFA to CFTC, dated February 14, 2020, which is on file with the Commission.

12.  The Commission acknowledges that this requirement is not effective until January 31, 2021, so an applicant's response, before that date, would not have an effect on meeting their fitness requirements.

13.  Interpretive Notice 9075-NFA Bylaw 301 and Compliance Rule 2-24: Proficiency Requirements for Swap APs,” effective January 31, 2020, available at https://www.nfa.futures.org/​rulebook/​rules.aspx?​Section=​9&​RuleID=​9075. See generally section 17(p)(1) of the Act, 7 U.S.C. 21(p), which requires a futures association to establish training standards and proficiency testing for persons involved in the solicitation of swaps and their supervisors.

14.  CEA section 17(j) (7 U.S.C. 21(j)) permits a registered futures association such as NFA to make rule changes effective ten days after receipt by the Commission of such changes, provided the Commission does not notify the registered futures association within that ten-day period that it intends to review the changes for approval. The Commission did not so notify NFA in this instance.

15.  The Commission expects those individuals that meet this standard to still retain documentation of proof.

16.  See, https://www.fbi.gov/​file-repository/​compact-council-noncriminal-justice-applicants-privacy-rights.pdf/​view.

17.  5 U.S.C. 552a.

18.  28 CFR 16.30-34.

19.  The notice and request for comment on the amended PRA burden will also address reassigning from Form 3-R to Form 8-R the PRA burden associated with providing updated information on Form 8-R.