Commodity Futures Trading Commission February 2006 – Federal Register Recent Federal Regulation Documents

The Commodity Futures Trading Commission (Commission) is amending Regulation 1.3(bb) by adding to that regulation a definition of the term ``client,'' as it relates to commodity trading advisors (CTAs). This amendment clarifies inconsistencies in the Commission's regulations concerning the advisees of CTAs, and it reflects the Commission's longstanding view that its antifraud authority extends to all CTAs, irrespective of whether they provide advice on a personalized or nonpersonalized basis. The Commission is also amending Regulation 1.3(bb) by adding the term ``derivatives transaction execution facility'' to the CTA definition set forth in that regulation.

The Commodity Futures Trading Commission (``Commission'' or ``CFTC'') is amending Commission rules to require that commodity pool annual financial reports submitted by commodity pool operators (``CPOs'') to the National Futures Association (``NFA'') be filed and affirmed electronically, in compliance with NFA's electronic filing procedures. NFA petitioned the Commission to adopt this amendment after its implementation of a pilot program for electronic filing of commodity pool annual reports in 2005. The amendment necessarily eliminates the requirement that the commodity pool annual report filed with NFA be manually signed, and replaces it with a requirement that CPOs maintain for five years in their own business records a manually signed oath or affirmation with respect to each annual report along with documentation supporting the compilation of certain key financial balances required to be submitted to NFA. In addition to mandating electronic filing, the Commission is also amending other provisions of its rules applicable to CPOs with respect to financial reporting to: (i) Explicitly state that commodity pool monthly and/or quarterly account statements distributed to participants must be prepared in accordance with generally accepted accounting principles; (ii) clarify that CPOs must file a notification of a change in a public accountant for a commodity pool with NFA; (iii) clarify that a reference to ``segregation'' with respect to a statement required to be made in an accountant's letter refers to the prohibition on commingling of funds of a commodity pool with the assets of any other person; and (iv) require that notifications concerning CPOs' election of fiscal years for commodity pools other than the calendar year or changes in fiscal year be filed solely with NFA and not the Commission. These amendments with respect to commodity pool financial reporting do not impact the distribution of annual reports to pool participants, which may continue to be provided through hard-copy distribution via postal mail or electronically if the pool participant consents thereto. Also, these amendments do not change the requirements or process for CPOs to request that the Commission provide confidential treatment to commodity pool annual reports submitted to NFA, in response to requests from the public made under the Freedom of Information Act.

On February 4, 2003, in response to a petition from the New York Mercantile Exchange, Inc. (``NYMEX'' or ``Exchange'') the Commodity Futures Trading Commission (``Commission''), issued an order \1\ pursuant to section 1a(12)(C) of the Commodity Exchange Act (``Act''). The order provided that, subject to certain conditions, Exchange floor brokers and floor traders (collectively referred to hereafter as ``floor members'') who are registered with the Commission, when acting in a proprietary trading capacity, shall be deemed to be ``eligible contract participants'' as that term is defined in section 1a(12) of the Act. The order (hereafter the ``original order'' or the ``ECP Order'') was effective for a two year period and would have expired on February 4, 2005.

The Commodity Futures Trading Commission (CFTC) is announcing an opportunity for public comment on the proposed collection of certain information by the agency. Under the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq., Federal agencies are required to publish notice in the Federal Register concerning each proposed collection of information, including each proposed extension of an existing collection of information, and to allow 60 days for public comment in response to the notice. This notice solicits comments on rules relating to review of National Futures Association decisions in disciplinary, membership denial, registration, and member responsibility actions.