Self-Regulatory Organizations; National Futures Association; Notice of Filing of Proposed Rule Change Relating to the NFA Interpretive Notice Entitled “NFA Compliance Rule 2-9: Enhanced Supervisory Requirements”, 39046-39048 [2014-15960]
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Federal Register / Vol. 79, No. 131 / Wednesday, July 9, 2014 / Notices
any; effective date, if any; market value
of the holding; and the percentage
weighting of the holding in the Fund’s
portfolio. Prior to the commencement of
trading, the Exchange will inform its
ETP Holders in an Information Bulletin
of the special characteristics and risks
associated with trading the Shares.
Trading in Shares of each Fund will
be halted if the circuit breaker
parameters in NYSE Arca Equities Rule
7.12 have been reached or because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Shares inadvisable, and trading in
the Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets
forth circumstances under which Shares
of each Fund may be halted. In addition,
as noted above, investors will have
ready access to information regarding
each Fund’s holdings, the IIV, the
Disclosed Portfolio, and quotation and
last-sale information for the Shares.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of additional types of actively-managed
exchange-traded products that will
enhance competition among market
participants, to the benefit of investors
and the marketplace. As noted above,
FINRA, on behalf of the Exchange, has
in place surveillance procedures that are
adequate to properly monitor trading in
the Shares in all trading sessions and to
deter and detect violations of Exchange
rules and applicable federal securities
laws. In addition, as noted above,
investors will have ready access to
information regarding each Fund’s
holdings, the IIV, the Disclosed
Portfolio, and quotation and last-sale
information for the Shares.
sroberts on DSK5SPTVN1PROD with NOTICES
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purpose of the Act. The Exchange
notes that the proposed rule change will
facilitate the listing and trading of
additional types of actively-managed
exchange-traded products that will
enhance competition among market
participants, to the benefit of investors
and the marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
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 email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2014–67 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2014–67. This
file number should be included on the
subject line if email 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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing will also be available for
Frm 00197
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014–15964 Filed 7–8–14; 8:45 am]
BILLING CODE 8011–01–P
IV. Solicitation of Comments
PO 00000
inspection and copying at the principal
office of the Exchange. 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 Number SR–
NYSEArca–2014–67 and should be
submitted on or before July 30, 2014.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72514; File No. SR–NFA–
2014–05]
Self-Regulatory Organizations;
National Futures Association; Notice
of Filing of Proposed Rule Change
Relating to the NFA Interpretive Notice
Entitled ‘‘NFA Compliance Rule 2–9:
Enhanced Supervisory Requirements’’
July 2, 2014.
Pursuant to Section 19(b)(7) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) 1 and Rule 19b–7
thereunder,2 notice is hereby given that
on June 18, 2014, National Futures
Association (‘‘NFA’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as 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.3
On June 18, 2014, NFA also filed the
proposed rule change with the
Commodity Futures Trading
Commission (‘‘CFTC’’) and requested
that the CFTC make a determination
31 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(7).
2 17 CFR 240.19b–7.
3 NFA previously filed amendments to the Notice
regarding Rule 2–9(b) with the Commission. See
Exchange Act Release No. 47533 (Mar. 19, 2003), 68
FR 14733 (Mar. 26, 2003) (SR–NFA–2003–01);
Exchange Act Release No. 52808 (Nov. 18, 2005),
70 FR 71347 (Nov. 28, 2005) (SR–NFA–2005–01);
Exchange Act Release No. 53568 (Mar. 29, 2006), 71
FR 16850 (Apr. 4, 2006) (SR–NFA–2006–01);
Exchange Act Release No. 55710 (May 4, 2007), 72
FR 26858 (May 11, 2007) (SR–NFA–2007–03);
Exchange Act Release No. 57142 (Jan. 14, 2008), 73
FR 3502 (Jan. 18, 2008) (SR–NFA–2007–07);
Exchange Act Release No. 57640 (Apr. 9, 2008), 73
FR 20341 (Apr. 15, 2008) (SR–NFA–2008–01); and
Exchange Act Release No. 63602 (Dec. 22, 2010), 76
FR 202 (Jan. 3, 2011) (SR–NFA–2010–04).
1 15
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Federal Register / Vol. 79, No. 131 / Wednesday, July 9, 2014 / Notices
that review of the proposed rule change
of NFA is not necessary. The CFTC has
not yet made such determination.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NFA Compliance Rule 2–9(b) (‘‘Rule
2–9(b)’’) and its related Interpretive
Notice entitled ‘‘NFA Compliance Rule
2–9: Enhanced Supervisory
Requirements’’ (‘‘Notice’’) require NFA
member firms (‘‘Members’’) that meet
certain criteria identified by NFA’s
Board of Directors (‘‘Board’’) to comply
with specific enhanced supervisory
requirements that are designed to
prevent abusive sales practices. One
way a Member firm triggers the
enhanced supervisory requirements is to
employ a certain specified number or
percentage of associated persons (APs)
that have previously been associated
with another firm that was a
‘‘Disciplined Firm’’ (as defined in the
Notice). The Notice, however, permits a
Member firm to exclude certain of those
APs and principals who meet very
specific criteria identified by the Board
from its determination of whether it
triggers the enhanced supervisory
requirements. The amendment to the
Notice revises this criterion to provide
limited additional relief to a few
individual principals who would
currently not be excluded from a
Member firm’s determination of
whether it triggers the enhanced
supervisory requirements.
The text of the proposed rule change
is available at the principal office of
NFA, on NFA’s Web site at https://
www.nfa.futures.org, and at the
Commission’s Public Reference Room.
sroberts on DSK5SPTVN1PROD with NOTICES
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 included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. 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.
Section 15A(k) of the Exchange Act 4
makes NFA a national securities
association for the limited purpose of
regulating the activities of Members
who are registered as brokers or dealers
in security futures products under
Section 15(b)(11) of the Exchange Act.5
The Notice entitled: ‘‘NFA Compliance
Rule 2–9: Enhanced Supervisory
Requirements’’ applies to all Members
who meet the criteria in the Notice and
could apply to Members registered as
security futures brokers or dealers under
Section 15(b)(11) of the Exchange Act.
Rule 2–9(b) authorizes NFA’s Board to
require Members that meet certain
criteria established by the Board to
comply with specific enhanced
supervisory requirements designed to
prevent abusive sales practices. The
related Notice specifies the criteria that
subject a Member firm to the enhanced
supervisory requirements and the
enhanced supervisory requirements that
must be followed.6 Rule 2–9(b) and the
Notice 7 also provide that a Member may
seek a waiver from the requirements
from NFA’s Telemarketing Procedures
Waiver Committee (‘‘Waiver
Committee’’), a Board-appointed panel
consisting of three members of NFA’s
Business Conduct Committee or Hearing
Committee.
As stated above, under Rule 2–9(b)
and the Notice, a Member firm with a
certain number or percentage of APs
who were previously employed or
associated with a Disciplined Firm is
required to comply with the enhanced
supervisory requirements. The Notice
also provides that any Member with a
principal who is or was a principal at
another Member that was required to
comply with the enhanced supervisory
requirements must itself adopt the
enhanced supervisory requirements or
seek a waiver. The Notice further
provides, however, that if the principal
satisfies certain criteria in the Notice,
the principal will not cause the Member
to comply with the enhanced
supervisory requirements.
NFA’s Waiver Committee suggested
that NFA make a minor modification to
the Notice to provide limited additional
relief to a few individual principals who
the Waiver Committee believes are
4 15
U.S.C. 78o–3(k).
U.S.C. 78o(b)(11).
6 See Notice at II (Obligations of Members Subject
to Enhanced Supervisory Requirements).
7 See Notice at IV (Waiver Procedure).
5 15
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39047
similarly situated to the current exempt
group of principals but who do not
benefit from the relief contemplated in
creating the exemption because the
principal does not satisfy the criteria
that he/she was a principal at only one
firm that was subject to the enhanced
supervisory requirements. The Waiver
Committee is concerned with respect to
situations where a Member firm
becomes subject to the enhanced
supervisory requirements by virtue of
having a significant percentage of APs
who had formerly worked at Disciplined
Firms. If a principal of that firm is also
a principal of another Member firm,
then the second Member firm
automatically is subject to the enhanced
supervisory requirements
simultaneously with the original firm
because the second Member firm now
has a principal who is a principal of
another Member (i.e., the first Member)
that is subject to the enhanced
supervisory requirements. There have
been several instances where both
Members have successfully petitioned
the Waiver Committee for full waivers;
however, the principals of those
Members do not qualify for the current
exemption because they have been
principals of more than one such
Member subject to the enhanced
supervisory requirements.
The Waiver Committee requested that
NFA modify the exemption to eliminate
the requirement that the principal could
only have been a principal of one firm
that has been subject to the enhanced
supervisory requirements and replace it
with the requirement that the most
recent firm in the principal’s history
that was subject to the enhanced
supervisory requirements either had
received a full waiver from those
requirements or had abided by the
requirements for two years and is no
longer subject to the requirements. The
proposed amendments do not eliminate
any of the other requirements including
that the individual principal must never
have been personally subject to CFTC or
NFA disciplinary action or a principal
or an AP of a current Disciplined Firm;
and that no firm in the principal’s
history that was subject to the enhanced
supervisory requirements has become
subject to a sales practice or
promotional material based disciplinary
action by NFA or the CFTC since
becoming subject to the enhanced
supervisory requirements.
2. Statutory Basis
NFA believes that the proposed rule
change is authorized by, and consistent
with, Section 15A(k)(2)(B) of the
Exchange Act. That section sets out
requirements for rules of a futures
E:\FR\FM\09JYN1.SGM
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39048
Federal Register / Vol. 79, No. 131 / Wednesday, July 9, 2014 / Notices
association, registered under Section 17
of the Commodity Exchange Act, that is
a registered national securities
association for the limited purpose of
regulating the activities of members who
are registered as brokers or dealers in
security futures products under Section
15(b)(11) of the Exchange Act. Under
Section 15A(k)(2)(B), the rules of such a
limited purpose national securities
association must be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, and, in general, to
protect investors and the public interest
in connection with security futures
products in a manner reasonably
comparable to the rules of a registered
national securities association
applicable to securities futures
products. NFA believes Rule 2–9(b) and
the Notice meet these requirements by
imposing enhanced supervisory
requirements on Members that meet
criteria that NFA’s Board has
determined indicates a greater potential
for sales practice fraud to occur. The
proposed rule change does not diminish
the effectiveness of Rule 2–9(b) and the
Notice but merely extends relief to
certain principals whose background
the Board has determined do not raise
the supervisory concerns that Rule 2–
9(b) and the Notice were intended to
address.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NFA does not believe that the
proposed rule change would impose any
burden on competition. The
amendments merely extend existing
relief to certain individual principals
whose backgrounds the Board has
determined do not raise the supervisory
concerns that Rule 2–9(b) and the
Notice were intended to address.
sroberts on DSK5SPTVN1PROD with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
NFA did not publish the rule changes
to its membership for comment. NFA
did not receive comment letters
concerning the rule changes.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The proposed rule change is not
effective because the CFTC has not yet
determined that review of the proposed
rule change is not necessary.
At any time 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
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20:08 Jul 08, 2014
Jkt 232001
change and require that the proposed
rule change be refiled in accordance
with the provisions of Section 19(b)(1)
of the Exchange Act.
IV. Solicitation of Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014–15960 Filed 7–8–14; 8:45 am]
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:
BILLING CODE 8011–01–P
Electronic Comments
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of
Amendment No. 1 and Designation of
a Longer Period for Commission
Action on Proposed Rule Change, as
Modified by Amendment No. 1 Thereto,
To List and Trade Shares of the PIMCO
Foreign Bond Exchange-Traded Fund
(U.S. Dollar-Hedged), PIMCO Foreign
Bond Exchange-Traded Fund
(Unhedged), PIMCO Global Advantage
Bond Exchange-Traded Fund, and
PIMCO International Advantage Bond
Exchange-Traded Fund
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NFA–2014–05 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NFA–2014–05. This file
number should be included on the
subject line if email 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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will 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
publicly available. All submissions
should refer to File Number SR–NFA–
2014–05 and should be submitted on or
before July 30, 2014.
PO 00000
Frm 00199
Fmt 4703
Sfmt 4703
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72531; File No. SR–
NYSEArca–2014–57]
July 3, 2014.
On May 1, 2014, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) 1 of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 2 and Rule 19b–4 thereunder,3 a
proposed rule change to list and trade
shares of the PIMCO Foreign Bond
Exchange-Traded Fund (U.S. DollarHedged), PIMCO Foreign Bond
Exchange-Traded Fund (Unhedged),
PIMCO Global Advantage Bond
Exchange-Traded Fund, and PIMCO
International Advantage Bond
Exchange-Traded Fund. The proposed
rule change was published for comment
in the Federal Register on May 22,
2014.4 On June 12, 2014, the Exchange
filed Amendment No. 1 to the proposed
rule change, which replaced the
proposed rule change in its entirety.5
The Commission received no comments
on the proposal. The Commission is
publishing this notice to solicit
comments from interested persons on
the proposed rule change, as modified
by Amendment No. 1 thereto, and to
designate a longer period for
Commission action on the proposed rule
8 17
CFR 200.30–3(a)(73).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 See Securities Exchange Act Release No. 72180
(May 16, 2014), 79 FR 29461.
5 Amendment No. 1 is available at: https://
www.sec.gov/comments/sr-nysearca-2014-57/
nysearca201457-1.pdf.
1 15
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]]>Agencies
[Federal Register Volume 79, Number 131 (Wednesday, July 9, 2014)]
[Notices]
[Pages 39046-39048]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-15960]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72514; File No. SR-NFA-2014-05]
Self-Regulatory Organizations; National Futures Association;
Notice of Filing of Proposed Rule Change Relating to the NFA
Interpretive Notice Entitled ``NFA Compliance Rule 2-9: Enhanced
Supervisory Requirements''
July 2, 2014.
Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934
(``Exchange Act'') \1\ and Rule 19b-7 thereunder,\2\ notice is hereby
given that on June 18, 2014, National Futures Association (``NFA'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as 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.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(7).
\2\ 17 CFR 240.19b-7.
\3\ NFA previously filed amendments to the Notice regarding Rule
2-9(b) with the Commission. See Exchange Act Release No. 47533 (Mar.
19, 2003), 68 FR 14733 (Mar. 26, 2003) (SR-NFA-2003-01); Exchange
Act Release No. 52808 (Nov. 18, 2005), 70 FR 71347 (Nov. 28, 2005)
(SR-NFA-2005-01); Exchange Act Release No. 53568 (Mar. 29, 2006), 71
FR 16850 (Apr. 4, 2006) (SR-NFA-2006-01); Exchange Act Release No.
55710 (May 4, 2007), 72 FR 26858 (May 11, 2007) (SR-NFA-2007-03);
Exchange Act Release No. 57142 (Jan. 14, 2008), 73 FR 3502 (Jan. 18,
2008) (SR-NFA-2007-07); Exchange Act Release No. 57640 (Apr. 9,
2008), 73 FR 20341 (Apr. 15, 2008) (SR-NFA-2008-01); and Exchange
Act Release No. 63602 (Dec. 22, 2010), 76 FR 202 (Jan. 3, 2011) (SR-
NFA-2010-04).
---------------------------------------------------------------------------
On June 18, 2014, NFA also filed the proposed rule change with the
Commodity Futures Trading Commission (``CFTC'') and requested that the
CFTC make a determination
[[Page 39047]]
that review of the proposed rule change of NFA is not necessary. The
CFTC has not yet made such determination.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NFA Compliance Rule 2-9(b) (``Rule 2-9(b)'') and its related
Interpretive Notice entitled ``NFA Compliance Rule 2-9: Enhanced
Supervisory Requirements'' (``Notice'') require NFA member firms
(``Members'') that meet certain criteria identified by NFA's Board of
Directors (``Board'') to comply with specific enhanced supervisory
requirements that are designed to prevent abusive sales practices. One
way a Member firm triggers the enhanced supervisory requirements is to
employ a certain specified number or percentage of associated persons
(APs) that have previously been associated with another firm that was a
``Disciplined Firm'' (as defined in the Notice). The Notice, however,
permits a Member firm to exclude certain of those APs and principals
who meet very specific criteria identified by the Board from its
determination of whether it triggers the enhanced supervisory
requirements. The amendment to the Notice revises this criterion to
provide limited additional relief to a few individual principals who
would currently not be excluded from a Member firm's determination of
whether it triggers the enhanced supervisory requirements.
The text of the proposed rule change is available at the principal
office of NFA, on NFA's Web site at https://www.nfa.futures.org, and at
the Commission's Public Reference Room.
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 included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Section 15A(k) of the Exchange Act \4\ makes NFA a national
securities association for the limited purpose of regulating the
activities of Members who are registered as brokers or dealers in
security futures products under Section 15(b)(11) of the Exchange
Act.\5\ The Notice entitled: ``NFA Compliance Rule 2-9: Enhanced
Supervisory Requirements'' applies to all Members who meet the criteria
in the Notice and could apply to Members registered as security futures
brokers or dealers under Section 15(b)(11) of the Exchange Act.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78o-3(k).
\5\ 15 U.S.C. 78o(b)(11).
---------------------------------------------------------------------------
Rule 2-9(b) authorizes NFA's Board to require Members that meet
certain criteria established by the Board to comply with specific
enhanced supervisory requirements designed to prevent abusive sales
practices. The related Notice specifies the criteria that subject a
Member firm to the enhanced supervisory requirements and the enhanced
supervisory requirements that must be followed.\6\ Rule 2-9(b) and the
Notice \7\ also provide that a Member may seek a waiver from the
requirements from NFA's Telemarketing Procedures Waiver Committee
(``Waiver Committee''), a Board-appointed panel consisting of three
members of NFA's Business Conduct Committee or Hearing Committee.
---------------------------------------------------------------------------
\6\ See Notice at II (Obligations of Members Subject to Enhanced
Supervisory Requirements).
\7\ See Notice at IV (Waiver Procedure).
---------------------------------------------------------------------------
As stated above, under Rule 2-9(b) and the Notice, a Member firm
with a certain number or percentage of APs who were previously employed
or associated with a Disciplined Firm is required to comply with the
enhanced supervisory requirements. The Notice also provides that any
Member with a principal who is or was a principal at another Member
that was required to comply with the enhanced supervisory requirements
must itself adopt the enhanced supervisory requirements or seek a
waiver. The Notice further provides, however, that if the principal
satisfies certain criteria in the Notice, the principal will not cause
the Member to comply with the enhanced supervisory requirements.
NFA's Waiver Committee suggested that NFA make a minor modification
to the Notice to provide limited additional relief to a few individual
principals who the Waiver Committee believes are similarly situated to
the current exempt group of principals but who do not benefit from the
relief contemplated in creating the exemption because the principal
does not satisfy the criteria that he/she was a principal at only one
firm that was subject to the enhanced supervisory requirements. The
Waiver Committee is concerned with respect to situations where a Member
firm becomes subject to the enhanced supervisory requirements by virtue
of having a significant percentage of APs who had formerly worked at
Disciplined Firms. If a principal of that firm is also a principal of
another Member firm, then the second Member firm automatically is
subject to the enhanced supervisory requirements simultaneously with
the original firm because the second Member firm now has a principal
who is a principal of another Member (i.e., the first Member) that is
subject to the enhanced supervisory requirements. There have been
several instances where both Members have successfully petitioned the
Waiver Committee for full waivers; however, the principals of those
Members do not qualify for the current exemption because they have been
principals of more than one such Member subject to the enhanced
supervisory requirements.
The Waiver Committee requested that NFA modify the exemption to
eliminate the requirement that the principal could only have been a
principal of one firm that has been subject to the enhanced supervisory
requirements and replace it with the requirement that the most recent
firm in the principal's history that was subject to the enhanced
supervisory requirements either had received a full waiver from those
requirements or had abided by the requirements for two years and is no
longer subject to the requirements. The proposed amendments do not
eliminate any of the other requirements including that the individual
principal must never have been personally subject to CFTC or NFA
disciplinary action or a principal or an AP of a current Disciplined
Firm; and that no firm in the principal's history that was subject to
the enhanced supervisory requirements has become subject to a sales
practice or promotional material based disciplinary action by NFA or
the CFTC since becoming subject to the enhanced supervisory
requirements.
2. Statutory Basis
NFA believes that the proposed rule change is authorized by, and
consistent with, Section 15A(k)(2)(B) of the Exchange Act. That section
sets out requirements for rules of a futures
[[Page 39048]]
association, registered under Section 17 of the Commodity Exchange Act,
that is a registered national securities association for the limited
purpose of regulating the activities of members who are registered as
brokers or dealers in security futures products under Section 15(b)(11)
of the Exchange Act. Under Section 15A(k)(2)(B), the rules of such a
limited purpose national securities association must be designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, and, in general, to protect
investors and the public interest in connection with security futures
products in a manner reasonably comparable to the rules of a registered
national securities association applicable to securities futures
products. NFA believes Rule 2-9(b) and the Notice meet these
requirements by imposing enhanced supervisory requirements on Members
that meet criteria that NFA's Board has determined indicates a greater
potential for sales practice fraud to occur. The proposed rule change
does not diminish the effectiveness of Rule 2-9(b) and the Notice but
merely extends relief to certain principals whose background the Board
has determined do not raise the supervisory concerns that Rule 2-9(b)
and the Notice were intended to address.
B. Self-Regulatory Organization's Statement on Burden on Competition
NFA does not believe that the proposed rule change would impose any
burden on competition. The amendments merely extend existing relief to
certain individual principals whose backgrounds the Board has
determined do not raise the supervisory concerns that Rule 2-9(b) and
the Notice were intended to address.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
NFA did not publish the rule changes to its membership for comment.
NFA did not receive comment letters concerning the rule changes.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change is not effective because the CFTC has not
yet determined that review of the proposed rule change is not
necessary.
At any time 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 Exchange Act.
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 email to rule-comments@sec.gov. Please include
File Number SR-NFA-2014-05 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NFA-2014-05. This file
number should be included on the subject line if email 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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will 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 publicly available. All
submissions should refer to File Number SR-NFA-2014-05 and should be
submitted on or before July 30, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(73).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014-15960 Filed 7-8-14; 8:45 am]
BILLING CODE 8011-01-P
