Commodity Pool Operators: Relief From Compliance With Certain Disclosure, Reporting and Recordkeeping Requirements for Registered CPOs of Commodity Pools Listed for Trading on a National Securities Exchange; CPO Registration Exemption for Certain Independent Directors or Trustees of These Commodity Pools, 28641-28645 [2011-11551]
Download as PDF
<![CDATA[
Federal Register / Vol. 76, No. 96 / Wednesday, May 18, 2011 / Rules and Regulations
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 71
[Docket No. FAA–2010–1027; Airspace
Docket No. 10–AGL–15]
Amendment of Class E Airspace;
Indianapolis Executive Airport, IN
Correction
In rule document 2011–9404
appearing on pages 22013–22014 in the
issue of Wednesday, April 20, 2011,
make the following corrections:
§ 71.1
[Corrected]
1. On page 22014, in the second
column, on the 4th line from the bottom
of the page, ‘‘86°102′7″ W’’ should read
‘‘86°10′27″ W’’.
■ 2. On the same page, in the third
column, on the 4th line from the top of
the page, ‘‘86°092′0″ W’’ should read
‘‘86°09′20″ W’’.
■
[FR Doc. C1–2011–9404 Filed 5–17–11; 8:45 am]
BILLING CODE 1505–01–D
COMMODITY FUTURES TRADING
COMMISSION
17 CFR Part 4
RIN 3038–AC46
Commodity Pool Operators: Relief
From Compliance With Certain
Disclosure, Reporting and
Recordkeeping Requirements for
Registered CPOs of Commodity Pools
Listed for Trading on a National
Securities Exchange; CPO Registration
Exemption for Certain Independent
Directors or Trustees of These
Commodity Pools
Commodity Futures Trading
Commission.
ACTION: Final rule.
AGENCY:
The Commodity Futures
Trading Commission (Commission or
CFTC) is adopting amendments to its
regulations as they affect certain
commodity pool operators (CPOs) of
commodity pools whose units of
participation are listed and traded on a
national securities exchange
(Amendments). Specifically, this action
codifies the relief from certain
disclosure, reporting, and recordkeeping
requirements that Commission staff
previously had issued to these CPOs on
a case-by-case basis. It also codifies
relief from the CPO registration
requirement for certain independent
directors or trustees of actively-managed
wwoods2 on DSK1DXX6B1PROD with RULES_PART 1
SUMMARY:
VerDate Mar<15>2010
14:51 May 17, 2011
Jkt 223001
commodity pools that Commission staff
similarly has issued.
DATES: Effective date: June 17, 2011.
FOR FURTHER INFORMATION CONTACT:
Christopher W. Cummings, Special
Counsel, Division of Clearing and
Intermediary Oversight, or Barbara S.
Gold, Associate Director, Division of
Clearing and Intermediary Oversight,
Commodity Futures Trading
Commission, 1155 21st Street, NW.,
Washington, DC 20581, telephone
number: (202) 418–5450; facsimile
number: (202) 418–5528; and electronic
mail: ccummings@cftc.gov, or
bgold@cftc.gov, respectively.
SUPPLEMENTARY INFORMATION:
I. Background
In order to make generally available
the relief that Commission staff
previously had issued on a case-by-case
basis to individual CPOs of publiclyoffered, exchange-listed pools, on
September 9, 2010, the Commission
published in the Federal Register
proposed amendments to its Regulations
4.12 and 4.13 1 (Proposing Release).2
The Proposing Release commenced by
explaining the history and background
of the regulation of CPOs by the
Commission under the Commodity
Exchange Act (Act) 3 and the
background and development of various
statutory and regulatory provisions
granting relief from CPO regulation.
With respect to this relief the
Commission stated:
In implementing its statutory mandate to
regulate the activities of CPOs, the
Commission has endeavored to refine its
regulations as appropriate to respond to
changing market conditions in a manner
consistent with customer protection. In
addition to the issuance of relief by
Commission staff on a case-by-case basis to
facilitate application of regulatory
requirements to new market conditions, the
Commission has provided certain
exemptions for registered CPOs from various
of the requirements of Part 4 of its
regulations, and where appropriate, it has
provided exemptions from the CPO
registration requirement itself.4
The Proposing Release then went on
to discuss the relatively recent
development of publicly-offered
commodity pools with units of
participation listed on a national
1 17 CFR 4.12 and 4.13. Commission regulations
may be accessed through the Commission’s Web
site, at https://www.cftc.gov.
2 75 FR 54794.
3 7 U.S.C. 1 et seq. (2006), as amended by The
Dodd Frank Wall Street Reform and Consumer
Protection Act. Public Law 111–203, 124 Stat. 1376
(2010). The Act similarly may be accessed through
the Commission’s Web site.
4 75
PO 00000
FR 54794.
Frm 00017
Fmt 4700
Sfmt 4700
28641
securities exchange (Commodity ETFs) 5
and to describe the numerous similar
requests for relief from CPOs of
Commodity ETFs that Commission staff
had received, and to which they had
favorably responded (Prior Relief
Letters).6 Because the requests for relief
and the Prior Relief Letters the staff had
issued in response thereto had become
fairly standardized and routine, the
Commission proposed to amend the
relevant regulations so as to make the
relief generally available to all CPOs
who meet the requisite criteria.
Thus, the Commission proposed
adding new paragraph (c) to Regulation
4.12 that, subject to specified
conditions, would permit the CPO of a
Commodity ETF to claim relief from the
specific Disclosure Document delivery
and acknowledgment requirements of
Regulation 4.21, the monthly Account
Statement delivery requirement of
Regulation 4.22, and the requirement to
keep the CPO’s books and records at its
main business address in Regulation
4.23. In addition, the Commission
proposed, subject to certain conditions,
to exempt from CPO registration an
independent director or trustee of a
Commodity ETF, where that person was
required to serve as a director or trustee
solely for purposes of constituting and
maintaining the audit committee
required for actively-managed public
companies (including actively-managed
Commodity ETFs) under provisions of
the Sarbanes-Oxley Act of 2002 7 (and
Securities and Exchange Commission
rules and exchange listing requirements
adopted pursuant thereto) by adding
new paragraph (a)(5) to Regulation 4.13.
As the Proposing Release explained,
then, the Commission’s actions were
intended to respond to financial market
developments in the limited context of
CPOs whose units of participation in the
pools they operated were listed for
trading on a national securities
exchange.8 The specific changes that the
Commission proposed, as well as the
rationale for those proposed changes,
are set forth in the Proposing Release.9
In light of the generally favorable
comments it received (discussed in
Section II below), the Commission is
adopting the Amendments essentially as
proposed. In this regard, however, and
5 See 75 FR 54794, at 54794–95. The Commission
explained the origin and use of the term
‘‘Commodity ETF’’.
6 Id. at 54795–96.
7 Public Law 107–204, 116 Stat. 745, enacted July
30, 2002. See Section 10A(m) of the Securities
Exchange Act of 1934 (Exchange Act), 78j–1(m)
(2006), and Rule 10A–3 under the Exchange Act, 17
CFR 240.10A–3 (2010).
8 75 FR at 54795.
9 See 75 FR at 54796–98.
E:\FR\FM\18MYR1.SGM
18MYR1
28642
Federal Register / Vol. 76, No. 96 / Wednesday, May 18, 2011 / Rules and Regulations
as the Commission stated in the
Proposing Release, it is important to
note that:
[R]egardless of registration status, all
persons who come within the CPO definition
are subject to certain operational and
advertising requirements under Part 4, to all
other provisions of the Act and the
Commission’s regulations prohibiting fraud
that apply to CPOs, and to all other relevant
provisions of the Act and the Commission’s
regulations that apply to all commodity
interest market participants, such as the
general antifraud provisions, prohibitions
against manipulations, and the trade
reporting requirements.10
Accordingly, while the regulations
being published by this Federal Register
release provide an exemption from
registration for certain CPOs, these
persons nonetheless remain subject to
the Commission’s jurisdiction.
Consistent with past practice, in a
separate document published elsewhere
in today’s Federal Register, the
Commission is issuing a Notice and
Order that authorizes the National
Futures Association to process: (1)
Claims of exemption from certain Part 4
requirements for CPOs with respect to
Commodity ETFs; and (2) notices of
exemption from registration as a CPO
filed by independent directors or
trustees of Commodity ETFs.
wwoods2 on DSK1DXX6B1PROD with RULES_PART 1
II. The Comments on the Proposing
Release
The Commission received five
comment letters on the Proposing
Release, as follows: Two from CPOs of
Commodity ETFs; one from a registered
futures association; one from a national
securities exchange; and one from a bar
association.11 The commenters were
uniformly in support of the
amendments to the Commission’s
regulations set forth in the Proposing
Release. In the words of the registered
futures association, for example, the
proposed amendments would ‘‘provide
the appropriate relief without materially
impacting customer protection,’’ and
they would serve as an appropriate
modification of the Commission’s
existing requirements by ‘‘promot[ing]
innovation in the marketplace.’’ The
national securities exchange provided
similar comments, stating that the
Proposing Release would ‘‘provide[]
appropriate regulatory relief in response
to the developing financial marketplace
consistent with the goal of customer
protection.’’
10 75
FR 54794 (footnotes omitted).
comment letters are available on the
Commission’s Web site at: https://
comments.cftc.gov/PublicComments/
CommentList.aspx?id=761.
11 These
VerDate Mar<15>2010
14:51 May 17, 2011
Jkt 223001
Commenters nonetheless requested
certain clarifications and enhancements
of the proposed amendments to the
Commission’s regulations.
A. Clarification of Relief From the
Disclosure Document Delivery and
Acknowledgment Requirements of
Regulation 4.21
Several commenters asked whether
the Disclosure Document delivery and
acknowledgment requirements would
apply under proposed Regulation
4.12(c) in various circumstances,
including: Secondary market
transactions not involving a direct
purchase from the CPO; secondary
market transactions not involving an
underwriter or distributor; sales or
resales by Authorized Participants;12
and purchases and resales of
Commodity ETF shares by an
underwriter or distributor.
As a general principle, the
Commission believes that secondary
market transactions to which a CPO or
any person acting as the agent of the
CPO is not a party do not trigger the
requirement for the CPO to deliver a
Disclosure Document or to obtain a
signed acknowledgment of receipt.13
For a CPO of a Commodity ETF who has
claimed an exemption under Regulation
4.12(c), the Disclosure Document
delivery and acknowledgment
requirements also do not apply in the
case of transactions involving
Authorized Participants or transactions
involving the underwriters or
distributors (acting as the CPO’s agents)
of the Commodity ETF’s securities
offering. Nevertheless, the CPO claiming
relief under Regulation 4.12(c) is
obligated to keep the Commodity ETF’s
Disclosure Document current and
posted on the CPO’s Web site, regardless
of whether the CPO of the Commodity
ETF has characterized its pool as an
‘‘open-end’’ or ‘‘closed-end’’ fund.14
12 In the case of many Commodity ETFs, one or
more registered broker dealers (Authorized
Participants) contract with the CPO to purchase or
redeem large blocks of Commodity ETF units as
necessary to ensure that the unit price and the
Commodity ETF’s net asset value do not diverge
and create arbitrage opportunities. See e.g., CFTC
Staff Letter 05–19 [2005–2007 Transfer Binder]
Comm. Fut. L. Rep. (CCH) ¶30,164 (Nov. 10, 2005).
13 See 44 FR 25658 (May 2, 1979), where in
interpreting newly-adopted Regulation 4.21 the
Commission stated:
The operator of a commodity pool is not required
to provide a Disclosure Document [rule 4.21] to a
person who purchases a unit of participation or
interest in the pool from a pool participant if the
pool operator did not solicit the purchase.
14 See, e.g., CFTC Staff Letter 05–19 [2005–2007
Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 30,164
(Nov. 10, 2005), where the CPO in making its
request characterized its pool as an ‘‘open end’’
fund, and CFTC Staff Letter 10–06 [Current Transfer
Binder] Comm. Fut. L. Rep. (CCH) ¶ 31,557 (Mar.
PO 00000
Frm 00018
Fmt 4700
Sfmt 4700
B. Requirement To Clearly Inform
Prospective Participants of the CPO’s
Internet Web Site
One commenter sought guidance on
the requirement in proposed Regulation
4.12(c)(2)(i)(C) to‘‘[c]learly inform
prospective pool participants of the
Internet address of such Web site’’ on
which the CPO has posted the
Commodity ETF’s Disclosure Document.
The commenter pointed out that, in the
context of a pool whose shares are
traded on a national securities
exchange, the CPO typically does not
know the identities of many prospective
pool participants.
In response, the Commission has
revised the text of Regulation
4.12(c)(2)(i)(C) to make clear that the
CPO is required to clearly inform those
prospective pool participants with
whom it has contact of the Web site
address. Additionally, and as proposed,
the regulation requires the CPO to direct
brokers, dealers and other selling agents
to so inform prospective pool
participants. Based on the
representations made by the CPOs to
whom the Prior Relief Letters were
issued, and the Commission’s
understanding of the Federal securities
laws applicable to the sale of publiclyoffered, exchange-listed securities, the
Commission expects that persons will
purchase shares in a Commodity ETF
through a registered broker or dealer.
C. Request To Expand Relief From
Regulation 4.22 To Include Annual
Reports
Another commenter asked that the
CPO of a Commodity ETF claiming
relief under proposed Regulation 4.12(c)
be permitted to satisfy the Annual
Report requirement under Regulation
4.22(c) by providing the Commodity
ETF’s Form 10–K on the same Web site
where the CPO makes available the
Commodity ETF’s Disclosure Document
and monthly Account Statements.
The Commission did not include such
an amendment to Regulation 4.22 in the
Proposing Release, and it is not
including one in the Amendments. This
is because the Commission believes that
the benefits to Commodity ETF
participants of a familiar, standardized,
certified, annual report of the
Commodity ETF’s financial condition
outweigh the burden of, for example,
ascertaining the names and addresses of
participants at year-end and preparing
and delivering the Annual Report (all of
which the CPO has 90 days to
accomplish). Accordingly, the CPO of a
Commodity ETF claiming exemption
29, 2010), where the CPO characterized its pool as
a ‘‘closed-end’’ fund.
E:\FR\FM\18MYR1.SGM
18MYR1
Federal Register / Vol. 76, No. 96 / Wednesday, May 18, 2011 / Rules and Regulations
under Regulation 4.12(c) remains
subject to the Annual Report
requirements of Regulation 4.22(c).15
wwoods2 on DSK1DXX6B1PROD with RULES_PART 1
D. Filing Requirement for Statement by
an Alternate Recordkeeper
The Commission also received a
comment recommending that instead of
filing with the National Futures
Association (NFA), as proposed, the
statement required of an alternate
recordkeeper by proposed Regulation
4.12(c)((2)(iii)(C), the CPO should be
required ‘‘to maintain the statement as a
business record and make it available to
NFA’’ upon NFA’s request.
In response, the Commission notes
that the statement, whereby an alternate
recordkeeper acknowledges its role,
agrees to carry it out in compliance with
Regulation 1.31, and agrees to keep the
records it keeps open to inspection by
Commission or Department of Justice
representatives and available to pool
participants, is a pre-requisite and
condition precedent to effectiveness of
relief from Regulation 4.23. Moreover, if
for some reason, the books and records
kept at the CPO’s main business address
are unavailable, the statement would be
inaccessible as well. Accordingly, the
Commission is retaining the filing
requirement of Regulation
4.12(c)(2)(iii)(C).
E. Clarification of Effect on Recipients of
Prior Relief Letters
In the Proposing Release the
Commission stated that, after adoption
of final regulations, a recipient of a Prior
Relief Letter could continue to rely
upon the Prior Relief Letter without
taking any further action (such as filing
a notice under Regulation 4.12(d)), so
long as the requirements of the final
regulations were no more restrictive
than the requirements of the Prior Relief
Letter to which the recipient was
subject. One of the commenters asked
for clarification of the words ‘‘no more
restrictive.’’
Inasmuch as the requirements of
Regulations 4.12(c) and 4.13(a)(5) as
adopted are no more restrictive than
those of any of the Prior Relief Letters,
by this Federal Register release the
Commission confirms that each
recipient of a Prior Relief Letter may
continue to rely upon that letter without
taking any further action. Nevertheless,
and as the Commission stated in the
Proposing Release:
[I]f the facts and representations upon
which a Prior Relief Letter was based
15 Regulation 4.22(c) sets forth the basic
requirement for distribution of the Annual Report.
Regulations 4.22(d) through (i) contain additional
provisions concerning the Annual Report, all of
which remain applicable to the CPO.
VerDate Mar<15>2010
14:51 May 17, 2011
Jkt 223001
materially change, the [recipient of that Prior
Relief Letter] will be required to file a
[n]otice under the final rule, or cease
engaging in the activities that prompted the
request for the Prior Relief Letter.16
A. Regulatory Flexibility Act
The Regulatory Flexibility Act
(RFA) 17 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.18 With respect to CPOs, the
Commission has previously determined
that a CPO is a small entity if it meets
the criteria for exemption from
registration under current Regulation
4.13(a)(2).19 Therefore, the requirements
of the RFA do not apply to CPOs who
do not meet those criteria. The
Commission believes that the
Amendments will not place any
burdens, whether new or additional, on
CPOs who would be affected hereunder.
This is because the certain of the
Amendments provide disclosure,
reporting and recordkeeping relief for
more CPOs, and another Amendment
provides registration relief. The
Commission did not receive any
comments relative to its analysis of the
RFA in the Proposing Release.
Therefore, the Chairman, on behalf of
the Commission, hereby certifies,
pursuant to 5 U.S.C. 605(b), that these
regulations will not have a significant
economic impact on a substantial
number of small entities.
B. Paperwork Reduction Act
The final rule affects information
collection requirements. As required by
the Paperwork Reduction Act of 1995
(44 U.S.C. 3507(d)), the Commission has
submitted a copy of this section to the
Office of Management and Budget for its
review. The information collection
burdens created by the Commission’s
proposed rules, which were discussed
in detail in the Proposing Release, are
identical to the collective information
collection burdens of the final rules.
The Commission invited the public
and other Federal agencies to comment
on any aspect of the information
collection requirements discussed
above. The Commission received no
comment on its burden estimates or on
any other aspect of the information
16 75
FR 54794, 54798.
U.S.C. 601 et seq.
18 47 FR 18618 (Apr. 30, 1982).
19 Id. at 18619–20.
17 5
Frm 00019
Fmt 4700
collection requirements contained in its
proposing release. The affected
collection is Collection 3038–0005 (part
4 of the Commission’s regulations).
C. Cost-Benefit Analysis
III. Related Matters
PO 00000
28643
Sfmt 4700
Section 15(a) of the Act requires the
Commission to consider the costs and
benefits of its action before issuing a
new regulation under the Act. By its
terms, Section 15(a) does not require the
Commission to quantify the costs and
benefits of a new regulation or to
determine whether the benefits of the
proposed regulation outweigh its costs.
Rather, Section 15(a) simply requires
the Commission to ‘‘consider the costs
and benefits’’ of its action.
Section 15(a) further specifies that
costs and benefits shall be evaluated in
light of five broad areas of market and
public concern: (1) Protection of market
participants and the public; (2)
efficiency, competitiveness, and
financial integrity of futures markets;
(3) price discovery; (4) sound risk
management practices; and (5) other
public interest considerations.
Accordingly, the Commission could in
its discretion give greater weight to any
one of the five enumerated areas and
could in its discretion determine that,
notwithstanding its costs, a particular
rule was necessary or appropriate to
protect the public interest or to
effectuate any of the provisions or to
accomplish any of the purposes of the
Act.
The Commission has considered the
costs and benefits of these new
regulations in light of the specific
provisions of Section 15(a) of the Act.
The Commission has determined that
the costs of the Amendments are not
significant. While the Amendments are
expected to lessen the burden that
would otherwise be imposed upon
CPOs of Commodity ETFs, market
participants and members of the public
will nonetheless be protected because
any exemption of persons from
regulatory requirements would be based
on such factors as substituted
compliance with other similar
requirements. The Commission has
determined that the benefits of the
Amendments are substantial. The
Amendments will promote efficiency in
the markets by providing uniform
standards for CPOs and by reducing
duplicative regulation.
The Commission requested comment
on its application of these factors in the
Proposing Release. No such comments
were received.
After considering the costs and
benefits, the Commission has
determined to adopt the Amendments.
E:\FR\FM\18MYR1.SGM
18MYR1
28644
Federal Register / Vol. 76, No. 96 / Wednesday, May 18, 2011 / Rules and Regulations
List of Subjects in 17 CFR Part 4
Advertising, Brokers, Commodity
futures, Commodity pool operators,
Commodity trading advisors, Consumer
protection, Reporting and recordkeeping
requirements.
For the reasons presented above, the
Commission hereby amends Chapter I of
Title 17 of the Code of Federal
Regulations as follows:
PART 4—COMMODITY POOL
OPERATORS AND COMMODITY
TRADING ADVISORS
1. The authority citation for part 4
continues to read as follows:
■
Authority: 7 U.S.C. 1a, 2, 4, 6b, 6c, 6l, 6m,
6n, 6o, 12a and 23
2. Section 4.12 is amended by:
a. Revising the heading of paragraph
(b);
■ b. Revising the introductory text of
paragraph (b)(1);
■ c. Amending paragraph (b)(2) by
adding a heading;
■ d. Redesignating paragraphs (b)(3)
through (b)(6) as paragraphs (d)(1)
through (d)(4) and revising newly
redesignated paragraphs (d)(1)
introductory text, (d)(1)(iii)(A),
(d)(1)(iii)(B), (d)(1)(iv), and (d)(2)(ii);
and
■ e. Adding new paragraph (c), to read
as follows:
■
■
§ 4.12
4.
Exemption from provisions of part
wwoods2 on DSK1DXX6B1PROD with RULES_PART 1
*
*
*
*
*
(b) Exemption from Subpart B for
certain commodity pool operators based
on amount and nature of commodity
interest trading. (1) Eligibility. Subject to
compliance with the provisions of
paragraph (d) of this section, any person
who is registered as a commodity pool
operator, or has applied for such
registration, may claim any or all of the
relief available under paragraph (b)(2) of
this section if:
*
*
*
*
*
(2) Relief available to pool operator.
* * *
*
*
*
*
*
(c) Exemption from Subpart B for
certain commodity pool operators based
on listing of pool participation units for
trading on a national securities
exchange. (1) Eligibility. Subject to
compliance with the provisions of
paragraph (d) of this section, any person
who is registered as a commodity pool
operator, or has applied for such
registration, may claim any or all of the
relief available under paragraph (c)(2) of
this section if the units of participation
in the pool for which it makes such
claim:
VerDate Mar<15>2010
14:51 May 17, 2011
Jkt 223001
(i) Will be offered and sold pursuant
to an effective registration statement
under the Securities Act of 1933; and
(ii) Will be listed for trading on a
national securities exchange registered
as such under the Securities Exchange
Act of 1934.
(2) Relief available to pool operator.
The commodity pool operator of a pool
whose units of participation meet the
criteria of paragraph (c)(1) of this
section may claim the following relief:
(i) In the case of § 4.21, exemption
from the Disclosure Document delivery
and acknowledgment requirements of
that section, Provided, however, that the
pool operator:
(A) Cause the pool’s Disclosure
Document to be readily accessible on an
Internet Web site maintained by the
pool operator;
(B) Cause the Disclosure Document to
be kept current in accordance with the
requirements of § 4.26(a);
(C) Clearly inform prospective pool
participants with whom it has contact of
the Internet address of such Web site
and direct any broker, dealer or other
selling agent to whom the pool operator
sells units of participation in the pool to
so inform prospective pool participants;
and
(D) Comply with all other
requirements applicable to pool
Disclosure Documents under Part 4. The
pool operator may satisfy the
requirement of § 4.26(b) to attach to the
Disclosure Document a copy of the
pool’s most current Account Statement
and Annual Report if the pool operator
makes such Account Statement and
Annual Report readily accessible on an
Internet Web site maintained by the
pool operator.
(ii) In the case of § 4.22, exemption
from the Account Statement distribution
requirement of that section; Provided,
however, that the pool operator:
(A) Cause the pool’s Account
Statements, including the certification
required by § 4.22(h), to be readily
accessible on an Internet Web site
maintained by the pool operator within
30 calendar days after the last day of the
applicable reporting period and
continuing for a period of not less than
30 calendar days; and
(B) Cause the Disclosure Document
for the pool to clearly indicate:
(1) That the information required to
be included in the Account Statements
will be readily accessible on an Internet
Web site maintained by the pool
operator; and
(2) The Internet address of such Web
site.
(iii) In the case of § 4.23, exemption
from the requirement to keep the books
and records specified by that section at
PO 00000
Frm 00020
Fmt 4700
Sfmt 4700
the pool operator’s main business office;
Provided, however, that:
(A) The books and records that the
pool operator will not keep at its main
business office will be maintained by
one or more of the following: The pool’s
administrator, distributor or custodian,
or a bank or registered broker or dealer
acting in a similar capacity with respect
to the pool;
(B) At the time it files electronically
with the National Futures Association
the notice required under paragraph (d)
of this section, the pool operator files a
statement that:
(1) Identifies the name, main business
address, and main business telephone
number of the person(s) who will be
keeping required books and records in
lieu of the pool operator;
(2) Sets forth the name and telephone
number of a contact for each person
who will be keeping required books and
records in lieu of the pool operator;
(3) Specifies, by reference to the
respective paragraph of § 4.23, the books
and records that such person will be
keeping; and
(4) Contains representations from the
pool operator that:
(i) It will promptly amend the
statement if the contact information or
location of any of the books and records
required to be kept by § 4.23 changes, by
identifying in such amendment the new
location and any other information that
has changed;
(ii) It remains responsible for ensuring
that all books and records required by
§ 4.23 are kept in accordance with
§ 1.31;
(iii) Within forty-eight hours after a
request by a representative of the
Commission, it will obtain the original
books and records from the location at
which they are maintained, and provide
them for inspection at the pool
operator’s main business office;
Provided, however, that if the original
books and records are permitted to be,
and are maintained, at a location
outside the United States, its territories
or possessions, the pool operator will
obtain and provide such original books
and records for inspection at the pool
operator’s main business office within
seventy-two hours of such a request;
and
(iv) It will disclose in the pool’s
Disclosure Document the location of its
books and records that are required
under § 4.23.
(C) At the time it files the notice
required under paragraph (d) of this
section, the pool operator files
electronically with the National Futures
Association a statement from each
person who will be keeping required
E:\FR\FM\18MYR1.SGM
18MYR1
wwoods2 on DSK1DXX6B1PROD with RULES_PART 1
Federal Register / Vol. 76, No. 96 / Wednesday, May 18, 2011 / Rules and Regulations
books and records in lieu of the pool
operator wherein such person:
(1) Acknowledges that the pool
operator intends that the person keep
and maintain required pool books and
records;
(2) Agrees to keep and maintain such
required books and records in
accordance with § 1.31 of this chapter;
and
(3) Agrees to keep such required
books and records open to inspection by
any representative of the Commission or
the United States Justice Department in
accordance with § 1.31 of this chapter
and to make such required books and
records available to pool participants in
accordance with § 4.23 of this chapter.
*
*
*
*
*
(d)(1) Notice of claim for exemption.
Any registered commodity pool
operator, or applicant for commodity
pool operator registration, who desires
to claim the relief available under
paragraph (b) or (c) of this § 4.12 must
file electronically a claim of exemption
with the National Futures Association
through its electronic exemption filing
system. Such claim must:
*
*
*
*
*
(iii) * * *
(A) The pool will be operated in
compliance with paragraph (b)(1)(i) of
this section and the pool operator will
comply with the requirements of
paragraph (b)(1)(ii) of this section; or
(B) The pool will be operated in
compliance with paragraph (c)(1) of this
section;
(iv) Specify the relief sought under
paragraph (b)(2) or (c)(2) of this section,
as the case may be, and
*
*
*
*
*
(2)(i) * * *
(ii) The claim of exemption shall be
effective upon filing; Provided, however,
That any exemption claimed hereunder:
(A) Will not be effective unless and
until the notice required by this
paragraph (d) contains all information
called for herein and any statements
required under paragraph (c)(2)(iii) have
been provided; and
(B) Will cease to be effective upon any
change which would render the
representations made pursuant to
paragraph (d)(1)(iii) of this section
inaccurate or the continuation of such
representations false or misleading.
*
*
*
*
*
3. Section 4.13 is amended by:
a. Removing the word ‘‘or’’ at the end
of paragraph (a)(3)(iv);
■ b. Removing the period at the end of
paragraph (a)(4)(ii)(B) and adding ‘‘; or’’;
■ c. Redesignating paragraph (a)(5) as
paragraph (a)(6), and revising newly
■
■
VerDate Mar<15>2010
14:51 May 17, 2011
Jkt 223001
redesignated paragraph (a)(6)(i)
introductory text;
■ d. Adding new paragraph (a)(5); and
■ e. Revising paragraphs (b)(1)(ii) and
(b)(2), to read as follows:
§ 4.13 Exemption from registration as a
commodity pool operator.
*
*
*
*
*
(a) * * *
(5) The person is acting as a director
or trustee with respect to a pool whose
operator is registered as a commodity
pool operator and is eligible to claim
relief under § 4.12(c) of this chapter,
Provided, however, that:
(i) The person acts in such capacity
solely to comply with the requirements
under section 10A of the Securities
Exchange Act of 1934, as amended, and
any Securities and Exchange
Commission rules and exchange listing
requirements adopted pursuant thereto,
that the pool have an audit committee
comprised exclusively of independent
directors or trustees;
(ii) The person has no power or
authority to manage or control the
operations or activities of the pool
except as necessary to comply with such
requirement; and
(iii) The registered pool operator of
the pool is and will be liable for any
violation of the Act or the Commission’s
regulations by the person in connection
with the person’s serving as a director
or trustee with respect to the pool.
(6)(i) Eligibility for exemption under
paragraph (a)(1), (a)(2), (a)(3) or (a)(4) of
this section is subject to the person
furnishing in written communication
physically delivered or delivered
through electronic transmission to each
prospective participant in the pool:
* * *
*
*
*
*
*
(b)(1) * * *
(ii) Contain the section number
pursuant to which the operator is filing
the notice (i.e., § 4.13(a)(1), (a)(2), (a)(3),
(a)(4) or (a)(5), or both (a)(3) and (a)(4))
and represent that the pool will be
operated in accordance with the criteria
of that paragraph or paragraphs; and
*
*
*
*
*
(2) The person must file the notice by
no later than the time that the pool
operator delivers a subscription
agreement for the pool to a prospective
participant in the pool; Provided,
however, that in the case of a claim for
relief under § 4.13(a)(5), the person must
file the notice by the later of the
effective date of the pool’s registration
statement under the Securities Act of
1933 or the date on which the person
first becomes a director or trustee; and
Provided, further, that where a person
registered with the Commission as a
PO 00000
Frm 00021
Fmt 4700
Sfmt 4700
28645
commodity pool operator intends to
withdraw from registration in order to
claim exemption hereunder, the person
must notify its pool’s participants in
written communication physically
delivered or delivered through
electronic transmission that it intends to
withdraw from registration and claim
the exemption, and it must provide each
such participant with a right to redeem
its interest in the pool prior to the
person filing a notice of exemption from
registration
*
*
*
*
*
Issued in Washington, DC, on May 5, 2011,
by the Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. 2011–11551 Filed 5–17–11; 8:45 am]
BILLING CODE P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 117
[Docket No. USCG–2011–0389]
Drawbridge Operation Regulation;
Calcasieu River, Westlake, LA
Coast Guard, DHS.
Notice of temporary deviation
from regulations.
AGENCY:
ACTION:
The Commander, Eighth
Coast Guard District, has issued a
temporary deviation from the regulation
governing the operation of the Union
Pacific Railroad swing bridge across the
Calcasieu River, mile 36.4, at Westlake,
Calcasieu Parish, Louisiana. The
deviation is necessary to upgrade the
electrical and mechanical systems of the
bridge. This deviation allows the bridge
to remain closed-to-navigation on five
different dates in June.
DATES: This deviation is effective from
8 a.m. on Thursday, June 2, 2011,
through 5 p.m. on Thursday, June 30,
2011.
ADDRESSES: Documents mentioned in
this preamble as being available in the
docket are part of docket USCG–2011–
0389 and are available online by going
to https://www.regulations.gov, inserting
USCG–2011–0389 in the ‘‘Keyword’’ box
and then clicking ‘‘Search.’’ They are
also available for inspection or copying
at the Docket Management Facility (M–
30), U.S. Department of Transportation,
West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue, SE.,
Washington, DC 20590, between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal holidays.
SUMMARY:
E:\FR\FM\18MYR1.SGM
18MYR1
]]>Agencies
[Federal Register Volume 76, Number 96 (Wednesday, May 18, 2011)]
[Rules and Regulations]
[Pages 28641-28645]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-11551]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 4
RIN 3038-AC46
Commodity Pool Operators: Relief From Compliance With Certain
Disclosure, Reporting and Recordkeeping Requirements for Registered
CPOs of Commodity Pools Listed for Trading on a National Securities
Exchange; CPO Registration Exemption for Certain Independent Directors
or Trustees of These Commodity Pools
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC)
is adopting amendments to its regulations as they affect certain
commodity pool operators (CPOs) of commodity pools whose units of
participation are listed and traded on a national securities exchange
(Amendments). Specifically, this action codifies the relief from
certain disclosure, reporting, and recordkeeping requirements that
Commission staff previously had issued to these CPOs on a case-by-case
basis. It also codifies relief from the CPO registration requirement
for certain independent directors or trustees of actively-managed
commodity pools that Commission staff similarly has issued.
DATES: Effective date: June 17, 2011.
FOR FURTHER INFORMATION CONTACT: Christopher W. Cummings, Special
Counsel, Division of Clearing and Intermediary Oversight, or Barbara S.
Gold, Associate Director, Division of Clearing and Intermediary
Oversight, Commodity Futures Trading Commission, 1155 21st Street, NW.,
Washington, DC 20581, telephone number: (202) 418-5450; facsimile
number: (202) 418-5528; and electronic mail: ccummings@cftc.gov, or
bgold@cftc.gov, respectively.
SUPPLEMENTARY INFORMATION:
I. Background
In order to make generally available the relief that Commission
staff previously had issued on a case-by-case basis to individual CPOs
of publicly-offered, exchange-listed pools, on September 9, 2010, the
Commission published in the Federal Register proposed amendments to its
Regulations 4.12 and 4.13 \1\ (Proposing Release).\2\ The Proposing
Release commenced by explaining the history and background of the
regulation of CPOs by the Commission under the Commodity Exchange Act
(Act) \3\ and the background and development of various statutory and
regulatory provisions granting relief from CPO regulation. With respect
to this relief the Commission stated:
\1\ 17 CFR 4.12 and 4.13. Commission regulations may be accessed
through the Commission's Web site, at https://www.cftc.gov.
\2\ 75 FR 54794.
\3\ 7 U.S.C. 1 et seq. (2006), as amended by The Dodd Frank Wall
Street Reform and Consumer Protection Act. Public Law 111-203, 124
Stat. 1376 (2010). The Act similarly may be accessed through the
Commission's Web site.
---------------------------------------------------------------------------
In implementing its statutory mandate to regulate the activities
of CPOs, the Commission has endeavored to refine its regulations as
appropriate to respond to changing market conditions in a manner
consistent with customer protection. In addition to the issuance of
relief by Commission staff on a case-by-case basis to facilitate
application of regulatory requirements to new market conditions, the
Commission has provided certain exemptions for registered CPOs from
various of the requirements of Part 4 of its regulations, and where
appropriate, it has provided exemptions from the CPO registration
requirement itself.\4\
\4\ 75 FR 54794.
---------------------------------------------------------------------------
The Proposing Release then went on to discuss the relatively recent
development of publicly-offered commodity pools with units of
participation listed on a national securities exchange (Commodity ETFs)
\5\ and to describe the numerous similar requests for relief from CPOs
of Commodity ETFs that Commission staff had received, and to which they
had favorably responded (Prior Relief Letters).\6\ Because the requests
for relief and the Prior Relief Letters the staff had issued in
response thereto had become fairly standardized and routine, the
Commission proposed to amend the relevant regulations so as to make the
relief generally available to all CPOs who meet the requisite criteria.
---------------------------------------------------------------------------
\5\ See 75 FR 54794, at 54794-95. The Commission explained the
origin and use of the term ``Commodity ETF''.
\6\ Id. at 54795-96.
---------------------------------------------------------------------------
Thus, the Commission proposed adding new paragraph (c) to
Regulation 4.12 that, subject to specified conditions, would permit the
CPO of a Commodity ETF to claim relief from the specific Disclosure
Document delivery and acknowledgment requirements of Regulation 4.21,
the monthly Account Statement delivery requirement of Regulation 4.22,
and the requirement to keep the CPO's books and records at its main
business address in Regulation 4.23. In addition, the Commission
proposed, subject to certain conditions, to exempt from CPO
registration an independent director or trustee of a Commodity ETF,
where that person was required to serve as a director or trustee solely
for purposes of constituting and maintaining the audit committee
required for actively-managed public companies (including actively-
managed Commodity ETFs) under provisions of the Sarbanes-Oxley Act of
2002 \7\ (and Securities and Exchange Commission rules and exchange
listing requirements adopted pursuant thereto) by adding new paragraph
(a)(5) to Regulation 4.13.
---------------------------------------------------------------------------
\7\ Public Law 107-204, 116 Stat. 745, enacted July 30, 2002.
See Section 10A(m) of the Securities Exchange Act of 1934 (Exchange
Act), 78j-1(m) (2006), and Rule 10A-3 under the Exchange Act, 17 CFR
240.10A-3 (2010).
---------------------------------------------------------------------------
As the Proposing Release explained, then, the Commission's actions
were intended to respond to financial market developments in the
limited context of CPOs whose units of participation in the pools they
operated were listed for trading on a national securities exchange.\8\
The specific changes that the Commission proposed, as well as the
rationale for those proposed changes, are set forth in the Proposing
Release.\9\
---------------------------------------------------------------------------
\8\ 75 FR at 54795.
\9\ See 75 FR at 54796-98.
---------------------------------------------------------------------------
In light of the generally favorable comments it received (discussed
in Section II below), the Commission is adopting the Amendments
essentially as proposed. In this regard, however, and
[[Page 28642]]
as the Commission stated in the Proposing Release, it is important to
---------------------------------------------------------------------------
note that:
[R]egardless of registration status, all persons who come within
the CPO definition are subject to certain operational and
advertising requirements under Part 4, to all other provisions of
the Act and the Commission's regulations prohibiting fraud that
apply to CPOs, and to all other relevant provisions of the Act and
the Commission's regulations that apply to all commodity interest
market participants, such as the general antifraud provisions,
prohibitions against manipulations, and the trade reporting
requirements.\10\
---------------------------------------------------------------------------
\10\ 75 FR 54794 (footnotes omitted).
Accordingly, while the regulations being published by this Federal
Register release provide an exemption from registration for certain
CPOs, these persons nonetheless remain subject to the Commission's
jurisdiction.
Consistent with past practice, in a separate document published
elsewhere in today's Federal Register, the Commission is issuing a
Notice and Order that authorizes the National Futures Association to
process: (1) Claims of exemption from certain Part 4 requirements for
CPOs with respect to Commodity ETFs; and (2) notices of exemption from
registration as a CPO filed by independent directors or trustees of
Commodity ETFs.
II. The Comments on the Proposing Release
The Commission received five comment letters on the Proposing
Release, as follows: Two from CPOs of Commodity ETFs; one from a
registered futures association; one from a national securities
exchange; and one from a bar association.\11\ The commenters were
uniformly in support of the amendments to the Commission's regulations
set forth in the Proposing Release. In the words of the registered
futures association, for example, the proposed amendments would
``provide the appropriate relief without materially impacting customer
protection,'' and they would serve as an appropriate modification of
the Commission's existing requirements by ``promot[ing] innovation in
the marketplace.'' The national securities exchange provided similar
comments, stating that the Proposing Release would ``provide[]
appropriate regulatory relief in response to the developing financial
marketplace consistent with the goal of customer protection.''
---------------------------------------------------------------------------
\11\ These comment letters are available on the Commission's Web
site at: https://comments.cftc.gov/PublicComments/CommentList.aspx?id=761.
---------------------------------------------------------------------------
Commenters nonetheless requested certain clarifications and
enhancements of the proposed amendments to the Commission's
regulations.
A. Clarification of Relief From the Disclosure Document Delivery and
Acknowledgment Requirements of Regulation 4.21
Several commenters asked whether the Disclosure Document delivery
and acknowledgment requirements would apply under proposed Regulation
4.12(c) in various circumstances, including: Secondary market
transactions not involving a direct purchase from the CPO; secondary
market transactions not involving an underwriter or distributor; sales
or resales by Authorized Participants;\12\ and purchases and resales of
Commodity ETF shares by an underwriter or distributor.
---------------------------------------------------------------------------
\12\ In the case of many Commodity ETFs, one or more registered
broker dealers (Authorized Participants) contract with the CPO to
purchase or redeem large blocks of Commodity ETF units as necessary
to ensure that the unit price and the Commodity ETF's net asset
value do not diverge and create arbitrage opportunities. See e.g.,
CFTC Staff Letter 05-19 [2005-2007 Transfer Binder] Comm. Fut. L.
Rep. (CCH) ]30,164 (Nov. 10, 2005).
---------------------------------------------------------------------------
As a general principle, the Commission believes that secondary
market transactions to which a CPO or any person acting as the agent of
the CPO is not a party do not trigger the requirement for the CPO to
deliver a Disclosure Document or to obtain a signed acknowledgment of
receipt.\13\ For a CPO of a Commodity ETF who has claimed an exemption
under Regulation 4.12(c), the Disclosure Document delivery and
acknowledgment requirements also do not apply in the case of
transactions involving Authorized Participants or transactions
involving the underwriters or distributors (acting as the CPO's agents)
of the Commodity ETF's securities offering. Nevertheless, the CPO
claiming relief under Regulation 4.12(c) is obligated to keep the
Commodity ETF's Disclosure Document current and posted on the CPO's Web
site, regardless of whether the CPO of the Commodity ETF has
characterized its pool as an ``open-end'' or ``closed-end'' fund.\14\
---------------------------------------------------------------------------
\13\ See 44 FR 25658 (May 2, 1979), where in interpreting newly-
adopted Regulation 4.21 the Commission stated:
The operator of a commodity pool is not required to provide a
Disclosure Document [rule 4.21] to a person who purchases a unit of
participation or interest in the pool from a pool participant if the
pool operator did not solicit the purchase.
\14\ See, e.g., CFTC Staff Letter 05-19 [2005-2007 Transfer
Binder] Comm. Fut. L. Rep. (CCH) ] 30,164 (Nov. 10, 2005), where the
CPO in making its request characterized its pool as an ``open end''
fund, and CFTC Staff Letter 10-06 [Current Transfer Binder] Comm.
Fut. L. Rep. (CCH) ] 31,557 (Mar. 29, 2010), where the CPO
characterized its pool as a ``closed-end'' fund.
---------------------------------------------------------------------------
B. Requirement To Clearly Inform Prospective Participants of the CPO's
Internet Web Site
One commenter sought guidance on the requirement in proposed
Regulation 4.12(c)(2)(i)(C) to``[c]learly inform prospective pool
participants of the Internet address of such Web site'' on which the
CPO has posted the Commodity ETF's Disclosure Document. The commenter
pointed out that, in the context of a pool whose shares are traded on a
national securities exchange, the CPO typically does not know the
identities of many prospective pool participants.
In response, the Commission has revised the text of Regulation
4.12(c)(2)(i)(C) to make clear that the CPO is required to clearly
inform those prospective pool participants with whom it has contact of
the Web site address. Additionally, and as proposed, the regulation
requires the CPO to direct brokers, dealers and other selling agents to
so inform prospective pool participants. Based on the representations
made by the CPOs to whom the Prior Relief Letters were issued, and the
Commission's understanding of the Federal securities laws applicable to
the sale of publicly-offered, exchange-listed securities, the
Commission expects that persons will purchase shares in a Commodity ETF
through a registered broker or dealer.
C. Request To Expand Relief From Regulation 4.22 To Include Annual
Reports
Another commenter asked that the CPO of a Commodity ETF claiming
relief under proposed Regulation 4.12(c) be permitted to satisfy the
Annual Report requirement under Regulation 4.22(c) by providing the
Commodity ETF's Form 10-K on the same Web site where the CPO makes
available the Commodity ETF's Disclosure Document and monthly Account
Statements.
The Commission did not include such an amendment to Regulation 4.22
in the Proposing Release, and it is not including one in the
Amendments. This is because the Commission believes that the benefits
to Commodity ETF participants of a familiar, standardized, certified,
annual report of the Commodity ETF's financial condition outweigh the
burden of, for example, ascertaining the names and addresses of
participants at year-end and preparing and delivering the Annual Report
(all of which the CPO has 90 days to accomplish). Accordingly, the CPO
of a Commodity ETF claiming exemption
[[Page 28643]]
under Regulation 4.12(c) remains subject to the Annual Report
requirements of Regulation 4.22(c).\15\
---------------------------------------------------------------------------
\15\ Regulation 4.22(c) sets forth the basic requirement for
distribution of the Annual Report. Regulations 4.22(d) through (i)
contain additional provisions concerning the Annual Report, all of
which remain applicable to the CPO.
---------------------------------------------------------------------------
D. Filing Requirement for Statement by an Alternate Recordkeeper
The Commission also received a comment recommending that instead of
filing with the National Futures Association (NFA), as proposed, the
statement required of an alternate recordkeeper by proposed Regulation
4.12(c)((2)(iii)(C), the CPO should be required ``to maintain the
statement as a business record and make it available to NFA'' upon
NFA's request.
In response, the Commission notes that the statement, whereby an
alternate recordkeeper acknowledges its role, agrees to carry it out in
compliance with Regulation 1.31, and agrees to keep the records it
keeps open to inspection by Commission or Department of Justice
representatives and available to pool participants, is a pre-requisite
and condition precedent to effectiveness of relief from Regulation
4.23. Moreover, if for some reason, the books and records kept at the
CPO's main business address are unavailable, the statement would be
inaccessible as well. Accordingly, the Commission is retaining the
filing requirement of Regulation 4.12(c)(2)(iii)(C).
E. Clarification of Effect on Recipients of Prior Relief Letters
In the Proposing Release the Commission stated that, after adoption
of final regulations, a recipient of a Prior Relief Letter could
continue to rely upon the Prior Relief Letter without taking any
further action (such as filing a notice under Regulation 4.12(d)), so
long as the requirements of the final regulations were no more
restrictive than the requirements of the Prior Relief Letter to which
the recipient was subject. One of the commenters asked for
clarification of the words ``no more restrictive.''
Inasmuch as the requirements of Regulations 4.12(c) and 4.13(a)(5)
as adopted are no more restrictive than those of any of the Prior
Relief Letters, by this Federal Register release the Commission
confirms that each recipient of a Prior Relief Letter may continue to
rely upon that letter without taking any further action. Nevertheless,
and as the Commission stated in the Proposing Release:
[I]f the facts and representations upon which a Prior Relief
Letter was based materially change, the [recipient of that Prior
Relief Letter] will be required to file a [n]otice under the final
rule, or cease engaging in the activities that prompted the request
for the Prior Relief Letter.\16\
---------------------------------------------------------------------------
\16\ 75 FR 54794, 54798.
---------------------------------------------------------------------------
III. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) \17\ 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.\18\ With respect to CPOs, the Commission has previously
determined that a CPO is a small entity if it meets the criteria for
exemption from registration under current Regulation 4.13(a)(2).\19\
Therefore, the requirements of the RFA do not apply to CPOs who do not
meet those criteria. The Commission believes that the Amendments will
not place any burdens, whether new or additional, on CPOs who would be
affected hereunder. This is because the certain of the Amendments
provide disclosure, reporting and recordkeeping relief for more CPOs,
and another Amendment provides registration relief. The Commission did
not receive any comments relative to its analysis of the RFA in the
Proposing Release.
---------------------------------------------------------------------------
\17\ 5 U.S.C. 601 et seq.
\18\ 47 FR 18618 (Apr. 30, 1982).
\19\ Id. at 18619-20.
---------------------------------------------------------------------------
Therefore, the Chairman, on behalf of the Commission, hereby
certifies, pursuant to 5 U.S.C. 605(b), that these regulations will not
have a significant economic impact on a substantial number of small
entities.
B. Paperwork Reduction Act
The final rule affects information collection requirements. As
required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)),
the Commission has submitted a copy of this section to the Office of
Management and Budget for its review. The information collection
burdens created by the Commission's proposed rules, which were
discussed in detail in the Proposing Release, are identical to the
collective information collection burdens of the final rules.
The Commission invited the public and other Federal agencies to
comment on any aspect of the information collection requirements
discussed above. The Commission received no comment on its burden
estimates or on any other aspect of the information collection
requirements contained in its proposing release. The affected
collection is Collection 3038-0005 (part 4 of the Commission's
regulations).
C. Cost-Benefit Analysis
Section 15(a) of the Act requires the Commission to consider the
costs and benefits of its action before issuing a new regulation under
the Act. By its terms, Section 15(a) does not require the Commission to
quantify the costs and benefits of a new regulation or to determine
whether the benefits of the proposed regulation outweigh its costs.
Rather, Section 15(a) simply requires the Commission to ``consider the
costs and benefits'' of its action.
Section 15(a) further specifies that costs and benefits shall be
evaluated in light of five broad areas of market and public concern:
(1) Protection of market participants and the public; (2) efficiency,
competitiveness, and financial integrity of futures markets; (3) price
discovery; (4) sound risk management practices; and (5) other public
interest considerations. Accordingly, the Commission could in its
discretion give greater weight to any one of the five enumerated areas
and could in its discretion determine that, notwithstanding its costs,
a particular rule was necessary or appropriate to protect the public
interest or to effectuate any of the provisions or to accomplish any of
the purposes of the Act.
The Commission has considered the costs and benefits of these new
regulations in light of the specific provisions of Section 15(a) of the
Act. The Commission has determined that the costs of the Amendments are
not significant. While the Amendments are expected to lessen the burden
that would otherwise be imposed upon CPOs of Commodity ETFs, market
participants and members of the public will nonetheless be protected
because any exemption of persons from regulatory requirements would be
based on such factors as substituted compliance with other similar
requirements. The Commission has determined that the benefits of the
Amendments are substantial. The Amendments will promote efficiency in
the markets by providing uniform standards for CPOs and by reducing
duplicative regulation.
The Commission requested comment on its application of these
factors in the Proposing Release. No such comments were received.
After considering the costs and benefits, the Commission has
determined to adopt the Amendments.
[[Page 28644]]
List of Subjects in 17 CFR Part 4
Advertising, Brokers, Commodity futures, Commodity pool operators,
Commodity trading advisors, Consumer protection, Reporting and
recordkeeping requirements.
For the reasons presented above, the Commission hereby amends
Chapter I of Title 17 of the Code of Federal Regulations as follows:
PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS
0
1. The authority citation for part 4 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 4, 6b, 6c, 6l, 6m, 6n, 6o, 12a and
23
0
2. Section 4.12 is amended by:
0
a. Revising the heading of paragraph (b);
0
b. Revising the introductory text of paragraph (b)(1);
0
c. Amending paragraph (b)(2) by adding a heading;
0
d. Redesignating paragraphs (b)(3) through (b)(6) as paragraphs (d)(1)
through (d)(4) and revising newly redesignated paragraphs (d)(1)
introductory text, (d)(1)(iii)(A), (d)(1)(iii)(B), (d)(1)(iv), and
(d)(2)(ii); and
0
e. Adding new paragraph (c), to read as follows:
Sec. 4.12 Exemption from provisions of part 4.
* * * * *
(b) Exemption from Subpart B for certain commodity pool operators
based on amount and nature of commodity interest trading. (1)
Eligibility. Subject to compliance with the provisions of paragraph (d)
of this section, any person who is registered as a commodity pool
operator, or has applied for such registration, may claim any or all of
the relief available under paragraph (b)(2) of this section if:
* * * * *
(2) Relief available to pool operator. * * *
* * * * *
(c) Exemption from Subpart B for certain commodity pool operators
based on listing of pool participation units for trading on a national
securities exchange. (1) Eligibility. Subject to compliance with the
provisions of paragraph (d) of this section, any person who is
registered as a commodity pool operator, or has applied for such
registration, may claim any or all of the relief available under
paragraph (c)(2) of this section if the units of participation in the
pool for which it makes such claim:
(i) Will be offered and sold pursuant to an effective registration
statement under the Securities Act of 1933; and
(ii) Will be listed for trading on a national securities exchange
registered as such under the Securities Exchange Act of 1934.
(2) Relief available to pool operator. The commodity pool operator
of a pool whose units of participation meet the criteria of paragraph
(c)(1) of this section may claim the following relief:
(i) In the case of Sec. 4.21, exemption from the Disclosure
Document delivery and acknowledgment requirements of that section,
Provided, however, that the pool operator:
(A) Cause the pool's Disclosure Document to be readily accessible
on an Internet Web site maintained by the pool operator;
(B) Cause the Disclosure Document to be kept current in accordance
with the requirements of Sec. 4.26(a);
(C) Clearly inform prospective pool participants with whom it has
contact of the Internet address of such Web site and direct any broker,
dealer or other selling agent to whom the pool operator sells units of
participation in the pool to so inform prospective pool participants;
and
(D) Comply with all other requirements applicable to pool
Disclosure Documents under Part 4. The pool operator may satisfy the
requirement of Sec. 4.26(b) to attach to the Disclosure Document a
copy of the pool's most current Account Statement and Annual Report if
the pool operator makes such Account Statement and Annual Report
readily accessible on an Internet Web site maintained by the pool
operator.
(ii) In the case of Sec. 4.22, exemption from the Account
Statement distribution requirement of that section; Provided, however,
that the pool operator:
(A) Cause the pool's Account Statements, including the
certification required by Sec. 4.22(h), to be readily accessible on an
Internet Web site maintained by the pool operator within 30 calendar
days after the last day of the applicable reporting period and
continuing for a period of not less than 30 calendar days; and
(B) Cause the Disclosure Document for the pool to clearly indicate:
(1) That the information required to be included in the Account
Statements will be readily accessible on an Internet Web site
maintained by the pool operator; and
(2) The Internet address of such Web site.
(iii) In the case of Sec. 4.23, exemption from the requirement to
keep the books and records specified by that section at the pool
operator's main business office; Provided, however, that:
(A) The books and records that the pool operator will not keep at
its main business office will be maintained by one or more of the
following: The pool's administrator, distributor or custodian, or a
bank or registered broker or dealer acting in a similar capacity with
respect to the pool;
(B) At the time it files electronically with the National Futures
Association the notice required under paragraph (d) of this section,
the pool operator files a statement that:
(1) Identifies the name, main business address, and main business
telephone number of the person(s) who will be keeping required books
and records in lieu of the pool operator;
(2) Sets forth the name and telephone number of a contact for each
person who will be keeping required books and records in lieu of the
pool operator;
(3) Specifies, by reference to the respective paragraph of Sec.
4.23, the books and records that such person will be keeping; and
(4) Contains representations from the pool operator that:
(i) It will promptly amend the statement if the contact information
or location of any of the books and records required to be kept by
Sec. 4.23 changes, by identifying in such amendment the new location
and any other information that has changed;
(ii) It remains responsible for ensuring that all books and records
required by Sec. 4.23 are kept in accordance with Sec. 1.31;
(iii) Within forty-eight hours after a request by a representative
of the Commission, it will obtain the original books and records from
the location at which they are maintained, and provide them for
inspection at the pool operator's main business office; Provided,
however, that if the original books and records are permitted to be,
and are maintained, at a location outside the United States, its
territories or possessions, the pool operator will obtain and provide
such original books and records for inspection at the pool operator's
main business office within seventy-two hours of such a request; and
(iv) It will disclose in the pool's Disclosure Document the
location of its books and records that are required under Sec. 4.23.
(C) At the time it files the notice required under paragraph (d) of
this section, the pool operator files electronically with the National
Futures Association a statement from each person who will be keeping
required
[[Page 28645]]
books and records in lieu of the pool operator wherein such person:
(1) Acknowledges that the pool operator intends that the person
keep and maintain required pool books and records;
(2) Agrees to keep and maintain such required books and records in
accordance with Sec. 1.31 of this chapter; and
(3) Agrees to keep such required books and records open to
inspection by any representative of the Commission or the United States
Justice Department in accordance with Sec. 1.31 of this chapter and to
make such required books and records available to pool participants in
accordance with Sec. 4.23 of this chapter.
* * * * *
(d)(1) Notice of claim for exemption. Any registered commodity pool
operator, or applicant for commodity pool operator registration, who
desires to claim the relief available under paragraph (b) or (c) of
this Sec. 4.12 must file electronically a claim of exemption with the
National Futures Association through its electronic exemption filing
system. Such claim must:
* * * * *
(iii) * * *
(A) The pool will be operated in compliance with paragraph
(b)(1)(i) of this section and the pool operator will comply with the
requirements of paragraph (b)(1)(ii) of this section; or
(B) The pool will be operated in compliance with paragraph (c)(1)
of this section;
(iv) Specify the relief sought under paragraph (b)(2) or (c)(2) of
this section, as the case may be, and
* * * * *
(2)(i) * * *
(ii) The claim of exemption shall be effective upon filing;
Provided, however, That any exemption claimed hereunder:
(A) Will not be effective unless and until the notice required by
this paragraph (d) contains all information called for herein and any
statements required under paragraph (c)(2)(iii) have been provided; and
(B) Will cease to be effective upon any change which would render
the representations made pursuant to paragraph (d)(1)(iii) of this
section inaccurate or the continuation of such representations false or
misleading.
* * * * *
0
3. Section 4.13 is amended by:
0
a. Removing the word ``or'' at the end of paragraph (a)(3)(iv);
0
b. Removing the period at the end of paragraph (a)(4)(ii)(B) and adding
``; or'';
0
c. Redesignating paragraph (a)(5) as paragraph (a)(6), and revising
newly redesignated paragraph (a)(6)(i) introductory text;
0
d. Adding new paragraph (a)(5); and
0
e. Revising paragraphs (b)(1)(ii) and (b)(2), to read as follows:
Sec. 4.13 Exemption from registration as a commodity pool operator.
* * * * *
(a) * * *
(5) The person is acting as a director or trustee with respect to a
pool whose operator is registered as a commodity pool operator and is
eligible to claim relief under Sec. 4.12(c) of this chapter, Provided,
however, that:
(i) The person acts in such capacity solely to comply with the
requirements under section 10A of the Securities Exchange Act of 1934,
as amended, and any Securities and Exchange Commission rules and
exchange listing requirements adopted pursuant thereto, that the pool
have an audit committee comprised exclusively of independent directors
or trustees;
(ii) The person has no power or authority to manage or control the
operations or activities of the pool except as necessary to comply with
such requirement; and
(iii) The registered pool operator of the pool is and will be
liable for any violation of the Act or the Commission's regulations by
the person in connection with the person's serving as a director or
trustee with respect to the pool.
(6)(i) Eligibility for exemption under paragraph (a)(1), (a)(2),
(a)(3) or (a)(4) of this section is subject to the person furnishing in
written communication physically delivered or delivered through
electronic transmission to each prospective participant in the pool: *
* *
* * * * *
(b)(1) * * *
(ii) Contain the section number pursuant to which the operator is
filing the notice (i.e., Sec. 4.13(a)(1), (a)(2), (a)(3), (a)(4) or
(a)(5), or both (a)(3) and (a)(4)) and represent that the pool will be
operated in accordance with the criteria of that paragraph or
paragraphs; and
* * * * *
(2) The person must file the notice by no later than the time that
the pool operator delivers a subscription agreement for the pool to a
prospective participant in the pool; Provided, however, that in the
case of a claim for relief under Sec. 4.13(a)(5), the person must file
the notice by the later of the effective date of the pool's
registration statement under the Securities Act of 1933 or the date on
which the person first becomes a director or trustee; and Provided,
further, that where a person registered with the Commission as a
commodity pool operator intends to withdraw from registration in order
to claim exemption hereunder, the person must notify its pool's
participants in written communication physically delivered or delivered
through electronic transmission that it intends to withdraw from
registration and claim the exemption, and it must provide each such
participant with a right to redeem its interest in the pool prior to
the person filing a notice of exemption from registration
* * * * *
Issued in Washington, DC, on May 5, 2011, by the Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. 2011-11551 Filed 5-17-11; 8:45 am]
BILLING CODE P
