Chief Compliance Officer Annual Report Requirements for Futures Commission Merchants, Swap Dealers, and Major Swap Participants; Amendments to Filing Dates, 80563-80567 [2016-27525]

Download as PDF 80563 Rules and Regulations Federal Register Vol. 81, No. 221 Wednesday, November 16, 2016 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. Prices of new books are listed in the first FEDERAL REGISTER issue of each week. 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 Commodity Futures Trading Commission. ACTION: Final rule. AGENCY: The Commodity Futures Trading Commission (‘‘Commission’’ or ‘‘CFTC’’) is amending its regulations regarding the timing for furnishing to the Commission the chief compliance officer (‘‘CCO’’) annual reports of futures commission merchants (‘‘FCMs’’), swap dealers (‘‘SDs’’), and major swap participants (‘‘MSPs’’) (collectively, ‘‘Registrants’’). The Commission is also amending its regulations by delegating 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: This rule will become effective November 16, 2016. FOR FURTHER INFORMATION CONTACT: Eileen T. 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: mstockstill on DSK3G9T082PROD with RULES SUMMARY: VerDate Sep<11>2014 16:03 Nov 15, 2016 Jkt 241001 I. Proposed Rule On August 12, 2016, the Commission published a Notice of Proposed Rulemaking (‘‘Proposal’’) 1 to amend Commission Regulation 3.3(f) regarding when Registrants must furnish to the Commission annual reports describing, among other things, their compliance with the Commodity Exchange Act (‘‘CEA’’) and CFTC regulations (the ‘‘CCO Annual Reports’’).2 The Proposal sought to extend the time period for furnishing the CCO Annual Report to the Commission from 60 days to 90 days after a Registrant’s fiscal year-end by codifying the ongoing relief most recently provided to Registrants in CFTC Staff Letter No. 15–15.3 The Proposal would permit an FCM to furnish its CCO Annual Report to the Commission not more than 30 days after submission of its Form 1–FR–FCM or Financial Operational Combined Uniform Single Report (‘‘FOCUS Report’’), and would 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 Proposal also contemplated adding new paragraph (f)(2)(ii) to clarify the filing requirements for SDs and MSPs located in a jurisdiction for which the Commission has issued a comparability 1 Chief Compliance Officer Annual Report Requirements for Futures Commission Merchants, Swap Dealers, and Major Swap Participants; Amendments to Filing Dates, 81 FR 53343 (Aug. 12, 2016). 2 CEA section 4s(k)(3)(A)(i), 7 U.S.C. 6s(k)(3)(A)(i), requires CCOs for SDs and MSPs, in accordance with rules prescribed by the Commission, to prepare and sign an annual report describing, among other things, the SD’s or MSP’s compliance with the CEA and CFTC regulations. CEA section 4s(k)(3)(B)(i), 7 U.S.C. 6s(k)(3)(B)(i), requires the CCO Annual Report to accompany each appropriate financial report of the SD or MSP required to be furnished to the Commission. CEA section 4d(d), 7 U.S.C. 6d(d), requires CCOs of FCMs to ‘‘perform such duties and responsibilities’’ as are established by Commission regulation or rules of a registered futures association. Regulations 3.3(e) and (f), 17 CFR 3.3(e) and (f), codify the duty to furnish the CCO Annual Report to the Commission for all Registrants. 3 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. PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 determination and which elect to file reports in accordance with that determination (‘‘Substituted Compliance Registrants’’). Finally, the Proposal added new paragraph (h) to delegate to the Director of DSIO authority to grant extensions to the CCO Annual Report filing deadline. The Commission generally requested comments on the Proposal and also solicited comments on certain specific matters.4 For example, the Commission solicited comments on the appropriateness of permitting Registrants an additional 30 days to furnish their CCO Annual Reports to the Commission, as well as the Commission’s application of Regulation 3.3(f)(2) to Substituted Compliance Registrants. II. Summary of Comments In response to the Proposal, the Commission received one comment submitted jointly by the Futures Industry Association (the ‘‘FIA’’), International Swaps and Derivatives Association (‘‘ISDA’’), and the Securities Industry and Financial Markets Association (‘‘SIFMA’’) (collectively, ‘‘Commenters’’) on behalf of their FCM, SD, and MSP member firms.5 The Commenters were generally supportive of the Proposal and agreed with the basic premise that the statutory requirement under CEA section 4s(k)(3)(B)(i) requiring CCO Annual Reports to ‘‘accompany’’ each appropriate financial report does not require a simultaneous filing of the two reports. The Commenters made several suggestions aimed at more closely aligning the Proposal with the relief provided in CFTC Staff Letter No. 15– 15 and providing greater certainty for all SDs. First, Commenters cautioned against linking the filing deadline for the CCO Annual Report to the submission date for the applicable annual financial reports. The Commenters stated that using the submission date as a reference point, rather than the deadline date, could have the practical effect of reducing the time period for filing the CCO Annual Report if a Registrant chose to submit 4 See 81 FR at 53346. from FIA, ISDA, and SIFMA (Sept. 12, 2016). This comment letter is available on the Commission’s Web site at http://comments.cftc.gov/ PublicComments/CommentList.aspx?id=1729. 5 Letter E:\FR\FM\16NOR1.SGM 16NOR1 80564 Federal Register / Vol. 81, No. 221 / Wednesday, November 16, 2016 / Rules and Regulations their financial report early.6 Commenters asserted that this outcome would be problematic because the inherent differences, in both substance and process, between CCO Annual Reports and financial reports affect the time required to adequately prepare each report. As a result, linking the CCO Annual Report deadline to the submission of financial reports would require new coordination and processes between the distinct groups responsible for each report’s preparation.7 To address this technical timing issue, the Commenters recommended that the filing of the CCO Annual Report be required 30 days after the regulatory deadline for filing the financial reports.8 The Commenters further noted that under the Commission’s proposed Capital Requirements of Swap Dealers and Major Swap Participants rulemaking,9 prudentially regulated SDs would not be required to comply with the Commission’s financial condition report requirement.10 As such, Commenters explained that under language in the Proposal, which ties the submission of the CCO Annual Report with the submission of applicable financial reports, prudentially regulated SDs would have a different CCO Annual Report deadline than other SDs.11 Commenters suggested that, in order to achieve consistency among all SDs, the Commission should ‘‘set a 90-day deadline for SDs that are not subject to the Commission’s proposed financial reporting rule.’’ 12 Finally, regarding application of the Proposal to Substituted Compliance Registrants, the Commenters requested that the Commission provide ‘‘supplemental guidance as to what constitutes a ‘specifically identifiable completion date’’’ for Substituted Compliance Registrants who file comparable annual reporting information (hereinafter, ‘‘Comparable Annual Report’’).13 The Commenters indicated that different jurisdictions address reporting deadlines in many different ways that can change over time and from year to year. Accordingly, it was not clear to Commenters how the Proposal language would apply in all instances. mstockstill on DSK3G9T082PROD with RULES 6 Id. at 2. 7 Id. III. The Final Rule The Commission has considered the comments it received in response to the Proposal. Upon consideration of Commenters’ suggestions, the Commission’s implementation experience,14 and the current absence of financial condition reporting requirements for SDs under Commission regulations,15 the Commission is adopting a final rule that modifies Regulation 3.3(f)(2)(i) to give all Registrants up to 90 days after their fiscal year-end to furnish the CCO Annual Report to the Commission. Because the CEA section 4s(k)(3)(B) contemplates year-end filing for financial reports and CCO Annual Reports, the final rule ensures that the two reports will accompany one another at the Commission within a proximate and predictable timeframe. The Commission believes that providing all Registrants a deadline that follows their annual fiscal year meets Congressional intent and achieves fairness and consistency across all Registrants, while also codifying longstanding no-action relief. The final rule text effectively results in the same outcome as the Proposal, but does so in a manner that is simple and direct. The Commission is adopting Regulation 3.3(f)(2)(ii) as proposed, which incorporates the modified language of Regulation 3.3(f)(2)(i), and also clarifying its application to Substituted Compliance Registrants. The Commission received no comments on the proposed delegation of authority to the Director of DSIO to grant extensions to the CCO annual report filing deadline, and is adopting Regulation 3.3(h) as proposed. A. CCO Annual Report Filing Deadline The Commission believes that the language in CEA section 4s(k)(3)(B) requiring the CCO to ‘‘annually’’ prepare a compliance report to accompany each ‘‘appropriate’’ financial report does not require a simultaneous filing of the two reports to achieve its intended purpose. Rather, the intention of the statute is to require the CCO Annual Report to follow an annual reporting cycle in line with the financial reporting cycle aimed at providing the Commission, and a Registrant’s senior management, with a timely selfevaluation and internal assessment of the Registrant’s compliance program.16 8 Id. 9 See Capital Requirements of Swap Dealers and Major Swap Participants, 76 FR 27802, 27838 (proposed May 12, 2011). 10 Letter from FIA, ISDA, and SIFMA at 2. 11 Id. 12 Id. 13 Id. at 3. VerDate Sep<11>2014 16:03 Nov 15, 2016 Jkt 241001 14 See 81 FR 53343, 53344 n.7. at 53345 n.14. 16 See Designation of a Chief Compliance Officer; Required Compliance Policies; and Annual Report of a Futures Commission Merchant, Swap Dealer, or Major Swap Participant, 75 FR 70881, 70883 (proposed Nov. 19, 2010). 15 Id. PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 In a similar manner, under Commission regulations, when entities are subject to capital adequacy requirements, periodic financial reporting is the mechanism employed to demonstrate compliance. Annual and other financial reporting requirements provide the Commission and self-regulatory organizations information about the financial condition of the registrant. As observed by the Commission and highlighted by Commenters, the CCO Annual Report and annual financial reports, though they serve similar informational goals, are inherently different and require different processes and expertise to produce. Accordingly, while each ought to be completed on an annual reporting cycle and provided to the Commission in temporal proximity, their submission to the Commission need not occur simultaneously to achieve their intended purpose. Permitting all Registrants to submit their CCO Annual Report to the Commission within 90 days after their fiscal year-end meets the statutory intent of having the CCO Annual Report follow an annual reporting cycle in line with the financial reporting cycle while providing fair and consistent treatment across all Registrants. The final rule also ensures that Registrants may continue to leverage their existing report preparation processes that were developed while the Commission’s noaction relief was in place. This ensures that there is effectively no change in the burden and expense of preparing the CCO Annual Reports as a result of the final rule. B. Deadline for Substituted Compliance Registrants With respect to the application of new paragraph (f)(2)(ii) to Substituted Compliance Registrants, the Proposal provided that Substituted Compliance Registrants whose home jurisdictions’ regulations identify a specific completion or due date have 15 days after that date to submit their Comparable Annual Report to the CFTC. If a Substituted Compliance Registrant’s home jurisdiction does not require or is silent as to a particular completion or due date for the Comparable Annual Report, then the Substituted Compliance Registrant must furnish its Comparable Annual Report to the Commission not more than 90 days after its fiscal year-end. As described above, the Commenters requested additional guidance on the meaning of ‘‘specifically identifiable completion date.’’ The Commission is clarifying that the completion or due date could be set by the Substituted Compliance Registrant’s home E:\FR\FM\16NOR1.SGM 16NOR1 Federal Register / Vol. 81, No. 221 / Wednesday, November 16, 2016 / Rules and Regulations jurisdiction’s regulations, or that the Substituted Compliance Registrant’s applicable regulatory authority could otherwise announce a modified completion or due date consistent with the practices and procedures of the applicable regulatory regime. The Commission anticipates a Substituted Compliance Registrant will timely inform DSIO of any such modifications to their completion or due date. Whether the completion or due date remains static from year to year, or is subject to annual modification, the Commission intends to defer to the Substituted Compliance Registrant’s home jurisdiction in this regard. The Commission, however, is concerned about the possibility of significant reporting delays or deferrals that may apply to a specific Registrant. Accordingly, the Commission expects that a Substituted Compliance Registrant will inform the Commission of any delays or deferrals beyond the deadlines set by their home jurisdiction regulations or applicable regulatory authority that would extend that particular Registrant’s Comparable Annual Report filing date, and seek appropriate relief under Regulation 3.3(f)(5), as necessary. C. Delegation of Authority to the Director of DSIO The Commission received no comments on its proposal to delegate to the Director of DSIO, or such other employee(s) that the Director may designate, the authority to grant extensions of time to file CCO Annual Reports. Accordingly, the Commission is adopting new paragraph (h) as proposed. IV. Related Matters mstockstill on DSK3G9T082PROD with RULES A. Regulatory Flexibility Act The Regulatory Flexibility Act 17 (‘‘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. In the Proposal, the Commission certified that the Proposal would not have a significant economic impact on those entities. The Commission received no comments with respect to the RFA. As discussed in the Proposal, the final rule amends the filing deadline for CCO Annual Reports of FCMs, SDs, and MSPs and clarifies the filing deadline for Comparable Annual Reports. The final rule affects FCMs, SDs, and MSPs that are required to be registered with 17 5 U.S.C. 601 et seq. VerDate Sep<11>2014 16:03 Nov 15, 2016 Jkt 241001 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.18 Therefore, the Commission believes that the final rule will 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 final rule being published today by this Federal Register release will not have a significant economic impact on a substantial number of small entities. B. Paperwork Reduction Act The Paperwork Reduction Act of 1995 (‘‘PRA’’) 19 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’’). As discussed in the Proposal, the final rule contains a collection of information for which the Commission has previously received a control number from the Office of Management and Budget (‘‘OMB’’). The title for this collection of information is ‘‘Annual Report for Chief Compliance Officer of Registrants, OMB control number 3038–0080.’’ As discussed in the Proposal, the Commission believes that this final rule will not impose any new information collection requirements that require approval of OMB under the PRA. As a general matter, the final rule allows 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, the final 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 18 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). 19 44 U.S.C. 3501 et seq. PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 80565 Annual Report pursuant to part 3 of the Commission’s regulations. C. Cost-Benefit Considerations 1. Background As discussed above, the Commission is adopting amendments to the filing requirements for CCO Annual Reports in Regulation 3.3 that: (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 Commission Regulation 3.3. 2. Costs The final rule does not change the report contents or require any additional actions to be taken by Registrants. The 90 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 final rule 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 should not materially impact the usefulness of the information in the reports.20 The Commission had no other information available to it indicating that changing the filing deadline would measurably change the cost to prepare the CCO Annual Reports. Accordingly, the Commission believes that the final rule does not impose any additional costs on any other market participants, the markets themselves, or the general public. In the Proposal, the Commission solicited comments regarding how the costs associated with the CCO Annual Reports could change as a result of adopting the Proposal, but did not receive any. 3. Benefits The Commission believes that the final rule provides relief for Registrants 20 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\16NOR1.SGM 16NOR1 80566 Federal Register / Vol. 81, No. 221 / Wednesday, November 16, 2016 / Rules and Regulations 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 solicited comments regarding the nature of any benefits that could result from adoption of the Proposal, but did not receive any specific comments. Commenters were generally appreciative of the Commission’s effort to improve the process.21 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.22 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 considered the costs and benefits resulting from its discretionary determinations with respect to the section 15(a) factors. mstockstill on DSK3G9T082PROD with RULES 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 final rule is intended to reduce some of the regulatory burdens on Registrants. While the final rule will delay the time in 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 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 final rule could improve allocational efficiency for participants in the market by reducing the burden of preparing the 21 Letter from FIA, ISDA, and SIFMA at 1. 22 7 U.S.C. 19(a). VerDate Sep<11>2014 16:03 Nov 15, 2016 Jkt 241001 CCO Annual Report in a shorter timeframe thereby allowing them to allocate compliance resources more efficiently over the report preparation period. The Commission believes that the final rule 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 believes that the final rule does not impact on price discovery. Given that the final rule affects 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 final rule does not affect price discovery. d. Sound Risk Management Practices The Commission believes that the final rule will 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 Registrants’ compliance programs, the final rule only amends 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 final rule is not significant given the nature of the information included in the report and allowing additional time to prepare CCO Annual Reports might allow 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. 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 amends 17 CFR part 3 as follows: 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, PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 16a, 18, 19, 21, and 23, as amended by Title VII of Pub. L. 111–203, 124 Stat. 1376. 2. Amend § 3.3 as follows: a. Revise paragraph (f)(2); and ■ b. Add paragraph (h). The revision and addition 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 90 days after the end of the fiscal year of the futures commission merchant, swap dealer, or major swap participant. (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 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 November 10, 2016, by the Commission. Robert N. Sidman, Deputy Secretary of the Commission. Note: The following appendix will not appear in the Code of Federal Regulations. E:\FR\FM\16NOR1.SGM 16NOR1 Federal Register / Vol. 81, No. 221 / Wednesday, November 16, 2016 / Rules and 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. 2016–27525 Filed 11–15–16; 8:45 am] Dated: November 9, 2016. Peter Lurie, Associate Commissioner for Public Health Strategy and Analysis. [FR Doc. 2016–27456 Filed 11–15–16; 8:45 am] BILLING CODE 4164–01–P DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 24 CFR Parts 888, 982, 983, and 985 BILLING CODE 6351–01–P [Docket No. FR–5855–F–03] RIN 2501–AD74 DEPARTMENT OF HEALTH AND HUMAN SERVICES Establishing a More Effective Fair Market Rent System; Using Small Area Fair Market Rents in the Housing Choice Voucher Program Instead of the Current 50th Percentile FMRs Food and Drug Administration 21 CFR Part 1105 Office of the Secretary, HUD. Final rule. AGENCY: [Docket No. FDA–2016–N–1555] ACTION: Refuse To Accept Procedures for Premarket Tobacco Product Submissions; Withdrawal This final rule applies the use of Small Area Fair Market Rents (Small Area FMRs) in the administration of the Housing Choice Voucher (HCV) program for certain metropolitan areas. This final rule provides for the use of Small Area FMRs, in place of the 50th percentile rent, the currently codified regulations, to address high levels of voucher concentration in certain communities. The use of Small Area FMRs is expected to give HCV tenants access to areas of high opportunity and lower poverty areas by providing a subsidy that is adequate to cover rents in those areas, thereby reducing the number of voucher families that reside in areas of high poverty concentration. DATES: Effective: January 17, 2017. FOR FURTHER INFORMATION CONTACT: For information about this rule, contact Peter B. Kahn, Director, Economic and Market Analysis Division, Office of Economic Affairs, Office of Policy Development and Research, U.S. Department of Housing and Urban Development, 451 7th Street SW., Washington, DC 20410, telephone (202) 402–2409 or Becky L. Primeaux, Director, Housing Voucher Management and Operations Division, U.S. Department of Housing and Urban Development, 451 7th Street SW., Washington, DC 20410, telephone (202) 708–0477; email: SAFMR_Rule@ hud.gov. The listed telephone numbers are not toll-free numbers. Persons with hearing or speech impairments may access this number through TTY by calling Federal Relay Service at (800) 877–8339 (this is a toll-free number). SUPPLEMENTARY INFORMATION: Under this final rule, public housing agencies AGENCY: SUMMARY: Food and Drug Administration, HHS. ACTION: Direct final rule; withdrawal. The Food and Drug Administration (FDA) published in the Federal Register of August 8, 2016, a direct final rule regarding procedures for refusing to accept premarket tobacco product submissions. The comment period closed October 24, 2016. FDA is withdrawing the direct final rule because the Agency received significant adverse comment. FDA will consider the comments we received on the direct final rule to be comments on the companion proposed rule published at 81 FR 52371 (August 8, 2016). SUMMARY: The direct final rule published at 81 FR 52329 (August 8, 2016), is withdrawn effective November 16, 2016. DATES: FOR FURTHER INFORMATION CONTACT: mstockstill on DSK3G9T082PROD with RULES Annette Marthaler or Paul Hart, Office of Regulations, Center for Tobacco Products, Food and Drug Administration, Document Control Center, Bldg. 71, Rm. G335, 10903 New Hampshire Ave., Silver Spring, MD 20993–0002, 877–287–1373, CTPRegulations@fda.hhs.gov. Therefore, under the Federal Food, Drug, and Cosmetic Act, and under authority delegated to the Commissioner of Food and Drugs, the direct final rule published on August 8, 2016, (81 FR 52329) is withdrawn. SUPPLEMENTARY INFORMATION: VerDate Sep<11>2014 16:03 Nov 15, 2016 Jkt 241001 PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 80567 (PHAs) operating in designated metropolitan areas are required to use Small Area FMRs, while PHAs not operating in the designated areas have the option to use Small Area FMRs in administering their HCV programs. Other programs that use FMRs would continue to use area-wide FMRs. This final rule also provides for regulatory implementation of certain provisions of the Housing Opportunity Through Modernization Act (HOTMA) related to FMRs, as well as conforming regulatory changes to part 982 concerning the reduction in payment standards during the term of the Housing Assistance Payment (HAP) contract in the HCV program. Specifically, the final rule provides for publication of FMRs by way of the World Wide Web, and provides that PHAs are no longer required to reduce the payment standard for a family under HAP contract when the PHA is required to reduce the payment standard for its program as the result of a reduction in the FMR. I. Executive Summary A. Purpose of the Regulatory Action This final rule establishes a more effective means for HCV tenants to move into areas of higher opportunity and lower poverty by providing the tenants with a subsidy adequate to make such areas accessible and, consequently, help reduce the number of voucher families that reside in areas of high poverty concentration. Prior to this rule, subsidy for HUD’s HCV program is determined by a formula that considers rent prices across an entire metropolitan area. However, rents can vary widely within a metropolitan area depending upon the size of the metropolitan area and the neighborhood in the metropolitan area within which one resides. The result of determining rents on the basis of an entire metropolitan area is that a voucher subsidy may be too high or may be too low to cover market rent in a given neighborhood. To date, HUD’s policy for addressing high concentrations of voucher holders raises the level of the FMR from the 40th percentile to the 50th percentile (roughly a 7—8 percent increase) in the whole FMR area. This level of added subsidy has not been targeted to areas of opportunity, and consequently, this formula has not proven effective in addressing the problem of concentrated poverty and economic and racial segregation in neighborhoods. Experience with the 50th percentile regime has shown that the majority of HCV tenants use their vouchers in neighborhoods where rents are low but E:\FR\FM\16NOR1.SGM 16NOR1

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[Federal Register Volume 81, Number 221 (Wednesday, November 16, 2016)]
[Rules and Regulations]
[Pages 80563-80567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27525]



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Rules and Regulations
                                                Federal Register
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This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 
Prices of new books are listed in the first FEDERAL REGISTER issue of each 
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Federal Register / Vol. 81, No. 221 / Wednesday, November 16, 2016 / 
Rules and Regulations

[[Page 80563]]



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: Final rule.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is amending its regulations regarding the timing for 
furnishing to the Commission the chief compliance officer (``CCO'') 
annual reports of futures commission merchants (``FCMs''), swap dealers 
(``SDs''), and major swap participants (``MSPs'') (collectively, 
``Registrants''). The Commission is also amending its regulations by 
delegating 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: This rule will become effective November 16, 2016.

FOR FURTHER INFORMATION CONTACT: Eileen T. 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. Proposed Rule

    On August 12, 2016, the Commission published a Notice of Proposed 
Rulemaking (``Proposal'') \1\ to amend Commission Regulation 3.3(f) 
regarding when Registrants must furnish to the Commission annual 
reports describing, among other things, their compliance with the 
Commodity Exchange Act (``CEA'') and CFTC regulations (the ``CCO Annual 
Reports'').\2\ The Proposal sought to extend the time period for 
furnishing the CCO Annual Report to the Commission from 60 days to 90 
days after a Registrant's fiscal year-end by codifying the ongoing 
relief most recently provided to Registrants in CFTC Staff Letter No. 
15-15.\3\ The Proposal would permit an FCM to furnish its CCO Annual 
Report to the Commission not more than 30 days after submission of its 
Form 1-FR-FCM or Financial Operational Combined Uniform Single Report 
(``FOCUS Report''), and would 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 Proposal also contemplated adding 
new paragraph (f)(2)(ii) to clarify the filing requirements for SDs and 
MSPs located in a jurisdiction for which the Commission has issued a 
comparability determination and which elect to file reports in 
accordance with that determination (``Substituted Compliance 
Registrants''). Finally, the Proposal added new paragraph (h) to 
delegate to the Director of DSIO authority to grant extensions to the 
CCO Annual Report filing deadline.
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    \1\ Chief Compliance Officer Annual Report Requirements for 
Futures Commission Merchants, Swap Dealers, and Major Swap 
Participants; Amendments to Filing Dates, 81 FR 53343 (Aug. 12, 
2016).
    \2\ CEA section 4s(k)(3)(A)(i), 7 U.S.C. 6s(k)(3)(A)(i), 
requires CCOs for SDs and MSPs, in accordance with rules prescribed 
by the Commission, to prepare and sign an annual report describing, 
among other things, the SD's or MSP's compliance with the CEA and 
CFTC regulations. CEA section 4s(k)(3)(B)(i), 7 U.S.C. 
6s(k)(3)(B)(i), requires the CCO Annual Report to accompany each 
appropriate financial report of the SD or MSP required to be 
furnished to the Commission. CEA section 4d(d), 7 U.S.C. 6d(d), 
requires CCOs of FCMs to ``perform such duties and 
responsibilities'' as are established by Commission regulation or 
rules of a registered futures association. Regulations 3.3(e) and 
(f), 17 CFR 3.3(e) and (f), codify the duty to furnish the CCO 
Annual Report to the Commission for all Registrants.
    \3\ 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.
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    The Commission generally requested comments on the Proposal and 
also solicited comments on certain specific matters.\4\ For example, 
the Commission solicited comments on the appropriateness of permitting 
Registrants an additional 30 days to furnish their CCO Annual Reports 
to the Commission, as well as the Commission's application of 
Regulation 3.3(f)(2) to Substituted Compliance Registrants.
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    \4\ See 81 FR at 53346.
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II. Summary of Comments

    In response to the Proposal, the Commission received one comment 
submitted jointly by the Futures Industry Association (the ``FIA''), 
International Swaps and Derivatives Association (``ISDA''), and the 
Securities Industry and Financial Markets Association (``SIFMA'') 
(collectively, ``Commenters'') on behalf of their FCM, SD, and MSP 
member firms.\5\ The Commenters were generally supportive of the 
Proposal and agreed with the basic premise that the statutory 
requirement under CEA section 4s(k)(3)(B)(i) requiring CCO Annual 
Reports to ``accompany'' each appropriate financial report does not 
require a simultaneous filing of the two reports.
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    \5\ Letter from FIA, ISDA, and SIFMA (Sept. 12, 2016). This 
comment letter is available on the Commission's Web site at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1729.
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    The Commenters made several suggestions aimed at more closely 
aligning the Proposal with the relief provided in CFTC Staff Letter No. 
15-15 and providing greater certainty for all SDs. First, Commenters 
cautioned against linking the filing deadline for the CCO Annual Report 
to the submission date for the applicable annual financial reports. The 
Commenters stated that using the submission date as a reference point, 
rather than the deadline date, could have the practical effect of 
reducing the time period for filing the CCO Annual Report if a 
Registrant chose to submit

[[Page 80564]]

their financial report early.\6\ Commenters asserted that this outcome 
would be problematic because the inherent differences, in both 
substance and process, between CCO Annual Reports and financial reports 
affect the time required to adequately prepare each report. As a 
result, linking the CCO Annual Report deadline to the submission of 
financial reports would require new coordination and processes between 
the distinct groups responsible for each report's preparation.\7\ To 
address this technical timing issue, the Commenters recommended that 
the filing of the CCO Annual Report be required 30 days after the 
regulatory deadline for filing the financial reports.\8\
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    \6\ Id. at 2.
    \7\ Id.
    \8\ Id.
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    The Commenters further noted that under the Commission's proposed 
Capital Requirements of Swap Dealers and Major Swap Participants 
rulemaking,\9\ prudentially regulated SDs would not be required to 
comply with the Commission's financial condition report 
requirement.\10\ As such, Commenters explained that under language in 
the Proposal, which ties the submission of the CCO Annual Report with 
the submission of applicable financial reports, prudentially regulated 
SDs would have a different CCO Annual Report deadline than other 
SDs.\11\ Commenters suggested that, in order to achieve consistency 
among all SDs, the Commission should ``set a 90-day deadline for SDs 
that are not subject to the Commission's proposed financial reporting 
rule.'' \12\
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    \9\ See Capital Requirements of Swap Dealers and Major Swap 
Participants, 76 FR 27802, 27838 (proposed May 12, 2011).
    \10\ Letter from FIA, ISDA, and SIFMA at 2.
    \11\ Id.
    \12\ Id.
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    Finally, regarding application of the Proposal to Substituted 
Compliance Registrants, the Commenters requested that the Commission 
provide ``supplemental guidance as to what constitutes a `specifically 
identifiable completion date''' for Substituted Compliance Registrants 
who file comparable annual reporting information (hereinafter, 
``Comparable Annual Report'').\13\ The Commenters indicated that 
different jurisdictions address reporting deadlines in many different 
ways that can change over time and from year to year. Accordingly, it 
was not clear to Commenters how the Proposal language would apply in 
all instances.
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    \13\ Id. at 3.
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III. The Final Rule

    The Commission has considered the comments it received in response 
to the Proposal. Upon consideration of Commenters' suggestions, the 
Commission's implementation experience,\14\ and the current absence of 
financial condition reporting requirements for SDs under Commission 
regulations,\15\ the Commission is adopting a final rule that modifies 
Regulation 3.3(f)(2)(i) to give all Registrants up to 90 days after 
their fiscal year-end to furnish the CCO Annual Report to the 
Commission. Because the CEA section 4s(k)(3)(B) contemplates year-end 
filing for financial reports and CCO Annual Reports, the final rule 
ensures that the two reports will accompany one another at the 
Commission within a proximate and predictable timeframe. The Commission 
believes that providing all Registrants a deadline that follows their 
annual fiscal year meets Congressional intent and achieves fairness and 
consistency across all Registrants, while also codifying longstanding 
no-action relief. The final rule text effectively results in the same 
outcome as the Proposal, but does so in a manner that is simple and 
direct. The Commission is adopting Regulation 3.3(f)(2)(ii) as 
proposed, which incorporates the modified language of Regulation 
3.3(f)(2)(i), and also clarifying its application to Substituted 
Compliance Registrants. The Commission received no comments on the 
proposed delegation of authority to the Director of DSIO to grant 
extensions to the CCO annual report filing deadline, and is adopting 
Regulation 3.3(h) as proposed.
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    \14\ See 81 FR 53343, 53344 n.7.
    \15\ Id. at 53345 n.14.
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A. CCO Annual Report Filing Deadline

    The Commission believes that the language in CEA section 
4s(k)(3)(B) requiring the CCO to ``annually'' prepare a compliance 
report to accompany each ``appropriate'' financial report does not 
require a simultaneous filing of the two reports to achieve its 
intended purpose. Rather, the intention of the statute is to require 
the CCO Annual Report to follow an annual reporting cycle in line with 
the financial reporting cycle aimed at providing the Commission, and a 
Registrant's senior management, with a timely self-evaluation and 
internal assessment of the Registrant's compliance program.\16\ In a 
similar manner, under Commission regulations, when entities are subject 
to capital adequacy requirements, periodic financial reporting is the 
mechanism employed to demonstrate compliance. Annual and other 
financial reporting requirements provide the Commission and self-
regulatory organizations information about the financial condition of 
the registrant. As observed by the Commission and highlighted by 
Commenters, the CCO Annual Report and annual financial reports, though 
they serve similar informational goals, are inherently different and 
require different processes and expertise to produce. Accordingly, 
while each ought to be completed on an annual reporting cycle and 
provided to the Commission in temporal proximity, their submission to 
the Commission need not occur simultaneously to achieve their intended 
purpose.
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    \16\ See Designation of a Chief Compliance Officer; Required 
Compliance Policies; and Annual Report of a Futures Commission 
Merchant, Swap Dealer, or Major Swap Participant, 75 FR 70881, 70883 
(proposed Nov. 19, 2010).
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    Permitting all Registrants to submit their CCO Annual Report to the 
Commission within 90 days after their fiscal year-end meets the 
statutory intent of having the CCO Annual Report follow an annual 
reporting cycle in line with the financial reporting cycle while 
providing fair and consistent treatment across all Registrants. The 
final rule also ensures that Registrants may continue to leverage their 
existing report preparation processes that were developed while the 
Commission's no-action relief was in place. This ensures that there is 
effectively no change in the burden and expense of preparing the CCO 
Annual Reports as a result of the final rule.

B. Deadline for Substituted Compliance Registrants

    With respect to the application of new paragraph (f)(2)(ii) to 
Substituted Compliance Registrants, the Proposal provided that 
Substituted Compliance Registrants whose home jurisdictions' 
regulations identify a specific completion or due date have 15 days 
after that date to submit their Comparable Annual Report to the CFTC. 
If a Substituted Compliance Registrant's home jurisdiction does not 
require or is silent as to a particular completion or due date for the 
Comparable Annual Report, then the Substituted Compliance Registrant 
must furnish its Comparable Annual Report to the Commission not more 
than 90 days after its fiscal year-end.
    As described above, the Commenters requested additional guidance on 
the meaning of ``specifically identifiable completion date.'' The 
Commission is clarifying that the completion or due date could be set 
by the Substituted Compliance Registrant's home

[[Page 80565]]

jurisdiction's regulations, or that the Substituted Compliance 
Registrant's applicable regulatory authority could otherwise announce a 
modified completion or due date consistent with the practices and 
procedures of the applicable regulatory regime. The Commission 
anticipates a Substituted Compliance Registrant will timely inform DSIO 
of any such modifications to their completion or due date. Whether the 
completion or due date remains static from year to year, or is subject 
to annual modification, the Commission intends to defer to the 
Substituted Compliance Registrant's home jurisdiction in this regard.
    The Commission, however, is concerned about the possibility of 
significant reporting delays or deferrals that may apply to a specific 
Registrant. Accordingly, the Commission expects that a Substituted 
Compliance Registrant will inform the Commission of any delays or 
deferrals beyond the deadlines set by their home jurisdiction 
regulations or applicable regulatory authority that would extend that 
particular Registrant's Comparable Annual Report filing date, and seek 
appropriate relief under Regulation 3.3(f)(5), as necessary.

C. Delegation of Authority to the Director of DSIO

    The Commission received no comments on its proposal to delegate to 
the Director of DSIO, or such other employee(s) that the Director may 
designate, the authority to grant extensions of time to file CCO Annual 
Reports. Accordingly, the Commission is adopting new paragraph (h) as 
proposed.

IV. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act \17\ (``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. In the Proposal, the Commission certified that the Proposal 
would not have a significant economic impact on those entities. The 
Commission received no comments with respect to the RFA.
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    \17\ 5 U.S.C. 601 et seq.
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    As discussed in the Proposal, the final rule amends the filing 
deadline for CCO Annual Reports of FCMs, SDs, and MSPs and clarifies 
the filing deadline for Comparable Annual Reports. The final rule 
affects 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.\18\ Therefore, the Commission 
believes that the final rule will 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 final rule being published today by this 
Federal Register release will not have a significant economic impact on 
a substantial number of small entities.
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    \18\ 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'') \19\ 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''). As discussed in the Proposal, the final rule contains 
a collection of information for which the Commission has previously 
received a control number from the Office of Management and Budget 
(``OMB''). The title for this collection of information is ``Annual 
Report for Chief Compliance Officer of Registrants, OMB control number 
3038-0080.'' As discussed in the Proposal, the Commission believes that 
this final rule will not impose any new information collection 
requirements that require approval of OMB under the PRA. As a general 
matter, the final rule allows 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, the final 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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    \19\ 44 U.S.C. 3501 et seq.
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C. Cost-Benefit Considerations

1. Background
    As discussed above, the Commission is adopting amendments to the 
filing requirements for CCO Annual Reports in Regulation 3.3 that: (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 Commission Regulation 3.3.
2. Costs
    The final rule does not change the report contents or require any 
additional actions to be taken by Registrants. The 90 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 final rule 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 should not 
materially impact the usefulness of the information in the reports.\20\ 
The Commission had no other information available to it indicating that 
changing the filing deadline would measurably change the cost to 
prepare the CCO Annual Reports. Accordingly, the Commission believes 
that the final rule does not impose any additional costs on any other 
market participants, the markets themselves, or the general public. In 
the Proposal, the Commission solicited comments regarding how the costs 
associated with the CCO Annual Reports could change as a result of 
adopting the Proposal, but did not receive any.
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    \20\ 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 final rule provides relief for 
Registrants

[[Page 80566]]

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 solicited comments regarding the 
nature of any benefits that could result from adoption of the Proposal, 
but did not receive any specific comments. Commenters were generally 
appreciative of the Commission's effort to improve the process.\21\
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    \21\ Letter from FIA, ISDA, and SIFMA at 1.
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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.\22\ 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 considered the costs and benefits 
resulting from its discretionary determinations with respect to the 
section 15(a) factors.
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    \22\ 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 
final rule is intended to reduce some of the regulatory burdens on 
Registrants. While the final rule will delay the time in 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 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 final rule 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 believes that the 
final rule 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 believes that the final rule does not impact on 
price discovery. Given that the final rule affects 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 final rule does not affect price 
discovery.
d. Sound Risk Management Practices
    The Commission believes that the final rule will 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 Registrants' compliance programs, the final rule 
only amends 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 
final rule is not significant given the nature of the information 
included in the report and allowing additional time to prepare CCO 
Annual Reports might allow 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.

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 amends 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, and 23, as amended by Title VII of Pub. 
L. 111-203, 124 Stat. 1376.


0
2. Amend Sec.  3.3 as follows:
0
a. Revise paragraph (f)(2); and
0
b. Add paragraph (h).
    The revision and addition 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 90 days after the end of the fiscal year of the futures 
commission merchant, swap dealer, or major swap participant.
    (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 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 November 10, 2016, by the 
Commission.
Robert N. Sidman,
Deputy Secretary of the Commission.

    Note: The following appendix will not appear in the Code of 
Federal Regulations.


[[Page 80567]]



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. 2016-27525 Filed 11-15-16; 8:45 am]
BILLING CODE 6351-01-P