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Ms. Eileen A. Donovan
Office of the Secretariat
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, N.W.
Washington, DC 20581
Re: Petition for Rulemaking to Amend CFTC Regulation 3.31(c)(1)
Dear Ms. Donovan:
National Futures Association (NFA) respectfully petitions the Commission under CFTC Regulation 13.2 to amend Commission Regulation 3.31(c)(1) to increase the number of days in which a firm may file a termination notice for an associated person ("AP") from 20 days to 30 days. The information required by CFTC Regulation 13.2 follows.
I. Text of Proposed Rule Amendments
* * *
3.31 Deficiencies, inaccuracies, and changes, to be reported
(c)(1) After the filing of a Form 8-R or a Form 3-R by or on behalf of any person for the purpose of permitting that person to be an associated person of a futures commission merchant, commodity trading advisor, commodity pool operator, introducing broker, or a leverage transaction merchant, that futures commission merchant, commodity trading advisor, commodity pool operator, introducing broker, or leverage transaction merchant must, within
twenty thirty days after the occurrence of either of the following, file a notice thereof with the National Futures Association indicating:
(ii) The termination of the association of the associated person with the futures commission merchant, commodity trading advisor, commodity pool operator, introducing broker, or leverage transaction merchant, and the reasons therefore.
II. Nature of NFA's Interest
NFA is a futures association registered under Section 17 of the Commodity Exchange Act. Pursuant to Commission Regulation 3.31, the termination of the association of an associated person (AP) with a futures commission merchant, commodity trading advisor, commodity pool operator, introducing broker, or leverage transaction merchant must be reported to NFA on a Form 8-T within twenty days of the employee's termination. For the reasons explained below, NFA believes the length of time in which a firm has to report an AP's termination should be increased slightly.
III. Supporting Arguments
Staff recently met with several large FCM/BD Members who are significant users of NFA's Online Registration System ('ORS") to obtain their input concerning possible improvements to the registration process. Many of these users raised an issue relating to NFA's and the CFTC's requirements for submitting registration termination notices, the Form 8-T. Specifically, these users noted that NFA Registration Rule 203(a)(10) imposes a $100 fee when a termination notice is filed more than 20 days after the effective date of the termination. This 20-day window is based on NFA Registration Rule 214(a) and CFTC Regulation 3.31(c)(1) which require termination notices to be filed within 20 days. Article V, Section 3(a) of NASD's Bylaws, however, allows termination notices to be filed within 30 days. These FCM/BD Members indicated that it is an undue regulatory burden for them to file these notices within the 20-day period for some APs while for the majority of their APs the NASD's allows a 30-day period. They also indicated that the 20-day period is particularly difficult to comply with when a termination notice contains disclosure information that has to be reviewed at the branch office and then by the legal and/or registration department, and on occasion the attorney representing the terminated AP, prior to the filing of the notice.
For these reasons, NFA respectfully requests that the Commission amend Regulation 3.31(c)(1) to slightly increase the length of time in which a firm may report an AP's termination. This amendment affords firms the time necessary to properly review these forms and conforms the futures industry's requirement to the securities industry's time allowance.
Very truly yours,
Thomas W. Sexton, III
Vice President and General Counsel