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Housekeeping, Reminders and Updates - May 2017

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Written by:    Mark E. Ruddy, Esq. Jessica I. Brown, CAMS COMMODITY FUTURES TRADING COMMISSION  Revisions to Form 8-R The Commodity Futures Trading Commission (“CFTC”) has revised Form 8-R, at the request of the National Futures Association (“NFA”).  Form 8-R is the application form for individuals registering as an associated person (“AP”), floor broker, floor trader or to be listed as a principal of an NFA Member firm. The following is a summary of changes to Form 8-R:
  • “Floor Trader Order Enterer” has been added to the list of registration categories. “Floor trader order enterer” is defined as an individual responsible for entry of orders from an entity floor trader’s own account.
  • Individuals registering as a principal are required to report their title from a list of options. The list of titles under “Principal Information” has been revised. The following title options have been added to the list: “Sole Proprietor”; “Indirect Owner”; and “No Listed Title”. The option of “Other, please specify” has been removed from the list of titles. Lastly, the title “Owner Only” has been changed to “Owner”.
  • The “Fingerprint Card Information” section will now include additional questions regarding new fingerprint requirements and exemptions; and exceptions for certain outside directors of Member firms.
  • The definition of “principal”, as it applies to the “Disciplinary Information” sections, has been revised. The purpose of the revision was to make clear that the term “principal” was not limited to the individual’s status as a principal only for CFTC registrants. For certain disciplinary questions, principal applies to an individual associated with any entity, not just CFTC registered entities.
  • A new question has been added to the “Disciplinary Information – Regulatory Disclosures” section regarding failing to supervise another person’s activities under any investment-related statute or regulation.
  • A question in the “Disciplinary Information – Financial Disclosures” section has been revised so that individuals are required to report any failure to pay any awards related to ALL products subject to CFTC jurisdiction.
  • Lastly, the NFA will simplify the process for submitting supplemental information and documentation regarding criminal, regulatory or financial disclosures.
A notice regarding the revised Form 8-R has been published in the Federal Register, which includes a copy of the revised individual application.  The revised Form 8-R will be effective when the NFA makes the form available on its website. Amendment to CFTC’s Whistleblower Rules On May 22, 2017, the CFTC published a Fact Sheet regarding amendments to the “Whistleblower Rules”. The purpose of the amendments is to strengthen the CFTC’s anti-retaliation protections for whistleblowers and to enhance the review process for whistleblower claims. The amendments also seek to harmonize the CFTC Whistleblower Rules with those of the Securities and Exchange Commission. Now the CFTC or the whistleblower has the ability to bring an action against an employer for retaliation against the whistleblower.  Also, the amendments will prohibit an employer from impeding a would-be whistleblower from communicating with the CFTC by authorizing the regulator to use a confidentiality, pre-dispute arbitration or similar agreements.  The amended Whistleblower Rules cover the following topics:
  • Retaliation and improper employer confidentially agreements;
  • Award eligibility requirements;
  • Awards for “related actions”, as defined by CFTC Rule 165;
  • The award claims review process;
  • Contents of record for award determinations; and
  • Whistleblower identifying information.
The CFTC Fact Sheet provides further details regarding the list of topics above. As per CFTC Press Release pr7559-17, the amended Whistleblower Rules will go into effect sixty (60) days after  publication in the Federal Register. CFTC Launches LabCFTC The CFTC announced the creation of LabCFTC, which they describe as a new initiative aimed at promoting responsible financial technology (“FinTech”) innovation to improve the quality, resiliency, and competition in the markets overseen by the CFTC. LabCFTC is a new agency within the CFTC. The CFTC laid out an overview of agency, which includes a focus on promoting FinTech innovation and fair competition by giving the CFTC more access to FinTech innovators. FinTech is now a driving force in the financial industry as companies develop new technologies in order to compete in the global marketplace. In response, LabCFTC’s mission is to promote responsible FinTech innovation which will allow the CFTC to influence policy development. LabCFTC has developed two (2) core components: GuidePoint and CFTC 2.0. Simply put, GuidePoint provides FinTech innovators with a dedicated point of contact within the agency and CFTC 2.0 harnesses FinTech innovation to make the CFTC more efficient and effective as a regulator. The CFTC announced LabCFTC in a May 17th press release, which coincided with the launch of the agency’s dedicated website. CFTC Proposes to Amend Chief Compliance Officer Rules and Annual Reports The May 8, 2017, Federal Registered included the CFTC’s proposed amendments to the regulations regarding certain duties of chief compliance officers (“CCOs”) and for annual report requirements. The proposed rules affect swap dealers (“SDs”), major swap participants (“MSPs”) and futures commission merchants (“FCMs”).  Specifically the proposed amendments would define “senior officer”, provide clarification regarding the duties of CCOs and modify the CCO annual reports content and submission requirements.  As per the proposed rules in the Federal Register, the CFTC is seeking comments from the public, which must be received on or before July 7, 2017.  Please review the Federal Register for instructions for submitting comments regarding the proposed rules. NATIONAL FUTURES ASSOCIATION Upcoming Due Date for Quarterly Pool Report The quarterly pool report for the period ending March 31, 2017 is due on May 30, 2017. NFA Compliance Rule 2-46 requires commodity pool operators (“CPOs”) to fulfill financial reporting requirements by submitting Form PQR, which provides the NFA with specific information about the firm and the pools that it operates.  Failure to file timely reports is a violation of NFA Rules and CFTC Regulations and could subject your firm to disciplinary action. Further, the NFA can impose a late fee to CPO Members for each business day the quarterly report is past due. The pool quarterly report, Form PQR, is submitted using the NFA’s EasyFile system. For further information about any of the topics covered, please feel free to contact the Ruddy Gregory, PLLC (www.ruddylaw.com) or 202-797-0762.

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