Self-Regulatory Organization; National Futures Association; Notice of Filing and Immediate Effectiveness of a Proposed Amendment Relating to NFA Compliance Rule 2-10, 15740-15741 [E7-5989]

Download as PDF 15740 Federal Register / Vol. 72, No. 62 / Monday, April 2, 2007 / Notices B. Self-Regulatory Organization’s Statement on Burden on Competition NASD does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) Impose any significant burden on competition; and (iii) Become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 9 and Rule 19b–4(f)(6) thereunder.10 At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. NASD has asked that the Commission waive the 30-day operative delay set forth in Rule 19b–4(f)(6)(iii) under the Act 11 to allow the proposed rule change to be implemented on the first day of operation of the NASD/NYSE TRF, which is currently anticipated to be in April 2007. The Commission believes such waiver is consistent with the protection of investors and the public interest, for it will allow the proposed fees and credits to be in place at the time NASD begins operating the NASD/ NYSE TRF. For these reasons, the Commission designates the proposal to be operative upon filing with the Commission.12 hsrobinson on PROD1PC76 with NOTICES IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, 9 15 U.S.C. 78s(b)(3)(A). 10 17 CFR 240.19b–4(f)(6). 11 17 CFR 240.19b–4(f)(6)(iii). 12 For purposes only of waiving the 30-day operative delay of this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). VerDate Aug<31>2005 18:39 Mar 30, 2007 Jkt 211001 including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NASD–2007–025 on the subject line. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55525; File No. SR–NFA– 2007–01] Self-Regulatory Organization; National Futures Association; Notice of Filing and Immediate Effectiveness of a Proposed Amendment Relating to NFA Compliance Rule 2–10 March 26, 2007. Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–7 under the Paper Comments Act,2 notice is hereby given that on February 27, 2007, National Futures • Send paper comments in triplicate Association (‘‘NFA’’) filed with the to Nancy M. Morris, Secretary, Securities and Exchange Commission Securities and Exchange Commission, (‘‘Commission’’) the proposed rule 100 F Street, NE., Washington, DC change described in Items I, II, and III 20549–1090. below, which Items have been All submissions should refer to File substantially prepared by NFA. The Number SR–NASD–2007–025. This file Commission is publishing this notice to solicit comments on the proposed rule number should be included on the subject line if e-mail is used. To help the change from interested persons. NFA also has filed the proposed rule change Commission process and review your with the Commodity Futures Trading comments more efficiently, please use only one method. The Commission will Commission (‘‘CFTC’’). NFA, on February 26, 2007, submitted post all comments on the Commission’s the proposed rule change to the CFTC Internet Web site (https://www.sec.gov/ for approval. The CFTC approved the rules/sro.shtml). Copies of the proposed rule change on March 12, submission, all subsequent 2007.3 amendments, all written statements with respect to the proposed rule I. Self-Regulatory Organization’s change that are filed with the Description of the Proposed Rule Commission, and all written Change communications relating to the Section 15A(k) of the Act 4 makes proposed rule change between the NFA a national securities association for Commission and any person, other than the limited purpose of regulating the those that may be withheld from the activities of NFA members (‘‘Members’’) public in accordance with the who are registered as brokers or dealers provisions of 5 U.S.C. 552, will be in security futures products under available for inspection and copying in Section 15(b)(11) of the Act.5 NFA the Commission’s Public Reference Compliance Rule 2–10(b) applies to all Room. Copies of such filing also will be futures commission merchant (‘‘FCM’’) available for inspection and copying at Members, including those who are the principal office of NASD. All registered as security futures brokers or comments received will be posted dealers under Section 15(b)(11) of the without change; the Commission does Act. not edit personal identifying NFA Compliance Rule 2–10 currently information from submissions. You requires FCM Members to maintain should submit only information that their books and records in an office you wish to make available publicly. All located in either the U.S. or a submissions should refer to File jurisdiction that the CFTC has Number SR–NASD–2007–025 and determined to have a comparable should be submitted on or before April regulatory scheme for purposes of the 23, 2007. CFTC’s Part 30 regulation.6 The amendment requires the U.S. or Part 30 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.13 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–5979 Filed 3–30–07; 8:45 am] BILLING CODE 8010–01–P 13 17 PO 00000 CFR 200.30–3(a)(12). Frm 00097 Fmt 4703 Sfmt 4703 1 15 U.S.C. 78s(b)(7). CFR 240.19b–7. 3 See Letter from Eileen Donovan, Acting Secretary, CFTC, to Thomas W. Sexton, General Counsel, NFA, dated March 12, 2007, confirming approval of the proposal. 4 15 U.S.C. 78o–3(k). 5 15 U.S.C. 78o(b)(11). 6 17 CFR 30.1–30.12. 2 17 E:\FR\FM\02APN1.SGM 02APN1 Federal Register / Vol. 72, No. 62 / Monday, April 2, 2007 / Notices jurisdiction office to be under the supervision of an associated person (‘‘AP’’) principal resident in that office. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NFA has prepared statements concerning the purpose of, and basis for, the proposed rule change, burdens on competition, and comments received from members, participants, and others. The text of these statements may be examined at the places specified in Item IV below. NFA has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change hsrobinson on PROD1PC76 with NOTICES 1. Purpose In November 2005, NFA’s Board adopted amendments to NFA Compliance Rule 2–10 to require FCMs to maintain their books and records in an office located in either the U.S. or a Part 30 jurisdiction (if the firm is subject to the Part 30 regulatory scheme).7 The rule does not require the office to be under the supervision of an AP principal resident in that office, however. This creates several potential problems. First, the rule allows the firm’s principals to supervise the office from a remote location. Without a principal on the premise to oversee the office’s day-to-day recordkeeping activities, the firm is less likely to discover potential problems quickly. Second, there may be no one in the office who is subject to NFA’s disciplinary jurisdiction. Although the firm’s AP principals may ultimately be responsible for the firm’s books and records violations, their distance from the office could dilute their sense of accountability as well as the accountability of those in the office. The lack of a resident principal also means that NFA Compliance staff may not have ready access to someone who can answer questions during an audit or investigation. Although Compliance Rule 2–10 requires all Members to have an individual who is authorized to act on the Member’s behalf, is fluent in 7 See Securities Exchange Act Release No. 53190 (January 30, 2006), 71 FR 6119 (February 6, 2006). VerDate Aug<31>2005 18:39 Mar 30, 2007 Jkt 211001 English, and is knowledgeable about the Member’s business and about financial matters, the absence of a resident AP principal can be problematic when NFA is seeking information from an FCM.8 Accordingly, NFA amends Compliance Rule 2–10(b) to require that an FCM’s books and records be kept in a U.S. or Part 30 office that is under the supervision of an AP principal resident in that office. As is currently the case, a firm could only use an office in a Part 30 jurisdiction if the firm is actually subject to regulation in that jurisdiction. 2. Statutory Basis The rule change is authorized by, and consistent with, Section 15A(k) of the Act.9 B. Self-Regulatory Organization’s Statement on Burden on Competition The rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act and the Commodity Exchange Act. C. Self-Regulatory Organization’s Statement of Comments on the Proposed Rule Change Received From Members, Participants, or Others NFA did not publish the rule change to the membership for comment. NFA did not receive comment letters concerning the rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action NFA, on February 26, 2007, submitted the proposed amendments to NFA Compliance Rule 2–10 to the CFTC for approval. The CFTC approved the proposed rule change on March 12, 2007. Within 60 days of the date of effectiveness of the proposed rule change, the Commission, after consultation with the CFTC, may summarily abrogate the proposed rule change and require that the proposed rule change be refiled in accordance with the provisions of Section 19(b)(1) of the Act.10 IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, 8 Telephone conversation between Kathryn Page Camp, Associate General Counsel, NFA, and Molly M. Kim, Special Counsel, Division of Market Regulation, Commission, on March 22, 2007. 9 15 U.S.C. 78o–3(k). 10 15 U.S.C. 78s(b)(1). PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 15741 including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rule-comments@sec.gov. Please include File No. SR–NFA–2007–01 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File No. SR–NFA–2007–01. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of NFA. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–NFA–2007–01 and should be submitted on or before April 23, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.11 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–5989 Filed 3–30–07; 8:45 am] BILLING CODE 8010–01–P 11 17 E:\FR\FM\02APN1.SGM CFR 200.30–3(a)(75). 02APN1

Agencies

[Federal Register Volume 72, Number 62 (Monday, April 2, 2007)]
[Notices]
[Pages 15740-15741]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-5989]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55525; File No. SR-NFA-2007-01]


Self-Regulatory Organization; National Futures Association; 
Notice of Filing and Immediate Effectiveness of a Proposed Amendment 
Relating to NFA Compliance Rule 2-10

March 26, 2007.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-7 under the Act,\2\ notice is hereby given 
that on February 27, 2007, National Futures Association (``NFA'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change described in Items I, II, and III below, which 
Items have been substantially prepared by NFA. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons. NFA also has filed the proposed rule change 
with the Commodity Futures Trading Commission (``CFTC'').
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
---------------------------------------------------------------------------

    NFA, on February 26, 2007, submitted the proposed rule change to 
the CFTC for approval. The CFTC approved the proposed rule change on 
March 12, 2007.\3\
---------------------------------------------------------------------------

    \3\ See Letter from Eileen Donovan, Acting Secretary, CFTC, to 
Thomas W. Sexton, General Counsel, NFA, dated March 12, 2007, 
confirming approval of the proposal.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    Section 15A(k) of the Act \4\ makes NFA a national securities 
association for the limited purpose of regulating the activities of NFA 
members (``Members'') who are registered as brokers or dealers in 
security futures products under Section 15(b)(11) of the Act.\5\ NFA 
Compliance Rule 2-10(b) applies to all futures commission merchant 
(``FCM'') Members, including those who are registered as security 
futures brokers or dealers under Section 15(b)(11) of the Act.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78o-3(k).
    \5\ 15 U.S.C. 78o(b)(11).
---------------------------------------------------------------------------

    NFA Compliance Rule 2-10 currently requires FCM Members to maintain 
their books and records in an office located in either the U.S. or a 
jurisdiction that the CFTC has determined to have a comparable 
regulatory scheme for purposes of the CFTC's Part 30 regulation.\6\ The 
amendment requires the U.S. or Part 30

[[Page 15741]]

jurisdiction office to be under the supervision of an associated person 
(``AP'') principal resident in that office.
---------------------------------------------------------------------------

    \6\ 17 CFR 30.1-30.12.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NFA has prepared statements 
concerning the purpose of, and basis for, the proposed rule change, 
burdens on competition, and comments received from members, 
participants, and others. The text of these statements may be examined 
at the places specified in Item IV below. NFA has prepared summaries, 
set forth in Sections A, B, and C below, of the most significant 
aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In November 2005, NFA's Board adopted amendments to NFA Compliance 
Rule 2-10 to require FCMs to maintain their books and records in an 
office located in either the U.S. or a Part 30 jurisdiction (if the 
firm is subject to the Part 30 regulatory scheme).\7\ The rule does not 
require the office to be under the supervision of an AP principal 
resident in that office, however.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 53190 (January 30, 
2006), 71 FR 6119 (February 6, 2006).
---------------------------------------------------------------------------

    This creates several potential problems. First, the rule allows the 
firm's principals to supervise the office from a remote location. 
Without a principal on the premise to oversee the office's day-to-day 
recordkeeping activities, the firm is less likely to discover potential 
problems quickly. Second, there may be no one in the office who is 
subject to NFA's disciplinary jurisdiction. Although the firm's AP 
principals may ultimately be responsible for the firm's books and 
records violations, their distance from the office could dilute their 
sense of accountability as well as the accountability of those in the 
office.
    The lack of a resident principal also means that NFA Compliance 
staff may not have ready access to someone who can answer questions 
during an audit or investigation. Although Compliance Rule 2-10 
requires all Members to have an individual who is authorized to act on 
the Member's behalf, is fluent in English, and is knowledgeable about 
the Member's business and about financial matters, the absence of a 
resident AP principal can be problematic when NFA is seeking 
information from an FCM.\8\
---------------------------------------------------------------------------

    \8\ Telephone conversation between Kathryn Page Camp, Associate 
General Counsel, NFA, and Molly M. Kim, Special Counsel, Division of 
Market Regulation, Commission, on March 22, 2007.
---------------------------------------------------------------------------

    Accordingly, NFA amends Compliance Rule 2-10(b) to require that an 
FCM's books and records be kept in a U.S. or Part 30 office that is 
under the supervision of an AP principal resident in that office. As is 
currently the case, a firm could only use an office in a Part 30 
jurisdiction if the firm is actually subject to regulation in that 
jurisdiction.
2. Statutory Basis
    The rule change is authorized by, and consistent with, Section 
15A(k) of the Act.\9\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78o-3(k).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The rule change will not impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act 
and the Commodity Exchange Act.

C. Self-Regulatory Organization's Statement of Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    NFA did not publish the rule change to the membership for comment. 
NFA did not receive comment letters concerning the rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    NFA, on February 26, 2007, submitted the proposed amendments to NFA 
Compliance Rule 2-10 to the CFTC for approval. The CFTC approved the 
proposed rule change on March 12, 2007.
    Within 60 days of the date of effectiveness of the proposed rule 
change, the Commission, after consultation with the CFTC, may summarily 
abrogate the proposed rule change and require that the proposed rule 
change be refiled in accordance with the provisions of Section 19(b)(1) 
of the Act.\10\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File No. SR-NFA-2007-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File No. SR-NFA-2007-01. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room. Copies of such 
filing will also be available for inspection and copying at the 
principal office of NFA. All comments received will be posted without 
change; the Commission does not edit personal identifying information 
from submissions. You should submit only information that you wish to 
make available publicly. All submissions should refer to File No. SR-
NFA-2007-01 and should be submitted on or before April 23, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(75).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-5989 Filed 3-30-07; 8:45 am]
BILLING CODE 8010-01-P
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