Chief Compliance Officer Annual Report Requirements for Futures Commission Merchants, Swap Dealers, and Major Swap Participants; Amendments to Filing Dates, 53343-53348 [2016-19231]

Download as PDF 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. ehiers on DSK5VPTVN1PROD with PROPOSALS 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). 14:23 Aug 11, 2016 Jkt 238001 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 VerDate Sep<11>2014 The Proposed Amendment 53343 * * 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. PO 00000 Frm 00010 Fmt 4702 Sfmt 4702 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: http:// 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: E:\FR\FM\12AUP1.SGM 12AUP1 53344 Federal Register / Vol. 81, No. 156 / Friday, August 12, 2016 / Proposed Rules • Federal eRulemaking Portal: http:// 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 http:// 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 ehiers on DSK5VPTVN1PROD with PROPOSALS 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 VerDate Sep<11>2014 14:23 Aug 11, 2016 Jkt 238001 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: http://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: http://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: http://www.cftc.gov/idc/groups/ public/@lrlettergeneral/documents/letter/15-15.pdf (‘‘CFTC Staff Letter No. 15–15’’). PO 00000 Frm 00011 Fmt 4702 Sfmt 4702 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). E:\FR\FM\12AUP1.SGM 12AUP1 Federal Register / Vol. 81, No. 156 / Friday, August 12, 2016 / Proposed Rules Comparable Annual Report must be furnished to the CFTC.12 II. The Proposal ehiers on DSK5VPTVN1PROD with PROPOSALS 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 VerDate Sep<11>2014 14:23 Aug 11, 2016 Jkt 238001 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. PO 00000 Frm 00012 Fmt 4702 Sfmt 4702 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. E:\FR\FM\12AUP1.SGM 12AUP1 53346 Federal Register / Vol. 81, No. 156 / Friday, August 12, 2016 / Proposed Rules 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. ehiers on DSK5VPTVN1PROD with PROPOSALS 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 VerDate Sep<11>2014 14:23 Aug 11, 2016 Jkt 238001 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. PO 00000 Frm 00013 Fmt 4702 Sfmt 4702 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. E:\FR\FM\12AUP1.SGM 12AUP1 Federal Register / Vol. 81, No. 156 / Friday, August 12, 2016 / Proposed Rules 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). VerDate Sep<11>2014 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: PO 00000 Frm 00014 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 E:\FR\FM\12AUP1.SGM 12AUP1 53348 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: VerDate Sep<11>2014 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: http:// 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 12AUP1

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]


=======================================================================
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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.

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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: http://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: http://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 
http://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\
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    \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\
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    \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).
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    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.
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    \6\ 17 CFR 3.3(e) and (f).
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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\
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    \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: http://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: http://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: http://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).
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    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\
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    \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.
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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\
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    \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.
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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.
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    \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).
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    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    \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