Chief Compliance Officer Annual Report Requirements for Futures Commission Merchants, Swap Dealers, and Major Swap Participants; Amendments to Filing Dates, 53343-53348 [2016-19231]
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Federal Register / Vol. 81, No. 156 / Friday, August 12, 2016 / Proposed Rules
operations descending below 1,500 feet
above the surface, and IFR departure
operations below 1,200 feet above the
surface.
This proposal would also remove
reference to the Maui VORTAC from the
airspace legal descriptions for the Class
E3 airspace area designated as an
extension to the Class C surface area,
and the Class E5 airspace area extending
upward from 700 feet above the surface.
Changes to the available instrument
flight procedures since the last review,
advances in GPS mapping accuracy, and
a reliance on precise geographic
coordinates to define airport and
airspace reference points have made the
proposed airspace redesign necessary
for the safety and management of
Instrument Flight Rules (IFR)
operations.
Class E airspace designations are
published in paragraphs 6003, and
6005, respectively, of FAA Order
7400.9Z, dated August 6, 2015, and
effective September 15, 2015, which is
incorporated by reference in 14 CFR
71.1. The Class E airspace designations
listed in this document will be
published subsequently in the Order.
The FAA has determined that this
regulation only involves an established
body of technical regulations for which
frequent and routine amendments are
necessary to keep them operationally
current, is non-controversial and
unlikely to result in adverse or negative
comments. It, therefore: (1) Is not a
‘‘significant regulatory action’’ under
Executive Order 12866; (2) is not a
‘‘significant rule’’ under DOT
Regulatory Policies and Procedures (44
FR 11034; February 26, 1979); and (3)
does not warrant preparation of a
regulatory evaluation as the anticipated
impact is so minimal. Since this is a
routine matter that will only affect air
traffic procedures and air navigation, it
is certified that this rule, when
promulgated, would not have a
significant economic impact on a
substantial number of small entities
under the criteria of the Regulatory
Flexibility Act.
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Environmental Review
This proposal will be subject to an
environmental analysis in accordance
with FAA Order 1050.1F,
‘‘Environmental Impacts: Policies and
Procedures’’ prior to any FAA final
regulatory action.
List of Subjects in 14 CFR Part 71
Airspace, Incorporation by reference,
Navigation (air).
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Accordingly, pursuant to the
authority delegated to me, the Federal
Aviation Administration proposes to
amend 14 CFR part 71 as follows:
PART 71—DESIGNATION OF CLASS A,
B, C, D, AND E AIRSPACE AREAS; AIR
TRAFFIC SERVICE ROUTES; AND
REPORTING POINTS
1. The authority citation for 14 CFR
part 71 continues to read as follows:
Issued in Seattle, Washington, on August 1,
2016.
Tracey Johnson,
Manager, Operations Support Group, Western
Service Center.
[FR Doc. 2016–19004 Filed 8–11–16; 8:45 am]
BILLING CODE 4910–13–P
COMMODITY FUTURES TRADING
COMMISSION
■
Authority: 49 U.S.C. 106(f), 106(g), 40103,
40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR,
1959–1963 Comp., p. 389.
§ 71.1
[Amended]
2. The incorporation by reference in
14 CFR 71.1 of FAA Order 7400.9Z,
Airspace Designations and Reporting
Points, dated August 6, 2015, and
effective September 15, 2015, is
amended as follows:
■
Paragraph 6003 Class E Airspace Areas
Designated as an Extension to a Class C
Surface Area.
*
*
*
AWP HI E3
Regulatory Notices and Analyses
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*
*
Kahului, HI [Modified]
Kahului Airport, HI
(Lat. 20°53′55″ N., long. 156°25′50″ W.)
That airspace extending upward from the
surface within 3 miles each side of the
Kahului Airport 203° bearing extending from
the 5-mile radius of the airport to 7 miles
southwest of the airport. This Class E
airspace area is effective during the specific
dates and times established in advance by a
Notice to Airmen. The effective date and time
will thereafter be continuously published in
the Pacific Chart Supplement.
Paragraph 6005 Class E Airspace Areas
Extending Upward From 700 Feet or More
Above the Surface of the Earth.
*
*
*
AWP HI E5
*
*
Kahului, HI [Modified]
Kahului Airport, HI
(Lat. 20°53′55″ N., long. 156°25′50″ W.)
That airspace extending upward from 700
feet above the surface within a 5-mile radius
of Kahului Airport, and within 3.6 miles each
side of the airport 038° bearing extending
from the 5-mile radius of the airport to 11.7
miles northeast of the airport, and within 2
miles each side of the airport 065° bearing
extending from the 5-mile radius of the
airport to 10 miles northeast of the airport,
and within 3 miles each side of the airport
203° bearing extending from the 5-mile
radius of the airport to 10.3 miles southwest
of the airport, and within the area bounded
by the airport 318° bearing clockwise to the
airport 013° bearing extending from the 5mile radius of the airport to 8.5-miles
northeast of the airport, excluding that
airspace beyond 12 miles from the coast.
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17 CFR Part 3
RIN 3038–AE49
Chief Compliance Officer Annual
Report Requirements for Futures
Commission Merchants, Swap Dealers,
and Major Swap Participants;
Amendments to Filing Dates
Commodity Futures Trading
Commission.
ACTION: Notice of proposed rulemaking.
AGENCY:
The Commodity Futures
Trading Commission (‘‘Commission’’ or
‘‘CFTC’’) is proposing to amend certain
provisions of its regulations concerning
Chief Compliance Officers (‘‘Proposal’’).
The regulation that is the subject of the
Proposal addresses chief compliance
officers (‘‘CCOs’’) of futures commission
merchants (‘‘FCMs’’), swap dealers
(‘‘SDs’’), and major swap participants
(‘‘MSPs’’) (collectively, ‘‘Registrants’’).
The proposed amendments would:
Codify existing no-action relief
regarding the timing of when a
Registrant must furnish its CCO annual
report to the Commission; clarify filing
requirements for Registrants located in a
jurisdiction for which the Commission
has issued a comparability
determination; and delegate to the
Director of the Division of Swap Dealer
and Intermediary Oversight (‘‘DSIO’’)
authority to grant extensions to the CCO
annual report filing deadline.
DATES: Comments must be received on
or before September 12, 2016.
ADDRESSES: You may submit comments,
identified by RIN 3038–AE49, by any of
the following methods:
• CFTC Web site: https://
comments.cftc.gov. Follow the
instructions for submitting comments
through the Comments Online process
on the Web site.
• Mail: Send to Christopher
Kirkpatrick, Secretary of the
Commission, Commodity Futures
Trading Commission, Three Lafayette
Centre, 1155 21st Street NW.,
Washington, DC 20581.
• Hand Delivery/Courier: Same as
Mail, above.
SUMMARY:
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• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
Please submit your comments using
only one of these methods.
All comments must be submitted in
English, or if not, accompanied by an
English translation. Comments will be
posted as received to https://
www.cftc.gov. You should submit only
information that you wish to make
available publicly. If you wish the
Commission to consider information
that is exempt from disclosure under the
Freedom of Information Act (‘‘FOIA’’),1
a petition for confidential treatment of
the exempt information may be
submitted according to the procedures
set forth in § 145.9 of the Commission’s
regulations.2
The Commission reserves the right,
but shall have no obligation, to review,
pre-screen, filter, redact, refuse or
remove any or all of your submission
from www.cftc.gov that it may deem to
be inappropriate for publication, such as
obscene language. All submissions that
have been redacted or removed that
contain comments on the merits of the
rulemaking will be retained in the
public comment file and will be
considered as required under the
Administrative Procedure Act and other
applicable laws, and may be accessible
under the FOIA.
FOR FURTHER INFORMATION CONTACT:
Eileen Flaherty, Director, 202–418–
5326, eflaherty@cftc.gov; Erik Remmler,
Deputy Director, 202–418–7630,
eremmler@cftc.gov; Laura Gardy,
Associate Director, 202–418–7645,
lgardy@cftc.gov; or Pamela M. Geraghty,
Special Counsel, 202–418–5634,
pgeraghty@cftc.gov, Division of Swap
Dealer and Intermediary Oversight,
Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street NW., Washington, DC
20581.
SUPPLEMENTARY INFORMATION:
I. Background
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A. Commission Requirements for
Submission of CCO Annual Reports
Section 4s(k)(3) of the Commodity
Exchange Act (‘‘CEA’’) requires CCOs
for SDs and MSPs, in accordance with
rules prescribed by the Commission, to
prepare and sign an annual report
(‘‘CCO Annual Report’’) describing,
among other things, the SD’s or MSP’s
compliance with the CEA and CFTC
15
U.S.C. 552.
CFR 145.9. The Commission’s regulations are
found at 17 CFR Chapter I and can be accessed
through the Commission’s Web site at www.cftc.gov.
2 17
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regulations.3 CEA section 4s(k)(3)(B)
requires the CCO Annual Report to
accompany each appropriate financial
report of the SD or MSP required to be
furnished to the Commission.4 CEA
section 4d(d) requires CCOs of FCMs to
‘‘perform such duties and
responsibilities’’ as are established by
Commission regulation or rules of a
registered futures association.5
Regulations 3.3(e) and (f) codify the
duty to prepare and furnish to the
Commission a CCO Annual Report for
all Registrants.6 Regulation 3.3(e)
requires the CCO Annual Report to
cover the most recently completed fiscal
year of the Registrant and specifies
certain reporting elements for
Registrants in describing their
compliance with the CEA and
Commission regulations. Regulation
3.3(f)(1) requires the furnishing of the
CCO Annual Report to the board or
senior officer prior to its submission to
the Commission. Regulation 3.3(f)(2)
currently requires the CCO Annual
Report to be furnished to the
Commission electronically not more
than 60 days after a Registrant’s fiscal
year-end.
B. Regulation 3.3(f)(2) Implementation
Experience
Since the adoption of the 60-day filing
requirement, DSIO has continuously
provided no-action relief for CCO
Annual Reports submitted to the
Commission within 90 days of a
Registrant’s fiscal year-end.7 The noaction letter currently in effect, CFTC
Staff Letter No. 15–15, responds to a
request for relief on behalf of FCM and
SD firms, which stated that having an
3 7 U.S.C. 6s(k)(3)(A)(i). The CEA can be accessed
through the Commission’s Web site.
4 7 U.S.C. 6s(k)(3)(B)(i).
5 7 U.S.C. 6d(d).
6 17 CFR 3.3(e) and (f).
7 See CFTC Letter No. 13–84, Time-Limited NoAction Relief for Futures Commission Merchants,
Swap Dealers, and Major Swap Participants from
Compliance with the Timing Requirements of
Commission Regulation 3.3(f)(2) Relating to Annual
Reports by Chief Compliance Officers (Dec. 30,
2013), available at: https://www.cftc.gov/idc/groups/
public/@lrlettergeneral/documents/letter/13-84.pdf;
CFTC Letter No. 14–154, Time-Limited No-Action
Relief for Futures Commission Merchants, Swap
Dealers, and Major Swap Participants from
Compliance with the Timing Requirements of
Commission Regulation 3.3(f)(2) Relating to Annual
Reports by Chief Compliance Officers (Dec. 22,
2014), available at: https://www.cftc.gov/idc/groups/
public/@lrlettergeneral/documents/letter/14154.pdf; and CFTC Letter No. 15–15, No-Action
Relief for Futures Commission Merchants, Swap
Dealers, and Major Swap Participants from
Compliance with the Timing Requirements of
Commission Regulation 3.3(f)(2) Relating to Annual
Reports by Chief Compliance Officers (Mar. 27,
2015), available at: https://www.cftc.gov/idc/groups/
public/@lrlettergeneral/documents/letter/15-15.pdf
(‘‘CFTC Staff Letter No. 15–15’’).
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additional 30 days to file the CCO
Annual Report allows each Registrant to
conduct a more substantive and
complete review of its compliance
program.8
Recently, the U.S. Securities and
Exchange Commission (‘‘SEC’’) adopted
final rules corresponding to Regulation
3.3, and implementing a provision of
Title VII of the Dodd-Frank Act the text
of which is effectively identical to CEA
section 4s(k)(3)(B).9 The SEC’s
corresponding rule requires that the
equivalent chief compliance officer
annual report for security-based swap
dealers and major security-based swap
participants be submitted to the SEC
within 30 days following the deadline
for filing each entity’s annual financial
report.10
C. Application of Regulation 3.3(f)(2) to
Entities Located in Certain Non-U.S.
Jurisdictions
In December 2013, the Commission
issued comparability determinations
deeming an SD or MSP located in
Canada, the European Union, Hong
Kong, Japan, or Switzerland
(‘‘Substituted Compliance Registrants’’)
to be in compliance with Regulation
3.3(e) if it complies with the applicable
corresponding regulation in its home
jurisdiction.11 Specifically, a
Substituted Compliance Registrant may
elect to furnish the Commission with
the comparable annual reporting
information (hereinafter, ‘‘Comparable
Annual Report’’) specified under the
standards of its home jurisdiction.
However, the Commission did not
provide a comparability determination
with respect to Regulation 3.3(f)
regarding the timing of when the
8 FIA and ISDA Letter, Request for no-action relief
concerning certain requirements of CFTC Rule 3.3
relating to the timing of the Annual Report (Mar.
10, 2015) (on file with the CFTC, available for
inspection and copying).
9 Business Conduct Standards for Security-Based
Swap Dealers and Major Security-Based Swap
Participants, 81 FR 29959 (May 13, 2016).
10 See id. at 30150.
11 See Comparability Determination for Canada:
Certain Entity-Level Requirements, 78 FR 78839,
78843 (Dec. 27, 2013); Comparability Determination
for the European Union: Certain Entity-Level
Requirements, 78 FR 78923, 78928 (Dec. 27, 2013);
Comparability Determination for Hong Kong:
Certain Entity-Level Requirements, 78 FR 78852,
78856 (Dec. 27, 2013); Comparability Determination
for Japan: Certain Entity-Level Requirements, 78 FR
78910, 78915 (Dec. 27, 2013); Comparability
Determination for Switzerland: Certain Entity-Level
Requirements, 78 FR 78899, 78903 (Dec. 27, 2013).
It should be noted that while Australia was granted
a determination of comparability for some entitylevel requirements, it was not granted a
determination of comparability with respect to the
requirements of Regulation 3.3(e). See
Comparability Determination for Australia: Certain
Entity-Level Requirements, 78 FR 78864, 78869
(Dec. 27, 2013).
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Comparable Annual Report must be
furnished to the CFTC.12
II. The Proposal
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A Proposed Amendments to Regulation
3.3(f)(2)
The Commission is proposing to
codify the current no-action relief by
amending Regulation 3.3(f)(2). The
amendments would permit an FCM to
furnish its CCO Annual Report to the
Commission not more than 30 days after
submission of the Form 1–FR–FCM 13 or
Financial Operational Combined
Uniform Single Report (‘‘FOCUS
Report’’). The Proposal would also
permit an SD or MSP to furnish its CCO
Annual Report to the Commission not
more than 90 days after its fiscal yearend until such time as the Commission
adopts and implements rules
establishing the time for filing the
annual financial condition report
required under CEA section 4s(f). The
Commission has proposed, but not yet
adopted, a financial condition report
requirement comprised of an annual
audited financial report for SDs and
MSPs.14 Once the Commission adopts
and implements a financial condition
report rule, like FCMs, an SD or MSP
will have up to 30 days after the
submission of its annual financial
condition report to submit the CCO
Annual Report to the Commission.
Regulation 3.3(e) requires a broad and
detailed assessment of each Registrant’s
compliance program over the preceding
year as well as a discussion of planned
changes and remedial steps to be taken
for non-compliance matters. The
Commission believes that providing up
to 30 days after a Registrant’s applicable
financial reports are due would provide
Registrants an appropriate amount of
time to complete the in-depth review
and analyses required by Regulation
3.3(e). As a policy matter, the
Commission recognizes that the
periodic self-evaluation that underlies
each CCO Annual Report is a critical
step in promoting an active and robust
compliance culture within firms.
In codifying the relief provided in
CFTC Staff Letter No. 15–15, the
Commission is clarifying that the
statutory requirement for an SD or
MSP’s CCO Annual Report to
‘‘accompany each appropriate financial
report’’ allows for the CCO Annual
12 See
note 11, supra.
proposed amendment also makes a
technical correction in Regulation 3.3(f)(2) by
correcting the cross reference to the Commission
regulation that requires the filing of Form 1–FR–
FCM to Regulation 1.10(b)(1)(ii).
14 See Capital Requirements of Swap Dealers and
Major Swap Participants, 76 FR 27802, 27838
(proposed May 12, 2011).
13 The
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Report to be furnished to the
Commission not more than 30 days after
the submission of a Registrant’s annual
financial report.15 The Commission
recognizes the separate and distinct
nature and purposes of the two reports,
and believes that allowing Registrants to
submit their CCO Annual Reports not
more than 30 days after their financial
reports are due satisfies the statutory
requirement that the CCO Annual
Report ‘‘accompany’’ the other financial
report. This is also consistent with the
SEC’s approach in its corresponding
rule for delivery of chief compliance
officer annual reports by security-based
swap dealers and major security-based
swap participants.16
B. Registrants Located in Substituted
Compliance Jurisdictions
The Commission is also proposing to
amend Regulation 3.3(f) to address the
timing of the filing requirement for
Comparable Annual Reports. If the
requirements of the Substituted
Compliance Registrant’s home
jurisdiction identify a specific date by
which the Comparable Annual Reports
must be completed, then the
Commission is proposing that
Comparable Annual Reports may be
furnished to the Commission
electronically up to 15 days after the
date on which the Comparable Annual
Report must be completed.17 The
additional 15 days would allow time for
translation of the report text into
English. If the Substituted Compliance
Registrant’s home jurisdiction does not
establish a specifically identifiable
completion date, then the Substituted
Compliance Registrant must comply
with the standard time frames provided
in Regulation 3.3(f), as amended. A
specifically identifiable completion date
would be a date that can be clearly
identified such as a specific calendar
15 The Proposal would remove the obligation of
Registrants to file their CCO Annual Reports
‘‘simultaneously’’ with the applicable FCM
financial report or financial condition report.
16 In the adopting release, the SEC addresses the
statutory language that links the filing of the CCO
Annual Report with the filing of appropriate
financial reports by stating, ‘‘The Commission is
interpreting ‘accompany’ in Section 15F(k)(3)(B)(i)
to mean follow within 30 days.’’ 81 FR 29959,
30059, n.1238.
17 While each of the jurisdictions that have been
granted a comparability determination with respect
to Regulation 3.3(e) requires Substituted
Compliance Registrants to produce and complete
comparable annual reporting information, there is
variation among the foreign jurisdictions as to
whether and/or when a Comparable Annual Report
must be furnished to the home regulator. Therefore,
the Commission is using the date on which the
Comparable Annual Report must be completed as
the benchmark for determining when the
Comparable Annual Report must be furnished to
the Commission.
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53345
date or a set number of days after the
Substituted Compliance Registrant’s
fiscal year-end. A home jurisdiction
requirement to complete the
Comparable Annual Report only if some
event occurs or upon request, or which
does not specify a deadline, is not
considered comparable to the
Commission’s annual delivery
requirement.
C. Proposed Amendments Regarding a
Delegation From the Commission to the
Division
Pursuant to Regulation 3.3(f)(5),
Registrants may request from the
Commission an extension of time to
furnish their CCO Annual Reports if the
failure to timely furnish the report could
not be avoided absent ‘‘unreasonable
effort or expense.’’ The rule provides the
Commission with discretion in granting
such extensions. To expedite review
and consideration of requests for
extensions, the Commission is
proposing to delegate to the Director of
DSIO, or such other employee(s) that the
Director may designate, the authority to
grant extensions of time subject to the
same standard set forth in Regulation
3.3(f)(5). The Commission notes that the
exercise of such delegated authority
would need to be consistent with
Regulation 3.3(f)(5) and therefore would
be limited to unique facts and
circumstances that clearly demonstrate
that the inability to timely furnish the
report to the Commission could not
have been eliminated absent
unreasonable effort or expense. The
Commission believes that such
delegation is prudent given that the
decision to provide an extension
requires consideration of specific facts
and circumstances and often this
consideration needs to occur within a
relatively short period of time. As is the
case with existing delegations to staff,
the Commission would continue to
reserve the right to perform the
functions described in Regulation
3.3(f)(5) itself at any time.18
The Commission requests comment
on the appropriateness of the proposed
delegation and whether additional
procedural detail is necessary.
D. Request for Comment
The Commission seeks comments
regarding the following matters:
• Given the current filing
requirements for the Form 1–FR–FCM
and FOCUS Reports, and the anticipated
18 In addition, notwithstanding any such
delegation, in any case in which a Commission
employee delegated authority under this section
believes it is appropriate, the employee may submit
the question to the Commission for its
consideration.
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filing requirements for the financial
condition report, is it appropriate to
permit FCMs, SDs, and MSPs an
additional 30-days to furnish their CCO
Annual Report to the Commission? Are
there any practical or policy reasons for
not permitting the additional 30 days?
• Does codifying the relief granted in
CFTC Staff Letter No. 15–15 sufficiently
address Registrants’ concerns?
• Should the Commission provide
any further clarification of the
requirements of Regulation 3.3(f) as they
apply to entities located in jurisdictions
for which comparability determinations
have been issued?
III. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act 19
(‘‘RFA’’) requires that agencies consider
whether the rules they propose will
have a significant economic impact on
a substantial number of small entities
and, if so, provide a regulatory
flexibility analysis reflecting the impact.
Section 3.3(f)(2), as proposed, amends
the filing deadline for CCO Annual
Reports of FCMs, SDs, and MSPs and
clarifies the filing deadline for
Comparable Annual Reports. The
proposed amendments would affect
FCMs, SDs, and MSPs that are required
to be registered with the Commission.
The Commission has previously
established certain definitions of ‘‘small
entities’’ to be used in evaluating the
impact of its regulations on small
entities in accordance with the RFA,
and has previously determined that
FCMs, SDs, and MSPs are not small
entities for purposes of the RFA.20
Therefore, the Commission believes that
the amendments to Regulation 3.3
would not have a significant economic
impact on a substantial number of small
entities. Accordingly, the Chairman, on
behalf of the Commission, hereby
certifies, pursuant to 5 U.S.C. 605(b),
that the proposed amendments will not
have a significant economic impact on
a substantial number of small entities.
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B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(‘‘PRA’’) 21 provides that a federal
agency may not conduct or sponsor, and
a person is not required to respond to,
a collection of information unless it
19 5
U.S.C. 601 et seq.
Policy Statement and Establishment of
Definitions of ‘‘Small Entities’’ for Purposes of the
Regulatory Flexibility Act, 47 FR 18618, 18619
(Apr. 30, 1982) (FCMs); Further Definition of ‘‘Swap
Dealer,’’ ‘‘Security-Based Swap Dealer,’’ ‘‘Major
Swap Participant,’’ ‘‘Major Security-Based Swap
Participant’’ and ‘‘Eligible Contract Participant,’’ 77
FR 30596, 30701 (May 23, 2012) (SDs and MSPs).
21 44 U.S.C. 3501 et seq.
20 See
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displays a currently valid control
number issued by the Office of
Management and Budget (‘‘OMB’’). The
collection of information related to this
proposed rule is OMB control number
3038–0080—Annual Report for Chief
Compliance Officer of Registrants. The
Commission believes that this proposed
rule will not impose any new
information collection requirements that
require approval of OMB under the
PRA. As a general matter, the proposed
rule would allow Registrants up to 90
days after the end of their fiscal years,
and certain Substituted Compliance
Registrants with up to 15 days after the
date on which the Comparable Annual
Report must be completed under the
requirements of their home jurisdiction,
to file the CCO Annual Report and
Comparable Annual Reports,
respectively. As such, this proposed
rule does not, by itself, impose any new
burden or any new information
collection requirements in addition to
those that already exist in connection
with the preparation and delivery of the
CCO Annual Report pursuant to part 3
of the Commission’s regulations.
C. Cost-Benefit Considerations
1. Background
As discussed above, the Commission
is proposing amendments to the filing
requirements for CCO Annual Reports
in Regulation 3.3 that would: (1)
Increase the amount of time registrants
have to file their CCO Annual Reports
with the Commission; and (2) clarify the
filing requirements for Comparable
Annual Reports. The baseline for this
cost and benefit consideration is
existing Regulation 3.3. Although CFTC
Staff Letter No. 15–15, as discussed
above, currently offers no-action relief
that is substantially similar to the relief
that the proposed amendments would
grant Registrants, as a no-action letter, it
only represents the position of the
issuing Division or Office and cannot
bind the Commission or other
Commission staff.22 Consequently, the
Commission believes that CFTC Staff
Letter No. 15–15 should not set or affect
the baseline against which the
Commission considers the costs and
benefits of the proposal.
2. Costs
The Commission received no
comments during the rulemaking
process for Regulation 3.3 regarding
costs associated with the timing of the
filing deadline for the CCO Annual
Report. The proposed amendment does
not change the report contents or
22 See 17 CFR 140.99(a)(2). See also CFTC Staff
Letter No. 15–15 at 4.
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require any additional actions to be
taken by Registrants. The additional 30
days (or up to 15 days after the date on
which a Comparable Annual Report
must be completed under applicable
home jurisdiction standards that allow
more time) provided by the proposal
lengthens the time before senior
management or the board of the
Registrants and the Commission may
receive the CCO Annual Reports. The
additional time to furnish the reports
should not materially impact regulatory
oversight given that the purpose of the
reports is to provide a status update for
the Registrant’s compliance activities
over the course of the preceding fiscal
year and planned changes for the
coming year. The reports generally do
not serve to address crisis situations for
which immediacy is critical. Therefore,
the additional time allowed will not
materially impact the usefulness of the
information in the reports.23 The
Commission has no other information
available to it that would indicate that
changing the filing deadline would
measurably change the cost to prepare
the CCO Annual Reports. Accordingly,
the Commission preliminarily believes
that the proposal would not impose any
additional costs on any other market
participants, the markets themselves, or
the general public. The Commission
invites comment regarding the nature of,
and the extent to which, costs
associated with the CCO Annual
Reports could change as a result of the
adoption of the proposal and, to the
extent they can be quantified, monetary
and other numerical estimates thereof.
3. Benefits
The Commission believes that the
proposal would provide relief for
Registrants from time pressures in
preparing and filing their CCO Annual
Reports. The additional time provided
will allow Registrants to more carefully
complete their internal processes used
to develop the broad variety of
information needed for the reports
resulting in more accurate and complete
reports. The Commission invites
comment regarding the nature and
extent of these and any other benefits
that could result from adoption of the
proposal—including benefits to other
market participants, the market itself, or
the general public—and, to the extent
they can be quantified, monetary and
other numerical estimates thereof.
23 The CCO Annual Report must contain a
description of material non-compliance events that
occurred over the review period. However,
reporting on those events in the CCO Annual Report
provides transparency regarding the effectiveness of
the implementation of the compliance program over
the preceding year for management and the CFTC.
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4. Section 15(a) Factors
Section 15(a) of the CEA requires the
Commission to consider the costs and
benefits of its actions before
promulgating a regulation under the
CEA or issuing certain orders.24 Section
15(a) further specifies that the 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. The
Commission considers the costs and
benefits resulting from its discretionary
determinations with respect to the
section 15(a) factors.
ehiers on DSK5VPTVN1PROD with PROPOSALS
a. Protection of Market Participants and
the Public
The Commission recognizes that there
are trade-offs between reducing
regulatory burdens and ensuring that
the Commission has sufficient, timely
information to fulfill its regulatory
mission. The proposed amendments to
Regulation 3.3 are intended to reduce
some of the regulatory burdens on
Registrants. While the amendment will
delay the time by which the
Commission will receive the CCO
Annual Reports, the delay is relatively
short given that the information in the
reports looks back over the entire yearlong reporting period and identifies
planned improvements for the coming
year. Accordingly, the Commission
preliminarily believes that the short
delay will not affect the protection of
market participants and the public.
b. Efficiency, Competitiveness, and
Financial Integrity of Markets
The Commission believes that the
proposed amendments to Regulation 3.3
could improve allocational efficiency
for participants in the market by
reducing the burden of preparing the
CCO Annual Report in a shorter timeframe, thereby allowing them to allocate
compliance resources more efficiently
over the report preparation period. The
Commission preliminarily believes that
the proposed amendments to Regulation
3.3 will not have any market efficiency,
competitiveness, or market integrity
impacts because the reports address
internal compliance programs of each
Registrant and are not publicly
available.
c. Price Discovery
The Commission preliminarily
believes that the proposed amendments
24 7
U.S.C. 19(a).
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14:23 Aug 11, 2016
Jkt 238001
to Regulation 3.3 would not impact on
price discovery. Given the fact that the
proposed amendments affect only the
timing of when the CCO Annual Reports
are filed with the Commission and the
CCO Annual Reports generally would
not contain trade information or be
available to the public, the proposed
amendments would not affect price
discovery.
d. Sound Risk Management Practices
The Commission preliminarily
believes that the proposed amendments
would not have a meaningful effect on
the risk management practices of
Registrants. While the CCO Annual
Reports may discuss certain risk
management aspects related to the
compliance programs of the Registrants,
the proposal would only amend the
timing of delivery of the reports to the
Commission, not the contents of the
reports. As described above under
subsection 4.a, the short delay in
delivery of the reports provided for by
the proposal is not significant given the
nature of the information included in
the report and allowing additional time
to prepare the CCO Annual Reports
might allow the Registrants to prepare
better reports that more effectively
address the information contained
therein.
e. Other Public Interest Considerations
The Commission has not identified
any other public interest considerations
for this rulemaking.
5. Request for Comment
The Commission invites comment on
all aspects of its preliminary
consideration of the costs and benefits
associated with the proposal and the
five factors the Commission is required
to consider under CEA section 15(a). In
addressing these areas and any other
aspect of the Commission’s preliminary
cost-benefit considerations, the
Commission encourages commenters to
submit any data or other information
they may have quantifying and/or
qualifying the costs and benefits of the
proposal.
List of Subjects in 17 CFR Part 3
Administrative practice and
procedure, Brokers, Commodity futures,
Major swap participants, Reporting and
recordkeeping requirements, Swap
dealers.
For the reasons stated in the
preamble, the Commodity Futures
Trading Commission proposes to amend
17 CFR part 3 as follows:
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Fmt 4702
Sfmt 4702
53347
PART 3—REGISTRATION
1. The authority citation for part 3 is
revised to read as follows:
■
Authority: 5 U.S.C. 552, 552b; 7 U.S.C. 1a,
2, 6a, 6b, 6b–1, 6c, 6d, 6e, 6f, 6g, 6h, 6i, 6k,
6m, 6n, 6o, 6p, 6s, 8, 9, 9a, 12, 12a, 13b, 13c,
16a, 18, 19, 21, 23, as amended by Title VII
of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, Pub. L. 111–203,
124 Stat. 1376 (Jul. 21, 2010).
2. Amend § 3.3 as follows:
a. Revise paragraph (f)(2); and
b. Add paragraph (h).
The revision and addition to read as
follows:
■
■
■
§ 3.3
Chief compliance officer.
*
*
*
*
*
(f) * * *
(2)(i) Except as provided in paragraph
(f)(2)(ii) of this section, the annual
report shall be furnished electronically
to the Commission not more than 30
days after the submission of Form 1–
FR–FCM, as required under
§ 1.10(b)(1)(ii) of this chapter, the
Financial and Operational Combined
Uniform Single Report, as required
under § 1.10(h) of this chapter, or the
financial condition report, as required
under section 4s(f) of the Act, as
applicable. Until such time as the
Commission adopts and implements a
regulation establishing the time for
filing the financial condition report, a
swap dealer or major swap participant
shall furnish the annual report
electronically to the Commission not
more than 90 days after the end of its
fiscal year.
(ii) The annual report of a swap dealer
or major swap participant that is eligible
to comply with a substituted
compliance regime for paragraph (e) of
this section pursuant to a comparability
determination of the Commission may
be furnished to the Commission
electronically up to 15 days after the
date on which the comparable annual
report must be completed under the
requirements of the applicable
substituted compliance regime. If the
substituted compliance regime does not
specify a date by which the comparable
annual report must be completed, then
the annual report shall be furnished to
the Commission by the date specified in
paragraph (f)(2)(i) of this section.
*
*
*
*
*
(h) Delegation of Authority. The
Commission hereby delegates to the
Director of the Division of Swap Dealer
and Intermediary Oversight, or such
other employee or employees as the
Director may designate from time to
time, the authority to grant extensions of
time, as set forth in paragraph (f)(5) of
this section. Notwithstanding such
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Federal Register / Vol. 81, No. 156 / Friday, August 12, 2016 / Proposed Rules
delegation, in any case in which a
Commission employee delegated
authority under this paragraph believes
it appropriate, he or she may submit to
the Commission for its consideration the
question of whether an extension of
time should be granted. The delegation
of authority in this paragraph shall not
prohibit the Commission, at its election,
from exercising the authority set forth in
paragraph (f)(5) of this section.
Issued in Washington, DC, on August 8,
2016, by the Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.
Note: The following appendix will not
appear in the Code of Federal Regulations.
Appendix to Chief Compliance Officer
Annual Report Requirements for
Futures Commission Merchants, Swap
Dealers, and Major Swap Participants;
Amendments to Filing Dates—
Commission Voting Summary
On this matter, Chairman Massad and
Commissioners Bowen and Giancarlo voted
in the affirmative. No Commissioner voted in
the negative.
[FR Doc. 2016–19231 Filed 8–11–16; 8:45 am]
BILLING CODE 6351–01–P
DEPARTMENT OF THE INTERIOR
Bureau of Safety and Environmental
Enforcement
30 CFR Part 250
[Docket ID: BSEE–2016–0004; 16XE1700DX
EEEE500000 EX1SF0000.DAQ000]
RIN 1014–AA32
Oil and Gas and Sulfur Operations in
the Outer Continental Shelf—
Decommissioning Costs for Pipelines
Bureau of Safety and
Environmental Enforcement,
Department of the Interior.
ACTION: Proposed rule.
AGENCY:
The Bureau of Safety and
Environmental Enforcement (BSEE)
proposes to amend the regulations
requiring lessees and owners of
operating rights to submit summaries of
actual decommissioning expenditures
incurred for certain decommissioning
activities related to oil and gas and
sulfur operations on the Outer
Continental Shelf (OCS). The proposed
rule would expand the scope of the
current regulations to require lessees,
owners of operating rights, and right-ofway (ROW) holders to submit
summaries of actual expenditures
incurred for pipeline decommissioning
activities.
ehiers on DSK5VPTVN1PROD with PROPOSALS
SUMMARY:
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14:23 Aug 11, 2016
Jkt 238001
Submit comments by September
12, 2016. BSEE may not fully consider
comments received after this date. You
may submit comments to the Office of
Management and Budget (OMB) on the
information collection burden in this
proposed rule by September 12, 2016.
ADDRESSES: You may submit comments
on this proposed rulemaking by any of
the following methods. Please use the
Regulation Identifier Number (RIN)
1014–AA32 as an identifier in your
message. BSEE may post all submitted
comments on a public Web site.
1. Submit comments electronically via
the Federal eRulemaking Portal: https://
www.regulations.gov. In the entry titled
‘‘Enter Keyword or ID,’’ enter BSEE–
2016–0004, then click ‘‘Search.’’ Follow
the instructions to submit public
comments and view supporting and
related materials available for this
proposed rulemaking.
2. Mail or hand-carry comments to the
Department of the Interior (DOI); Bureau
of Safety and Environmental
Enforcement; Attention: Regulations
and Standards Branch; 45600 Woodland
Road, Sterling, VA 20166, VAE–ORP.
Please reference ‘‘Decommissioning
Costs for Pipelines, 1014–AA32’’ in
your comments and include your name
and return address.
3. Comments on the information
collection contained in this proposed
rule should be submitted separately
from those on the substance of the
proposed rule. Send comments on the
information collection burden in this
proposed rule to: OMB, Interior Desk
Officer 1014–AA32, 202–395–5806
(fax); or email: OIRA_submission@
omb.eop.gov. Please send a copy of your
comments to BSEE using one of the
methods previously described.
FOR FURTHER INFORMATION CONTACT:
Betty Cox, Regulatory Analyst,
Regulations and Standards Branch,
Betty.Cox@bsee.gov, (703) 787–1616.
SUPPLEMENTARY INFORMATION:
DATES:
BSEE’s Functions and Authority
BSEE promotes safety, protects the
environment, and conserves natural
resources through vigorous regulatory
oversight and enforcement of certain
activities on the OCS. BSEE derives its
authority primarily from the Outer
Continental Shelf Lands Act (OCSLA),
43 U.S.C. 1331–1356a. Congress enacted
OCSLA in 1953, codifying Federal
control over the OCS and authorizing
the Secretary of the Interior (Secretary)
to regulate oil and natural gas
exploration, development, and
production operations on the OCS. The
Secretary has authorized BSEE to
perform certain of these functions,
PO 00000
Frm 00015
Fmt 4702
Sfmt 4702
including overseeing decommissioning.
(See 30 CFR 250.101; 30 CFR part 250,
subpart Q.) To carry out its
responsibilities, BSEE regulates
exploration, development, and
production of oil and natural gas to
enhance safety and environmental
protection in a way that reflects
advancements in technology and new
information. BSEE also conducts onsite
inspections to ensure compliance with
regulations, lease terms, and approved
plans or permits. Detailed information
concerning BSEE’s regulations and
guidance for the offshore industry may
be found on BSEE’s Web site at:
www.bsee.gov/Regulations-andGuidance/index.
Public Participation and Availability of
Comments
BSEE encourages you to participate in
this proposed rulemaking by submitting
written comments, as discussed in the
ADDRESSES and DATES sections of this
proposed rule. This proposed rule
provides 30 days for public comment for
the following reasons. The need for
submission of actual decommissioning
cost information for plugging wells,
removing platforms, and clearing of
sites was explained in a proposed rule
published on May 27, 2009 (74 FR
25177) and a final rule published on
December 4, 2015 (80 FR75806). That
final rule addressed and responded to
all of the relevant comments submitted
on the proposed rule. This proposed
rule would extend the existing
requirements for submitting summaries
of actual decommissioning costs (30
CFR 250.1704(i) and (j)) to pipelines.
The reasons for this proposed rule, as
discussed in the Background and
Purpose of Proposed Amendment
sections of this notice are effectively the
same for pipelines as the reasons
discussed in the December 4, 2016 rule
for the reporting of decommissioning
costs for other facilities. BSEE does not
expect that public comments on this
proposed rule are likely to raise any
significant issues that were not raised in
the earlier decommissioning cost
reporting rulemaking. Moreover, the
affected stakeholders in the oil and gas
industry are already familiar with the
terms and requirements of the existing
decommissioning cost reporting rule,
which would apply without change to
pipelines under this proposed rule.
Accordingly, BSEE has determined that
30 days provides a reasonable and
adequate opportunity for the public to
comment on this proposed rule.
Before including your address, phone
number, email address, or other
personal identifying information in your
comment on this proposed rule,
E:\FR\FM\12AUP1.SGM
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]]>Agencies
[Federal Register Volume 81, Number 156 (Friday, August 12, 2016)]
[Proposed Rules]
[Pages 53343-53348]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19231]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 3
RIN 3038-AE49
Chief Compliance Officer Annual Report Requirements for Futures
Commission Merchants, Swap Dealers, and Major Swap Participants;
Amendments to Filing Dates
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is proposing to amend certain provisions of its regulations
concerning Chief Compliance Officers (``Proposal''). The regulation
that is the subject of the Proposal addresses chief compliance officers
(``CCOs'') of futures commission merchants (``FCMs''), swap dealers
(``SDs''), and major swap participants (``MSPs'') (collectively,
``Registrants''). The proposed amendments would: Codify existing no-
action relief regarding the timing of when a Registrant must furnish
its CCO annual report to the Commission; clarify filing requirements
for Registrants located in a jurisdiction for which the Commission has
issued a comparability determination; and delegate to the Director of
the Division of Swap Dealer and Intermediary Oversight (``DSIO'')
authority to grant extensions to the CCO annual report filing deadline.
DATES: Comments must be received on or before September 12, 2016.
ADDRESSES: You may submit comments, identified by RIN 3038-AE49, by any
of the following methods:
CFTC Web site: https://comments.cftc.gov. Follow the
instructions for submitting comments through the Comments Online
process on the Web site.
Mail: Send to Christopher Kirkpatrick, Secretary of the
Commission, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW., Washington, DC 20581.
Hand Delivery/Courier: Same as Mail, above.
[[Page 53344]]
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
Please submit your comments using only one of these methods.
All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received to
https://www.cftc.gov. You should submit only information that you wish
to make available publicly. If you wish the Commission to consider
information that is exempt from disclosure under the Freedom of
Information Act (``FOIA''),\1\ a petition for confidential treatment of
the exempt information may be submitted according to the procedures set
forth in Sec. 145.9 of the Commission's regulations.\2\
---------------------------------------------------------------------------
\1\ 5 U.S.C. 552.
\2\ 17 CFR 145.9. The Commission's regulations are found at 17
CFR Chapter I and can be accessed through the Commission's Web site
at www.cftc.gov.
_____________________________________-
The Commission reserves the right, but shall have no obligation, to
review, pre-screen, filter, redact, refuse or remove any or all of your
submission from www.cftc.gov that it may deem to be inappropriate for
publication, such as obscene language. All submissions that have been
redacted or removed that contain comments on the merits of the
rulemaking will be retained in the public comment file and will be
considered as required under the Administrative Procedure Act and other
applicable laws, and may be accessible under the FOIA.
FOR FURTHER INFORMATION CONTACT: Eileen Flaherty, Director, 202-418-
5326, eflaherty@cftc.gov; Erik Remmler, Deputy Director, 202-418-7630,
eremmler@cftc.gov; Laura Gardy, Associate Director, 202-418-7645,
lgardy@cftc.gov; or Pamela M. Geraghty, Special Counsel, 202-418-5634,
pgeraghty@cftc.gov, Division of Swap Dealer and Intermediary Oversight,
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Background
A. Commission Requirements for Submission of CCO Annual Reports
Section 4s(k)(3) of the Commodity Exchange Act (``CEA'') requires
CCOs for SDs and MSPs, in accordance with rules prescribed by the
Commission, to prepare and sign an annual report (``CCO Annual
Report'') describing, among other things, the SD's or MSP's compliance
with the CEA and CFTC regulations.\3\ CEA section 4s(k)(3)(B) requires
the CCO Annual Report to accompany each appropriate financial report of
the SD or MSP required to be furnished to the Commission.\4\ CEA
section 4d(d) requires CCOs of FCMs to ``perform such duties and
responsibilities'' as are established by Commission regulation or rules
of a registered futures association.\5\
---------------------------------------------------------------------------
\3\ 7 U.S.C. 6s(k)(3)(A)(i). The CEA can be accessed through the
Commission's Web site.
\4\ 7 U.S.C. 6s(k)(3)(B)(i).
\5\ 7 U.S.C. 6d(d).
---------------------------------------------------------------------------
Regulations 3.3(e) and (f) codify the duty to prepare and furnish
to the Commission a CCO Annual Report for all Registrants.\6\
Regulation 3.3(e) requires the CCO Annual Report to cover the most
recently completed fiscal year of the Registrant and specifies certain
reporting elements for Registrants in describing their compliance with
the CEA and Commission regulations. Regulation 3.3(f)(1) requires the
furnishing of the CCO Annual Report to the board or senior officer
prior to its submission to the Commission. Regulation 3.3(f)(2)
currently requires the CCO Annual Report to be furnished to the
Commission electronically not more than 60 days after a Registrant's
fiscal year-end.
---------------------------------------------------------------------------
\6\ 17 CFR 3.3(e) and (f).
---------------------------------------------------------------------------
B. Regulation 3.3(f)(2) Implementation Experience
Since the adoption of the 60-day filing requirement, DSIO has
continuously provided no-action relief for CCO Annual Reports submitted
to the Commission within 90 days of a Registrant's fiscal year-end.\7\
The no-action letter currently in effect, CFTC Staff Letter No. 15-15,
responds to a request for relief on behalf of FCM and SD firms, which
stated that having an additional 30 days to file the CCO Annual Report
allows each Registrant to conduct a more substantive and complete
review of its compliance program.\8\
---------------------------------------------------------------------------
\7\ See CFTC Letter No. 13-84, Time-Limited No-Action Relief for
Futures Commission Merchants, Swap Dealers, and Major Swap
Participants from Compliance with the Timing Requirements of
Commission Regulation 3.3(f)(2) Relating to Annual Reports by Chief
Compliance Officers (Dec. 30, 2013), available at: https://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/13-84.pdf; CFTC Letter No. 14-154, Time-Limited No-Action Relief for
Futures Commission Merchants, Swap Dealers, and Major Swap
Participants from Compliance with the Timing Requirements of
Commission Regulation 3.3(f)(2) Relating to Annual Reports by Chief
Compliance Officers (Dec. 22, 2014), available at: https://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/14-154.pdf; and CFTC Letter No. 15-15, No-Action Relief for Futures
Commission Merchants, Swap Dealers, and Major Swap Participants from
Compliance with the Timing Requirements of Commission Regulation
3.3(f)(2) Relating to Annual Reports by Chief Compliance Officers
(Mar. 27, 2015), available at: https://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/15-15.pdf (``CFTC Staff
Letter No. 15-15'').
\8\ FIA and ISDA Letter, Request for no-action relief concerning
certain requirements of CFTC Rule 3.3 relating to the timing of the
Annual Report (Mar. 10, 2015) (on file with the CFTC, available for
inspection and copying).
---------------------------------------------------------------------------
Recently, the U.S. Securities and Exchange Commission (``SEC'')
adopted final rules corresponding to Regulation 3.3, and implementing a
provision of Title VII of the Dodd-Frank Act the text of which is
effectively identical to CEA section 4s(k)(3)(B).\9\ The SEC's
corresponding rule requires that the equivalent chief compliance
officer annual report for security-based swap dealers and major
security-based swap participants be submitted to the SEC within 30 days
following the deadline for filing each entity's annual financial
report.\10\
---------------------------------------------------------------------------
\9\ Business Conduct Standards for Security-Based Swap Dealers
and Major Security-Based Swap Participants, 81 FR 29959 (May 13,
2016).
\10\ See id. at 30150.
---------------------------------------------------------------------------
C. Application of Regulation 3.3(f)(2) to Entities Located in Certain
Non-U.S. Jurisdictions
In December 2013, the Commission issued comparability
determinations deeming an SD or MSP located in Canada, the European
Union, Hong Kong, Japan, or Switzerland (``Substituted Compliance
Registrants'') to be in compliance with Regulation 3.3(e) if it
complies with the applicable corresponding regulation in its home
jurisdiction.\11\ Specifically, a Substituted Compliance Registrant may
elect to furnish the Commission with the comparable annual reporting
information (hereinafter, ``Comparable Annual Report'') specified under
the standards of its home jurisdiction. However, the Commission did not
provide a comparability determination with respect to Regulation 3.3(f)
regarding the timing of when the
[[Page 53345]]
Comparable Annual Report must be furnished to the CFTC.\12\
---------------------------------------------------------------------------
\11\ See Comparability Determination for Canada: Certain Entity-
Level Requirements, 78 FR 78839, 78843 (Dec. 27, 2013);
Comparability Determination for the European Union: Certain Entity-
Level Requirements, 78 FR 78923, 78928 (Dec. 27, 2013);
Comparability Determination for Hong Kong: Certain Entity-Level
Requirements, 78 FR 78852, 78856 (Dec. 27, 2013); Comparability
Determination for Japan: Certain Entity-Level Requirements, 78 FR
78910, 78915 (Dec. 27, 2013); Comparability Determination for
Switzerland: Certain Entity-Level Requirements, 78 FR 78899, 78903
(Dec. 27, 2013). It should be noted that while Australia was granted
a determination of comparability for some entity-level requirements,
it was not granted a determination of comparability with respect to
the requirements of Regulation 3.3(e). See Comparability
Determination for Australia: Certain Entity-Level Requirements, 78
FR 78864, 78869 (Dec. 27, 2013).
\12\ See note 11, supra.
---------------------------------------------------------------------------
II. The Proposal
A Proposed Amendments to Regulation 3.3(f)(2)
The Commission is proposing to codify the current no-action relief
by amending Regulation 3.3(f)(2). The amendments would permit an FCM to
furnish its CCO Annual Report to the Commission not more than 30 days
after submission of the Form 1-FR-FCM \13\ or Financial Operational
Combined Uniform Single Report (``FOCUS Report''). The Proposal would
also permit an SD or MSP to furnish its CCO Annual Report to the
Commission not more than 90 days after its fiscal year-end until such
time as the Commission adopts and implements rules establishing the
time for filing the annual financial condition report required under
CEA section 4s(f). The Commission has proposed, but not yet adopted, a
financial condition report requirement comprised of an annual audited
financial report for SDs and MSPs.\14\ Once the Commission adopts and
implements a financial condition report rule, like FCMs, an SD or MSP
will have up to 30 days after the submission of its annual financial
condition report to submit the CCO Annual Report to the Commission.
---------------------------------------------------------------------------
\13\ The proposed amendment also makes a technical correction in
Regulation 3.3(f)(2) by correcting the cross reference to the
Commission regulation that requires the filing of Form 1-FR-FCM to
Regulation 1.10(b)(1)(ii).
\14\ See Capital Requirements of Swap Dealers and Major Swap
Participants, 76 FR 27802, 27838 (proposed May 12, 2011).
---------------------------------------------------------------------------
Regulation 3.3(e) requires a broad and detailed assessment of each
Registrant's compliance program over the preceding year as well as a
discussion of planned changes and remedial steps to be taken for non-
compliance matters. The Commission believes that providing up to 30
days after a Registrant's applicable financial reports are due would
provide Registrants an appropriate amount of time to complete the in-
depth review and analyses required by Regulation 3.3(e). As a policy
matter, the Commission recognizes that the periodic self-evaluation
that underlies each CCO Annual Report is a critical step in promoting
an active and robust compliance culture within firms.
In codifying the relief provided in CFTC Staff Letter No. 15-15,
the Commission is clarifying that the statutory requirement for an SD
or MSP's CCO Annual Report to ``accompany each appropriate financial
report'' allows for the CCO Annual Report to be furnished to the
Commission not more than 30 days after the submission of a Registrant's
annual financial report.\15\ The Commission recognizes the separate and
distinct nature and purposes of the two reports, and believes that
allowing Registrants to submit their CCO Annual Reports not more than
30 days after their financial reports are due satisfies the statutory
requirement that the CCO Annual Report ``accompany'' the other
financial report. This is also consistent with the SEC's approach in
its corresponding rule for delivery of chief compliance officer annual
reports by security-based swap dealers and major security-based swap
participants.\16\
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\15\ The Proposal would remove the obligation of Registrants to
file their CCO Annual Reports ``simultaneously'' with the applicable
FCM financial report or financial condition report.
\16\ In the adopting release, the SEC addresses the statutory
language that links the filing of the CCO Annual Report with the
filing of appropriate financial reports by stating, ``The Commission
is interpreting `accompany' in Section 15F(k)(3)(B)(i) to mean
follow within 30 days.'' 81 FR 29959, 30059, n.1238.
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B. Registrants Located in Substituted Compliance Jurisdictions
The Commission is also proposing to amend Regulation 3.3(f) to
address the timing of the filing requirement for Comparable Annual
Reports. If the requirements of the Substituted Compliance Registrant's
home jurisdiction identify a specific date by which the Comparable
Annual Reports must be completed, then the Commission is proposing that
Comparable Annual Reports may be furnished to the Commission
electronically up to 15 days after the date on which the Comparable
Annual Report must be completed.\17\ The additional 15 days would allow
time for translation of the report text into English. If the
Substituted Compliance Registrant's home jurisdiction does not
establish a specifically identifiable completion date, then the
Substituted Compliance Registrant must comply with the standard time
frames provided in Regulation 3.3(f), as amended. A specifically
identifiable completion date would be a date that can be clearly
identified such as a specific calendar date or a set number of days
after the Substituted Compliance Registrant's fiscal year-end. A home
jurisdiction requirement to complete the Comparable Annual Report only
if some event occurs or upon request, or which does not specify a
deadline, is not considered comparable to the Commission's annual
delivery requirement.
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\17\ While each of the jurisdictions that have been granted a
comparability determination with respect to Regulation 3.3(e)
requires Substituted Compliance Registrants to produce and complete
comparable annual reporting information, there is variation among
the foreign jurisdictions as to whether and/or when a Comparable
Annual Report must be furnished to the home regulator. Therefore,
the Commission is using the date on which the Comparable Annual
Report must be completed as the benchmark for determining when the
Comparable Annual Report must be furnished to the Commission.
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C. Proposed Amendments Regarding a Delegation From the Commission to
the Division
Pursuant to Regulation 3.3(f)(5), Registrants may request from the
Commission an extension of time to furnish their CCO Annual Reports if
the failure to timely furnish the report could not be avoided absent
``unreasonable effort or expense.'' The rule provides the Commission
with discretion in granting such extensions. To expedite review and
consideration of requests for extensions, the Commission is proposing
to delegate to the Director of DSIO, or such other employee(s) that the
Director may designate, the authority to grant extensions of time
subject to the same standard set forth in Regulation 3.3(f)(5). The
Commission notes that the exercise of such delegated authority would
need to be consistent with Regulation 3.3(f)(5) and therefore would be
limited to unique facts and circumstances that clearly demonstrate that
the inability to timely furnish the report to the Commission could not
have been eliminated absent unreasonable effort or expense. The
Commission believes that such delegation is prudent given that the
decision to provide an extension requires consideration of specific
facts and circumstances and often this consideration needs to occur
within a relatively short period of time. As is the case with existing
delegations to staff, the Commission would continue to reserve the
right to perform the functions described in Regulation 3.3(f)(5) itself
at any time.\18\
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\18\ In addition, notwithstanding any such delegation, in any
case in which a Commission employee delegated authority under this
section believes it is appropriate, the employee may submit the
question to the Commission for its consideration.
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The Commission requests comment on the appropriateness of the
proposed delegation and whether additional procedural detail is
necessary.
D. Request for Comment
The Commission seeks comments regarding the following matters:
Given the current filing requirements for the Form 1-FR-
FCM and FOCUS Reports, and the anticipated
[[Page 53346]]
filing requirements for the financial condition report, is it
appropriate to permit FCMs, SDs, and MSPs an additional 30-days to
furnish their CCO Annual Report to the Commission? Are there any
practical or policy reasons for not permitting the additional 30 days?
Does codifying the relief granted in CFTC Staff Letter No.
15-15 sufficiently address Registrants' concerns?
Should the Commission provide any further clarification of
the requirements of Regulation 3.3(f) as they apply to entities located
in jurisdictions for which comparability determinations have been
issued?
III. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act \19\ (``RFA'') requires that
agencies consider whether the rules they propose will have a
significant economic impact on a substantial number of small entities
and, if so, provide a regulatory flexibility analysis reflecting the
impact. Section 3.3(f)(2), as proposed, amends the filing deadline for
CCO Annual Reports of FCMs, SDs, and MSPs and clarifies the filing
deadline for Comparable Annual Reports. The proposed amendments would
affect FCMs, SDs, and MSPs that are required to be registered with the
Commission. The Commission has previously established certain
definitions of ``small entities'' to be used in evaluating the impact
of its regulations on small entities in accordance with the RFA, and
has previously determined that FCMs, SDs, and MSPs are not small
entities for purposes of the RFA.\20\ Therefore, the Commission
believes that the amendments to Regulation 3.3 would not have a
significant economic impact on a substantial number of small entities.
Accordingly, the Chairman, on behalf of the Commission, hereby
certifies, pursuant to 5 U.S.C. 605(b), that the proposed amendments
will not have a significant economic impact on a substantial number of
small entities.
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\19\ 5 U.S.C. 601 et seq.
\20\ See Policy Statement and Establishment of Definitions of
``Small Entities'' for Purposes of the Regulatory Flexibility Act,
47 FR 18618, 18619 (Apr. 30, 1982) (FCMs); Further Definition of
``Swap Dealer,'' ``Security-Based Swap Dealer,'' ``Major Swap
Participant,'' ``Major Security-Based Swap Participant'' and
``Eligible Contract Participant,'' 77 FR 30596, 30701 (May 23, 2012)
(SDs and MSPs).
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B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (``PRA'') \21\ provides that a
federal agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid control number issued by the Office of Management and
Budget (``OMB''). The collection of information related to this
proposed rule is OMB control number 3038-0080--Annual Report for Chief
Compliance Officer of Registrants. The Commission believes that this
proposed rule will not impose any new information collection
requirements that require approval of OMB under the PRA. As a general
matter, the proposed rule would allow Registrants up to 90 days after
the end of their fiscal years, and certain Substituted Compliance
Registrants with up to 15 days after the date on which the Comparable
Annual Report must be completed under the requirements of their home
jurisdiction, to file the CCO Annual Report and Comparable Annual
Reports, respectively. As such, this proposed rule does not, by itself,
impose any new burden or any new information collection requirements in
addition to those that already exist in connection with the preparation
and delivery of the CCO Annual Report pursuant to part 3 of the
Commission's regulations.
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\21\ 44 U.S.C. 3501 et seq.
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C. Cost-Benefit Considerations
1. Background
As discussed above, the Commission is proposing amendments to the
filing requirements for CCO Annual Reports in Regulation 3.3 that
would: (1) Increase the amount of time registrants have to file their
CCO Annual Reports with the Commission; and (2) clarify the filing
requirements for Comparable Annual Reports. The baseline for this cost
and benefit consideration is existing Regulation 3.3. Although CFTC
Staff Letter No. 15-15, as discussed above, currently offers no-action
relief that is substantially similar to the relief that the proposed
amendments would grant Registrants, as a no-action letter, it only
represents the position of the issuing Division or Office and cannot
bind the Commission or other Commission staff.\22\ Consequently, the
Commission believes that CFTC Staff Letter No. 15-15 should not set or
affect the baseline against which the Commission considers the costs
and benefits of the proposal.
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\22\ See 17 CFR 140.99(a)(2). See also CFTC Staff Letter No. 15-
15 at 4.
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2. Costs
The Commission received no comments during the rulemaking process
for Regulation 3.3 regarding costs associated with the timing of the
filing deadline for the CCO Annual Report. The proposed amendment does
not change the report contents or require any additional actions to be
taken by Registrants. The additional 30 days (or up to 15 days after
the date on which a Comparable Annual Report must be completed under
applicable home jurisdiction standards that allow more time) provided
by the proposal lengthens the time before senior management or the
board of the Registrants and the Commission may receive the CCO Annual
Reports. The additional time to furnish the reports should not
materially impact regulatory oversight given that the purpose of the
reports is to provide a status update for the Registrant's compliance
activities over the course of the preceding fiscal year and planned
changes for the coming year. The reports generally do not serve to
address crisis situations for which immediacy is critical. Therefore,
the additional time allowed will not materially impact the usefulness
of the information in the reports.\23\ The Commission has no other
information available to it that would indicate that changing the
filing deadline would measurably change the cost to prepare the CCO
Annual Reports. Accordingly, the Commission preliminarily believes that
the proposal would not impose any additional costs on any other market
participants, the markets themselves, or the general public. The
Commission invites comment regarding the nature of, and the extent to
which, costs associated with the CCO Annual Reports could change as a
result of the adoption of the proposal and, to the extent they can be
quantified, monetary and other numerical estimates thereof.
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\23\ The CCO Annual Report must contain a description of
material non-compliance events that occurred over the review period.
However, reporting on those events in the CCO Annual Report provides
transparency regarding the effectiveness of the implementation of
the compliance program over the preceding year for management and
the CFTC.
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3. Benefits
The Commission believes that the proposal would provide relief for
Registrants from time pressures in preparing and filing their CCO
Annual Reports. The additional time provided will allow Registrants to
more carefully complete their internal processes used to develop the
broad variety of information needed for the reports resulting in more
accurate and complete reports. The Commission invites comment regarding
the nature and extent of these and any other benefits that could result
from adoption of the proposal--including benefits to other market
participants, the market itself, or the general public--and, to the
extent they can be quantified, monetary and other numerical estimates
thereof.
[[Page 53347]]
4. Section 15(a) Factors
Section 15(a) of the CEA requires the Commission to consider the
costs and benefits of its actions before promulgating a regulation
under the CEA or issuing certain orders.\24\ Section 15(a) further
specifies that the 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. The Commission considers the costs and benefits
resulting from its discretionary determinations with respect to the
section 15(a) factors.
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\24\ 7 U.S.C. 19(a).
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a. Protection of Market Participants and the Public
The Commission recognizes that there are trade-offs between
reducing regulatory burdens and ensuring that the Commission has
sufficient, timely information to fulfill its regulatory mission. The
proposed amendments to Regulation 3.3 are intended to reduce some of
the regulatory burdens on Registrants. While the amendment will delay
the time by which the Commission will receive the CCO Annual Reports,
the delay is relatively short given that the information in the reports
looks back over the entire year-long reporting period and identifies
planned improvements for the coming year. Accordingly, the Commission
preliminarily believes that the short delay will not affect the
protection of market participants and the public.
b. Efficiency, Competitiveness, and Financial Integrity of Markets
The Commission believes that the proposed amendments to Regulation
3.3 could improve allocational efficiency for participants in the
market by reducing the burden of preparing the CCO Annual Report in a
shorter time-frame, thereby allowing them to allocate compliance
resources more efficiently over the report preparation period. The
Commission preliminarily believes that the proposed amendments to
Regulation 3.3 will not have any market efficiency, competitiveness, or
market integrity impacts because the reports address internal
compliance programs of each Registrant and are not publicly available.
c. Price Discovery
The Commission preliminarily believes that the proposed amendments
to Regulation 3.3 would not impact on price discovery. Given the fact
that the proposed amendments affect only the timing of when the CCO
Annual Reports are filed with the Commission and the CCO Annual Reports
generally would not contain trade information or be available to the
public, the proposed amendments would not affect price discovery.
d. Sound Risk Management Practices
The Commission preliminarily believes that the proposed amendments
would not have a meaningful effect on the risk management practices of
Registrants. While the CCO Annual Reports may discuss certain risk
management aspects related to the compliance programs of the
Registrants, the proposal would only amend the timing of delivery of
the reports to the Commission, not the contents of the reports. As
described above under subsection 4.a, the short delay in delivery of
the reports provided for by the proposal is not significant given the
nature of the information included in the report and allowing
additional time to prepare the CCO Annual Reports might allow the
Registrants to prepare better reports that more effectively address the
information contained therein.
e. Other Public Interest Considerations
The Commission has not identified any other public interest
considerations for this rulemaking.
5. Request for Comment
The Commission invites comment on all aspects of its preliminary
consideration of the costs and benefits associated with the proposal
and the five factors the Commission is required to consider under CEA
section 15(a). In addressing these areas and any other aspect of the
Commission's preliminary cost-benefit considerations, the Commission
encourages commenters to submit any data or other information they may
have quantifying and/or qualifying the costs and benefits of the
proposal.
List of Subjects in 17 CFR Part 3
Administrative practice and procedure, Brokers, Commodity futures,
Major swap participants, Reporting and recordkeeping requirements, Swap
dealers.
For the reasons stated in the preamble, the Commodity Futures
Trading Commission proposes to amend 17 CFR part 3 as follows:
PART 3--REGISTRATION
0
1. The authority citation for part 3 is revised to read as follows:
Authority: 5 U.S.C. 552, 552b; 7 U.S.C. 1a, 2, 6a, 6b, 6b-1, 6c,
6d, 6e, 6f, 6g, 6h, 6i, 6k, 6m, 6n, 6o, 6p, 6s, 8, 9, 9a, 12, 12a,
13b, 13c, 16a, 18, 19, 21, 23, as amended by Title VII of the Dodd-
Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-
203, 124 Stat. 1376 (Jul. 21, 2010).
0
2. Amend Sec. 3.3 as follows:
0
a. Revise paragraph (f)(2); and
0
b. Add paragraph (h).
The revision and addition to read as follows:
Sec. 3.3 Chief compliance officer.
* * * * *
(f) * * *
(2)(i) Except as provided in paragraph (f)(2)(ii) of this section,
the annual report shall be furnished electronically to the Commission
not more than 30 days after the submission of Form 1-FR-FCM, as
required under Sec. 1.10(b)(1)(ii) of this chapter, the Financial and
Operational Combined Uniform Single Report, as required under Sec.
1.10(h) of this chapter, or the financial condition report, as required
under section 4s(f) of the Act, as applicable. Until such time as the
Commission adopts and implements a regulation establishing the time for
filing the financial condition report, a swap dealer or major swap
participant shall furnish the annual report electronically to the
Commission not more than 90 days after the end of its fiscal year.
(ii) The annual report of a swap dealer or major swap participant
that is eligible to comply with a substituted compliance regime for
paragraph (e) of this section pursuant to a comparability determination
of the Commission may be furnished to the Commission electronically up
to 15 days after the date on which the comparable annual report must be
completed under the requirements of the applicable substituted
compliance regime. If the substituted compliance regime does not
specify a date by which the comparable annual report must be completed,
then the annual report shall be furnished to the Commission by the date
specified in paragraph (f)(2)(i) of this section.
* * * * *
(h) Delegation of Authority. The Commission hereby delegates to the
Director of the Division of Swap Dealer and Intermediary Oversight, or
such other employee or employees as the Director may designate from
time to time, the authority to grant extensions of time, as set forth
in paragraph (f)(5) of this section. Notwithstanding such
[[Page 53348]]
delegation, in any case in which a Commission employee delegated
authority under this paragraph believes it appropriate, he or she may
submit to the Commission for its consideration the question of whether
an extension of time should be granted. The delegation of authority in
this paragraph shall not prohibit the Commission, at its election, from
exercising the authority set forth in paragraph (f)(5) of this section.
Issued in Washington, DC, on August 8, 2016, by the Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.
Note: The following appendix will not appear in the Code of
Federal Regulations.
Appendix to Chief Compliance Officer Annual Report Requirements for
Futures Commission Merchants, Swap Dealers, and Major Swap
Participants; Amendments to Filing Dates--Commission Voting Summary
On this matter, Chairman Massad and Commissioners Bowen and
Giancarlo voted in the affirmative. No Commissioner voted in the
negative.
[FR Doc. 2016-19231 Filed 8-11-16; 8:45 am]
BILLING CODE 6351-01-P
