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March 04, 1997
Ms. Jean A. Webb
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, N.W.
Washington, D.C. 20581
Re: National Futures Association: Proposed Adoption of an Interpretive Notice Concerning the Electronic Filing of Financial Reports by FCMs and IBs
Dear Ms. Webb:
Pursuant to Section 17(j) of the Commodity Exchange Act, as amended, National Futures Association ("NFA") hereby submits to the Commodity Futures Trading Commission ("Commission" or "CFTC") the proposed adoption of an Interpretive Notice Concerning the Electronic Filing of Financial Reports by FCMs and IBs. The proposal contained herein was approved by NFA's Board of Directors ("Board") on February 20, 1997. NFA respectfully requests Commission review and approval of the proposal.
PROPOSED ADOPTION OF AN INTERPRETIVE NOTICE CONCERNING THE ELECTRONIC FILING OF FINANCIAL REPORTS BY FCMs AND IBs (to read as follows)
NFA FINANCIAL REQUIREMENTS INTERPRETIVE NOTICE CONCERNING THE ELECTRONIC FILING OF FINANCIAL REPORTS BY FCMs AND IBs
NFA Financial Requirements require each FCM for which NFA is DSRO and each IB which is not operating pursuant to a guarantee agreement to file financial reports with NFA. FCMs must file reports at least quarterly while IBs file on a semi-annual basis. FCMs file reports on CFTC Form 1-FR-FCM while IBs use Form 1-FR-IB. FCMs or IBs which are also registered as securities brokers or dealers may use the SEC FOCUS Report in lieu of the Form 1-FR for their financial reports.
The filing requirements are discussed in Schedule D of NFA Financial Requirements for FCMs and in Section 10 of the Financial Requirements for IBs. These rules cover the contents of the financial reports and the time periods in which the reports must be filed. Additionally, CFTC regulations require that any financial report filed by an FCM or IB with NFA must also be filed with the CFTC.
NFA has developed personal computer software which allows FCMs and IBs to electronically file financial reports with NFA and the CFTC. The software accommodates filing of the Form 1-FR-FCM, Form 1-FR-IB and the FOCUS Report. NFA's Board of Directors has determined that the electronic filing of financial reports will satisfy the filing requirements for FCMs and IBs set forth in NFA Financial Requirements. All other filing-related requirements, such as deadlines for filing and the contents of the reports, remain unchanged. These requirements are not affected by the manner of filing.
NFA's filing software will also include procedures for the appropriate representative of the NFA Member FCM or IB to attest to the completeness and accuracy of the financial report in order to comply with NFA and CFTC certification and attestation requirements.
Full details about the software and electronic filing procedures will be available from NFA.
Finally, while all Member FCMs and IBs are encouraged to file financial reports electronically, electronic filing of financial reports is not required. Member FCMs and IBs may continue to file hardcopy financial reports as they have in the past in accordance with NFA Financial Requirements.
As the Commission is aware, NFA Financial Requirements require FCMs and independent IBs for which NFA is the DSRO to file financial statements with NFA and the CFTC periodically. These financial statements have always been filed in hardcopy form. NFA has recently developed personal computer software which allows FCMs and IBs to file electronically with NFA and the CFTC the Form 1-FR-FCM, 1-FR-IB and the FOCUS Report. The software will also include procedures for the appropriate representative of the NFA Member FCM or IB to attest to the completeness and accuracy of the financial report in order to comply with NFA and CFTC certification and attestation requirements. NFA staff worked closely with Commission staff throughout the development of the software. The proposed Interpretive Notice informs NFA Members of this alternative means of fulfilling their financial filing requirements. As the Notice specifies, electronic filing of financial statements, though encouraged, would not be mandatory and NFA Members which prefer to file hardcopy financial reports would be free to do so.
NFA respectfully requests that the Commission review and approve the proposed Interpretive Notice contained in this submission and requests that it be declared effective upon Commission approval.
Daniel J. Roth
cc: Chairman Brooksley Born
Commissioner Barbara Pedersen Holum
Commissioner Joseph B. Dial
Commissioner John E. Tull, Jr.
Andrea M. Corcoran, Esq.
Geoffrey Aronow, Esq.
Alan L. Seifert, Esq.
Susan C. Ervin, Esq.
Lawrence B. Patent, Esq.
David Van Wagner, Esq.