Proposed Rule

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Federal Register / Vol. 81, No. 7 / Tuesday, January 12, 2016 / Proposed Rules
applying mountings and other ornaments,
which mountings or ornaments shall be of
the quality marked.
Note: Exemptions recognized in the
industry and not to be considered in any
assay for quality of a karat gold optical
product include: the hinge assembly (barrel
or other special types such as are customarily
used in plastic frames); washers, bushings,
and nuts of screw assemblies; dowels;
springs for spring shoe straps; metal parts
permanently encased in a non-metallic
covering; and for oxfords,8 coil and joint
springs.
(b) Exemptions recognized in the industry
and not to be considered in any assay for
quality of a gold filled, gold overlay and
rolled gold plate industry product, other than
watchcases, include joints, catches, screws,
pin stems, pins of scarf pins, hat pins, etc.,
field pieces and bezels for lockets, posts and
separate backs of lapel buttons, bracelet and
necklace snap tongues, springs, and metallic
parts completely and permanently encased in
a nonmetallic covering.
Note: Exemptions recognized in the
industry and not to be considered in any
assay for quality of a gold filled, gold overlay
and rolled gold plate optical product include:
screws; the hinge assembly (barrel or other
special types such as are customarily used in
plastic frames); washers, bushings, tubes and
nuts of screw assemblies; dowels; pad
inserts; springs for spring shoe straps, cores
and/or inner windings of comfort cable
temples; metal parts permanently encased in
a nonmetallic covering; and for oxfords, the
handle and catch.
(c) Exemptions recognized in the industry
and not to be considered in any assay for
quality of a silver industry product include
screws, rivets, springs, spring pins for wrist
watch straps; posts and separable backs of
lapel buttons; wire pegs, posts, and nuts used
for applying mountings or other ornaments,
which mountings or ornaments shall be of
the quality marked; pin stems (e.g., of badges,
brooches, emblem pins, hat pins, and scarf
pins, etc.); levers for belt buckles; blades and
skeletons of pocket knives; field pieces and
bezels for lockets; bracelet and necklace snap
tongues; any other joints, catches, or screws;
and metallic parts completely and
permanently encased in a nonmetallic
covering.
(d) Exemptions recognized in the industry
and not to be considered in any assay for
quality of an industry product of silver in
combination with gold include joints,
catches, screws, pin stems, pins of scarf pins,
hat pins, etc., posts and separable backs of
lapel buttons, springs, and metallic parts
completely and permanently encased in a
nonmetallic covering.
(e) Exemptions recognized in the industry
and not to be considered in any assay for
quality of a platinum industry product
include springs, winding bars, sleeves, crown
cores, mechanical joint pins, screws, rivets,
dust bands, detachable movement rims, hat
pin stems, and bracelet and necklace snap
8 Oxfords are a form of eyeglasses where a flat
spring joins the two eye rims and the tension it
exerts on the nose serves to hold the unit in place.
Oxfords are also referred to as pince nez.

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tongues. In addition, the following
exemptions are recognized for products
marked in accordance with § 23.6(b)(5) of
these Guides (i.e., products that are less than
500 parts per thousand platinum): pin
tongues, joints, catches, lapel button backs
and the posts to which they are attached,
scarf-pin stems, hat pin sockets, shirt-stud
backs, vest-button backs, and ear screw
backs, provided such parts are made of the
same quality platinum as is used in the
balance of the article.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2016–00107 Filed 1–11–16; 8:45 am]
BILLING CODE 6750–01–P

COMMODITY FUTURES TRADING
COMMISSION
17 CFR Part 3
RIN 3038–AE16

Alternative to Fingerprinting
Requirement for Foreign Natural
Persons
Commodity Futures Trading
Commission.
ACTION: Notice of proposed rulemaking.
AGENCY:

The Commodity Futures
Trading Commission (‘‘Commission’’ or
‘‘CFTC’’) is proposing to amend existing
Commission regulations to establish an
alternative to fingerprinting to evaluate
the fitness of natural persons who are
required to submit fingerprints under
the Commission’s regulations and who
have not resided in the United States
since reaching 18 years of age
(‘‘Proposal’’).
DATES: Comments must be received on
or before February 11, 2016.
ADDRESSES: You may submit comments,
identified by RIN 3038–AE16, by any of
the following methods:
• Agency Web site: Via its Comments
Online process: http://
comments.cftc.gov. Follow the
instructions on the Web site for
submitting comments.
• Mail: Send to Christopher
Kirkpatrick, Secretary, Commodity
Futures Trading Commission, 1155 21st
Street NW., Washington, DC 20581.
• Hand delivery/Courier: Same as
Mail above.
• Federal eRulemaking Portal: at
http://www.regulations.gov/. Follow the
instructions for submitting comments.
All comments must be submitted in
English, or if not, accompanied by an
English translation. Comments will be
posted as received to http://
www.cftc.gov. You should submit only
information that you wish to make
SUMMARY:

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available publicly. If you wish the
Commission to consider information
that is exempt from disclosure under the
Freedom of Information Act,1 a petition
for confidential treatment of the exempt
information may be submitted according
to the procedures set forth in § 145.9 of
the Commission’s regulations.2
The Commission reserves the right,
but shall have no obligation, to review,
pre-screen, filter, redact, refuse or
remove any or all of your submission
from http://www.cftc.gov that it may
deem to be inappropriate for
publication, such as obscene language.
All submissions that have been redacted
or removed that contain comments on
the merits of the rulemaking will be
retained in the public comment file and
will be considered as required under the
Administrative Procedure Act and other
applicable laws, and may be accessible
under the Freedom of Information Act.
FOR FURTHER INFORMATION CONTACT:
Katherine Driscoll, Associate Chief
Counsel, 202–418–5544, kdriscoll@
cftc.gov; Jacob Chachkin, Special
Counsel, 202–418–5496, jchachkin@
cftc.gov; or Adam Kezsbom, Special
Counsel, 202–418–5372, akezsbom@
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. Background
Subject to certain exceptions and
exclusions, persons engaging in
specified activities involving
commodity interests 3 are required
pursuant to the Commodity Exchange
Act (‘‘CEA’’ or ‘‘Act’’) and/or
Commission regulations 4 to register
with the Commission in certain
registration categories. These include
registration as a futures commission
merchant (‘‘FCM’’), retail foreign
exchange dealer (‘‘RFED’’), introducing
broker (‘‘IB’’), commodity pool operator
(‘‘CPO’’), commodity trading advisor
(‘‘CTA’’), swap dealer (‘‘SD’’), major
15

U.S.C. 552.

2 Commission

regulations referred to herein are
found at 17 CFR chapter. 1. Commission regulations
are accessible on the Commission’s Web site,
http://www.cftc.gov.
3 A commodity interest is (1) any contract for the
purchase or sale of a commodity for future delivery;
(2) any contract, agreement or transaction subject to
a Commission regulation under section 4c or 19 of
the Commodity Exchange Act; (3) any contract,
agreement or transaction subject to Commission
jurisdiction under section 2(c)(2) of such Act; and
(4) Any swap as defined in such Act, by the
Commission, or jointly by the Commission and the
Securities and Exchange Commission. 17 CFR
1.3(yy).
4 See, e.g., Commission regulation 3.4(a). 17 CFR
3.4(a).

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swap participant (‘‘MSP’’), leverage
transaction merchant (‘‘LTM’’), floor
broker (‘‘FB’’), and floor trader (‘‘FT’’).5
One of the critically important functions
of registration is to allow the
Commission to ensure that all futures
and swaps industry professionals who
deal with the public meet minimum
standards of fitness and competency.6
The fitness investigations that are part
of the registration process permit the
Commission and/or its delegatees to (a)
uncover past misconduct that may
disqualify an individual or entity from
registration and (b) help determine if
such persons have disclosed all matters
required to be disclosed in their
applications to become registered with
the Commission.7
Pursuant to the registration process
for determining a registrant’s fitness in
part 3 of the Commission’s regulations,
natural persons 8 that wish to be
principals 9 or associated persons 10 of
Commission registrants, or who are
responsible for entry of orders from an
FB’s or FT’s own account, are required
5 For the definitions of these registration
categories (other than RFED), see Section 1a of the
CEA and Commission regulation 1.3. 7 U.S.C. 1a
and 17 CFR 1.3. For the definition of RFED, see
Commission regulation 5.1(h). 17 CFR 5.1(h).
6 See, e.g., Commodity Futures Trading Comm’n,
Division of Clearing and Intermediary Oversight,
Public Report on the Registration Program of the
National Futures Association, June 2010, at 1 (citing
H.R. REP. NO. 97–565(I), at 48 (1982), reprinted in
1982 U.S.C.C.A.N. 3871, 3897–3899).
7 See http://www.nfa.futures.org/NFAregistration/index.HTML (last visited Dec. 22,
2015), stating that ‘‘[t]he primary purposes of
registration are to screen an applicant’s fitness to
engage in business as a futures professional and to
identify those individuals and organizations whose
activities are subject to federal regulation.’’
Pursuant to Commission regulation 3.60, the
Commission may, subject to some limitations, deny,
grant with conditions, suspend, revoke, or restrict
registration to an applicant if the Commission
alleges and is prepared to prove that the registrant
or applicant is subject to one or more of the
statutory disqualifications set forth in section 8a(2),
8a(3) or 8a(4) of the Act. 17 CFR 3.60. Sections 8a(2)
and 8a(3) of the Act contain an extensive list of
matters that provide grounds for refusing or
conditioning an applicant’s registration, including,
without limitation, felony convictions, commodities
or securities law violations, bars or other adverse
actions taken by financial regulators, and willfully
omitting to state any material fact in an application.
See 7 U.S.C. 12a(2) and (3). See also Interpretative
Statement With Respect to Section 8a(2)(C) and (E)
and Section 8a(3)(J) and (M) of the Commodity
Exchange Act, Appendix A to part 3 of the
Commission’s regulations.
8 As used herein, the terms ‘‘natural person’’ and
‘‘individual’’ have the same meaning.
9 See the definition of principal in Commission
regulation 3.1(a). 17 CFR 3.1(a).
10 An ‘‘associated person’’ is any natural person
who is associated in certain capacities with an
FCM, RFED, IB, CPO, CTA, SD, MSP, or LTM. 17
CFR 1.3(aa).

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to submit their fingerprints 11 (the
‘‘Fingerprinting Requirement’’).12
The Commission has delegated to
National Futures Association (‘‘NFA’’), a
registered futures association under
Section 17 of the CEA, the registration
functions set forth in subparts A, B, and
C of part 3 of the Commission’s
regulations, including the collection and
review of a completed Form 8–R 13 and
related fingerprint submissions from
each natural person completing a Form
8–R.14 NFA, working with law
enforcement agencies, uses these
fingerprints to conduct background
checks on these natural persons to assist
in determining their fitness.
In December 2012, the Commission’s
Division of Swap Dealer and
Intermediary Oversight (‘‘DSIO’’), in
response to concerns raised by industry
participants that the Fingerprinting
Requirement was unduly burdensome to
foreign natural persons and after
considering those concerns in light of
the continued need to evaluate the
fitness of those persons, issued a noaction letter, CFTC Staff Letter No. 12–
49.15 CFTC Staff Letter No. 12–49
provides an alternative to complying
with the Fingerprinting Requirement for
principals of LTMs, FCMs, RFEDs, IBs,
CPOs, CTAs, SDs, and MSPs that have
not resided in the United States since
reaching 18 years of age. Subject to
certain conditions specified in the letter,
DSIO staff stated that it would not
recommend that the Commission
commence an enforcement action
against any such firm based solely upon
that firm’s failure to submit with its
registration application a fingerprint
card for each such principal.
To rely on the relief provided in CFTC
Staff Letter No. 12–49, DSIO staff
required that any such firm submit, for
11 Currently, the Commission may, directly or
indirectly, require fingerprinting pursuant to
Commission regulations 3.10(a)(2); 3.11(a)(1);
3.12(c)(3), d(2), f(3), or (i)(3); 3.40(a)(1), (a)(2), or (b);
3.44(a)(5) or (c); or 3.46(a)(3). 17 CFR 3.10(a)(2);
3.11(a)(1); 3.12(c)(3), d(2), f(3), and (i)(3); 3.40(a)(1),
(a)(2), and (b); 3.44(a)(5) and (c); and 3.46(a)(3).
12 In support of its initial promulgation of the
fingerprinting requirements, the Commission stated
that these requirements ‘‘are necessary to permit
improvements in the Commission’s background
checking of applicants for registration, to permit
positive identification of certain individuals with
common names, to reduce the number of
applications filed by individuals who are unfit for
registration, and to facilitate fitness reviews of
registrants on a spot and periodic basis.’’ See
Revision of Registration Regulations; Final Rules;
Designation of New Part, 45 FR 80485, 80485 (Dec.
5, 1980).
13 Generally, Form 8–R is the Commission’s
application for natural persons that are associated
persons or principals of a registrant.
14 See 17 CFR 3.2(a).
15 CFTC Staff Letter No. 12–49 (Dec. 11, 2012),
available at http://www.cftc.gov/ucm/groups/
public/@lrlettergeneral/documents/letter/12-49.pdf.

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each principal, either a fingerprint card
(as required under Commission
regulation 3.10(a)(2)) or a certification,
signed by a person with authority to
bind such firm, stating that: (1) A
reasonable criminal history background
check using a reputable commercial
service had been conducted; (2) such
criminal history background check did
not reveal any matters that constitute a
disqualification under Sections 8a(2) or
8a(3) of the CEA,16 other than those
disclosed; and (3) such firm would
maintain, in accordance with
Commission regulation 1.31, records
documenting that such criminal history
background check was performed and
the results of such background check.17
After issuing CFTC Staff Letter No.
12–49, DSIO staff issued similar noaction relief from the Fingerprinting
Requirement for associated persons of
FCMs, RFEDs, IBs, CTAs, CPOs, and
LTMs that have not resided in the
United States since reaching 18 years of
age in CFTC Staff Letter No. 13–29 18
(CFTC Staff Letter No. 13–29, together
with CFTC Staff Letter No. 12–49, are
the ‘‘DSIO No-Action Letters’’ and the
relief provided by such letters is the
‘‘DSIO No-Action Relief’’).
II. Proposal
The Commission is proposing to
amend the Fingerprinting Requirement
by adding a new sub-section (e) to the
existing list of exemptions from the
Fingerprinting Requirement in § 3.21 19
to codify and clarify the DSIO NoAction Relief.
This Proposal differs from the DSIO
No-Action Relief. First, this Proposal
would extend the relief to certain
natural persons connected to FBs and
FTs. Second, the Proposal would
include all requirements to provide a
fingerprint card under Part 3 of the
Commission’s regulations, whereas the
DSIO No-Action Relief is more
limited.20 As a result, this Proposal
broadens the availability of the
alternative to fingerprinting provided in
16 7

U.S.C. 12a(2) and (3).
Staff Letter No. 12–49, at 2.
18 CFTC Staff Letter No. 13–29 (Jun. 21, 2013),
available at http://www.cftc.gov/ucm/groups/
public/@lrlettergeneral/documents/letter/13-29.pdf.
19 Commission regulation 3.21 provides
exemptions to the Fingerprinting Requirement,
subject to certain conditions, for persons whose
fingerprints have recently been identified and
processed by the Federal Bureau of Investigation,
for persons whose application for initial registration
with the Commission in any capacity was recently
granted, for persons that have a current Form 8–R
on file with the Commission or NFA, and for
principals that are outside directors. 17 CFR 3.21.
20 The DSIO No-Action Letters provide an
alternative solely to the requirements of
Commission regulations 3.10(a)(2) and 3.12(c)(3).
See DSIO No-Action Letters.
17 CFTC

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Federal Register / Vol. 81, No. 7 / Tuesday, January 12, 2016 / Proposed Rules
the DSIO No-Action Letters; however,
the Commission believes that the
rationale for providing the alternative to
fingerprinting described above is
equally applicable to natural persons
connected to FBs and FTs and to all
other requirements to provide a
fingerprint card under Part 3 of the
Commission’s regulations, as explained
further below.
Proposed sub-section (e)(2) of § 3.21
would provide that the obligation to
provide a fingerprint card for a Foreign
Natural Person under part 3 of the
Commission’s regulations would be
deemed satisfied for a Certifying Firm
(each, as defined below) if: (a) Such
Certifying Firm causes a criminal
history background check of such
Foreign Natural Person to be performed;
(b) such criminal history background
check does not reveal any matters that
constitute a disqualification under
Sections 8a(2) or 8a(3) of the CEA,21
other than those disclosed to NFA; and
(c) a person authorized by such
Certifying Firm submits, in reliance on
such criminal history background
check, a certification by such Certifying
Firm to NFA.
The certification must: (i) State that
the conditions described above have
been satisfied; and (ii) be signed by a
person authorized by such Certifying
Firm to make such certification. In
addition, each criminal history
background check must: (a) Be of a type
that would reveal all matters listed
under Sections 8a(2)(D) or 8a(3)(D), (E),
or (H) of the CEA 22 relating to the
Foreign Natural Person and (b) be
completed not more than one calendar
year prior to the date that such
Certifying Firm submits the certification
to NFA described in the proposed rule.
In terms of definitions, proposed
paragraph 3.21(e)(1)(i) would define
Foreign Natural Person, solely for
purposes of paragraph (e), as any natural
person who has not resided in the
United States since reaching the age of
18 years. Also, proposed paragraph
3.21(e)(1)(ii) would define Certifying
Firm, also solely for purposes of
paragraph (e), with respect to natural
persons acting in certain specified
capacities in relation to the firm.
By way of recordkeeping, proposed
paragraph 3.21(e)(3) would require that
the Certifying Firm maintain, in
accordance with Commission regulation
1.31, records documenting each
criminal history background check and
the results thereof.
21 7

U.S.C. 12a(2) and (3).
U.S.C. 12a(2)(D) and 12a(3)(D), (E), and (H).
These provisions of Sections 8a(2) and (3) of the
CEA generally relate to criminal convictions.
22 7

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The Commission believes the
proposal, in providing certainly to
market participants by way of
Commission regulation, will make the
commodity interest markets it oversees
more liquid, competitive, and accessible
by enabling Foreign Natural Persons to
demonstrate that they meet the
minimum standards for fitness and
competency without undue burden. The
alternative to fingerprinting proposed
will remove an impediment to
participation in United States’ markets
by persons located outside of the United
States while also ensuring the continued
protection of market participants and
the public. Further, the Commission
believes that, by providing an
alternative for persons outside the
United States, this Proposal is
consistent with the principles of
international comity.
As discussed above, in an attempt to
provide greater clarity to market
participants, this Proposal is slightly
different than the DSIO No-Action
Letters. In particular, where the NoAction Relief required that ‘‘a
reasonable criminal history background
check using a reputable commercial
service’’ be performed, this Proposal
does not include the terms ‘‘reasonable’’
or ‘‘reputable.’’ Instead, this Proposal
requires that the background check meet
the objective standard described above,
which relies on the clearly-stated
matters under Sections 8a(2)(D) and
8a(3)(D), (E), and (H) of the CEA. The
Commission believes that using such an
objective standard (one that does not
require a market participant to make a
subjective determination of what is
‘‘reasonable’’ or ‘‘reputable’’ for
purposes of the alternative) furthers its
goal of providing certainty to market
participants while allowing the
Commission to continue to ensure the
fitness of its registrants.
If adopted, the proposed rule would
supersede the DSIO No-Action Letters
without prejudice to those who are
relying on either of the DSIO No-Action
Letters and have satisfied the
requirements thereof prior to the date
hereof.
III. Request for Comments
The Commission requests comment
generally on all aspects of this Proposal.
In particular, the Commission requests
comment on the following:
1. Should the Commission promulgate
a final rule in relation to this Proposal
to provide an alternative to the
Fingerprinting Requirement for Foreign
Natural Persons?
2. Please describe the burdens that
Foreign Natural Persons face in
complying with the Fingerprinting

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Requirement. How are these burdens
different from those faced by natural
persons that are not Foreign Natural
Persons?
3. Is the criminal history background
check as set forth in the Proposal
sufficient to reveal the existence of all
matters listed under Sections 8a(2)(D) or
8a(3)(D), (E), or (H) of the CEA, if any
such matter existed? If not, please
provide specific additional or
alternative requirements for the criminal
history background check.
4. This Proposal is limited to Foreign
Natural Persons (i.e., individuals who
have not resided in the United States
since reaching 18 years of age). Should
the Commission use another measure to
determine whether an individual should
be eligible for the proposed alternative
to the Fingerprinting Requirement?
5. This Proposal requires that a
background check be completed not
more than one calendar year prior to the
date of a Certifying Firm’s related
certification. Should the Commission
require that the background check be
completed within a different period?
6. Are persons eligible for the DSIO
No-Action Relief currently availing
themselves of that alternative to the
Fingerprinting Requirement? To the
extent that such persons are not, please
provide reasons as to why they are not.
7. Are there any other matters that the
Commission should consider in
determining whether to adopt this
Proposal?
IV. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act
(‘‘RFA’’) 23 requires Federal agencies, in
promulgating regulations, to consider
whether the rules they propose will
have a significant economic impact on
a substantial number of small entities
and, if so, to provide a regulatory
flexibility analysis regarding the
economic impact on those entities. This
Proposal would affect certain FCMs,
RFEDs, IBs, CPOs, CTAs, SDs, MSPs,
LTMs, FBs, and FTs that wish to take
advantage of the alternative to
fingerprinting to evaluate the fitness of
their Foreign Natural Persons for which
fingerprints must be submitted to
NFA.24 The Commission has previously
determined that FCMs, RFEDS, CPOs,
SDs, MSPs, and LTMs are not small
23 5

U.S.C. 601 et seq.
Proposal will also directly affect certain of
such individuals; however, the Commission has
noted that the RFA, by its terms, does not apply to
individuals. See 48 FR 14933, 14954 n.115 (Apr. 6,
1983). Therefore, no analysis on the economic
impact of this rule on individuals is provided.
24 This

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entities for purposes of the RFA.25
Therefore, the requirements of the RFA
do not apply to those entities. With
respect to CTAs, FBs, FTs, and IBs, the
Commission has found it appropriate to
consider whether such registrants
should be deemed small entities for
purposes of the RFA on a case-by-case
basis, in the context of the particular
Commission regulation at issue.26 As
certain of these registrants may be small
entities for purposes of the RFA, the
Commission considered whether this
rulemaking would have a significant
economic impact on such registrants.
This Proposal will solely provide an
optional alternative to complying with
the Fingerprinting Requirement, which
already applies to such registrants, and
would, therefore, not impose any new
regulatory obligations on affected
registrants. This Proposal is not
expected to impose any new burdens on
market participants. Rather, to the
extent that this Proposal provides an
alternative means to comply with the
Fingerprinting Requirement and is
elected by a market participant, the
Commission believes it is reasonable to
infer that the alternative is less
burdensome to such participant. The
Commission does not, therefore, expect
small entities to incur any additional
costs as a result of this Proposal.
Consequently, the Commission finds
that no significant economic impact on
small entities will result from this
Proposal.
Accordingly, the Chairman, on behalf
of the Commission, hereby certifies
pursuant to 5 U.S.C. 605(b) that this
Proposal will not have a significant
economic impact on a substantial
number of small entities.
B. Paperwork Reduction Act
1. Background
The Paperwork Reduction Act of 1995
(‘‘PRA’’) 27 imposes certain
requirements on Federal agencies

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25 See

Policy Statement and Establishment of
Definitions of ‘‘Small Entities’’ for Purposes of the
Regulatory Flexibility Act, 47 FR 18618 (Apr. 30,
1982) (FCMs and CPOs); Leverage Transactions, 54
FR 41068 (Oct. 5, 1989) (LTMs); Regulation of OffExchange Retail Foreign Exchange Transactions and
Intermediaries, 75 FR 55410, 55416 (Sept. 10, 2010)
(RFEDs); and Registration of Swap Dealers and
Major Swap Participants, 77 FR 2613, 2620 (Jan. 19,
2012) (SDs and MSPs).
26 See 47 FR at 18620 (CTAs and FBs);
Registration of Floor Traders; Mandatory Ethics
Training for Registrants; Suspension of Registrants
Charged With Felonies, 58 FR 19575, 19588 (Apr.
15, 1993) (FTs); and Introducing Brokers and
Associated Persons of Introducing Brokers,
Commodity Trading Advisors and Commodity Pool
Operators; Registration and Other Regulatory
Requirements, 48 FR 35248, 35276 (Aug. 3, 1983)
(IBs).
27 44 U.S.C. 3501 et seq.

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(including the Commission) in
connection with conducting or
sponsoring any collection of
information as defined by the PRA. This
Proposal would result in a collection of
information within the meaning of the
PRA, as discussed below. The
Commission therefore is submitting this
Proposal to the Office of Management
and Budget (‘‘OMB’’) for review.
This Proposal contains collections of
information for which the Commission
has previously received control
numbers from OMB. The titles for these
collections of information are
‘‘Commodity Pool Operators and
Commodity Trading Advisors:
Amendments to Compliance
Obligations, OMB control number 3038–
0023’’ 28 and ‘‘Registration of Swap
Dealers and Major Swap Participants,
OMB control number 3038–0072.’’ 29
The responses to these collections of
information are mandatory. An 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 OMB.
The collection of information in this
Proposal would provide an optional
alternative to complying with the
Fingerprinting Requirement (as
described above). Eligible persons
would have the option to elect the
certification process, but no obligation
to do so. For this reason, except to the
extent that the Commission is amending
the subject OMB control numbers for
PRA purposes to reflect the alternative
certification process, this Proposal is not
expected to impose any new burdens on
market participants. Rather, to the
extent that this Proposal provides an
alternative means to comply with the
Fingerprinting Requirement and is
elected by market participants, it is
reasonable for the Commission to infer
that the alternative is less burdensome
to such participants.
2. Revisions to Collections 3038–0023
and 3038–0072
Collections 3038–0023 and 3038–
0072 are currently in force with their
control numbers having been provided
by OMB.
As discussed above, this Proposal
would add a new exemption that would
incorporate an alternative to
28 See OMB Control No. 3038–0023, http://
www.reginfo.gov/public/do/
PRAOMBHistory?ombControlNumber=3038-0023#
(last visited Dec. 22, 2015). The collection is being
retitled ‘‘Registration Under the Commodity
Exchange Act.’’
29 See OMB Control No. 3038–0072, http://
www.reginfo.gov/public/do/
PRAOMBHistory?ombControlNumber=3038-0072#
(last visited Dec. 22, 2015).

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fingerprinting to evaluate the fitness of
certain Foreign Natural Persons. In
order to qualify for this alternative, the
Certifying Firm must take the steps
required pursuant to this Proposal,
including submitting the required
certification to NFA and maintaining
records of the criminal history
background check and the results
thereof. Requiring such actions would
result in revisions to collections 3038–
0023 and 3038–0072. Therefore, the
Commission proposes to revise each of
collections 3038–0023 and 3038–0072.
The Commission understands that
NFA has received approximately 110
requests in each of 2014 and 2015 from
market participants asking to avail
themselves of the DSIO No-Action
Relief. However, as discussed above, the
relief provided by this Proposal is
broader than the DSIO No-Action relief
in that it extends the relief to certain
natural persons connected to FBs and
FTs. Therefore, the Commission
estimates that Certifying Firms will
submit 200 certifications per year to
take advantage of the alternative
provided in this Proposal.
As of November 23, 2015, there were
(i) 9,259 Commission-registered FCMs,
RFEDs, IBs, CPOs, CTAs, LTMs, FBs,
and FTs and (ii) 103 Commissionregistered SDs and MSPs, making an
aggregate total of 9,362 registrants.30 Of
these registrants, SDs and MSPs make
up approximately 1% and the other
registrants make up approximately 99%.
Based on the assumption that there is an
equal distribution of certifications
among the Certifying Firms eligible to
provide them, the Commission
estimates that approximately 198 31
FCMs, RFEDs, IBs, CPOs, CTAs, LTMs,
FBs, and FTs and 2 32 SDs and MSPs
will submit the required certification.
a. Estimated Additional Hour Burden
for Collection 3038–0023
Collection 3038–0023 relates to
collections of information from FCMs,
RFEDs, IBs, CPOs, CTAs, LTMs, FBs,
and FTs. Based on the above, the
estimated additional hour burden for
collection 3038–0023 of 495 hours is
calculated as follows:
Number of registrants: 198.
30 These numbers are slightly overstated, as
certain registrants are registered as SDs or MSPs
and as an FCM, RFED, IB, CPO, CTA, LTM, FB, or
FT.
31 198 was calculated by multiplying the number
of estimated requests per year (200) by the
proportion of registrants discussed above that are
FCMs, RFEDs, IBs, CPOs, CTAs, LTMs, FBs, or FTs
(approximately 99%).
32 2 was calculated by multiplying the number of
estimated requests per year (200) by the proportion
of registrants discussed above that are SDs or MSPs
(approximately 1%).

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Federal Register / Vol. 81, No. 7 / Tuesday, January 12, 2016 / Proposed Rules
Frequency of collection: As needed.
Estimated annual responses per
registrant: 1.
Estimated aggregate number of
annual responses: 198.
Estimated annual hour burden per
registrant: 2.5.33
Estimated aggregate annual hour
burden: 495 (198 registrants × 2.5 hours
per registrant).
b. Estimated Additional Hour Burden
for Collection 3038–0072
Collection 3038–0072 relates to
collections of information from SDs and
MSPs. Based on the above, the
estimated additional hour burden for
collection 3038–0072 of 5 hours is
calculated as follows:
Number of registrants: 2.
Frequency of collection: As needed.
Estimated annual responses per
registrant: 1.
Estimated aggregate number of
annual responses: 2.
Estimated annual hour burden per
registrant: 2.5.34
Estimated aggregate annual hour
burden: 5 (2 registrants × 2.5 hours per
registrant).

tkelley on DSK3SPTVN1PROD with PROPOSALS

3. Information Collection Comments
The Commission invites the public
and other Federal agencies to comment
on any aspect of the proposed
information collection requirements
discussed above. Pursuant to 44 U.S.C.
3506(c)(2)(B), the Commission solicits
comments in order to: (1) Evaluate
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information will have practical utility;
(2) evaluate the accuracy of the
Commission’s estimate of the burden of
the proposed collection of information;
(3) determine whether there are ways to
enhance the quality, utility, and clarity
of the information to be collected; and
(4) minimize the burden of the
collection of information on those who
are to respond, including through the
use of automated collection techniques
or other forms of information
technology.
33 This collection’s burdens are restricted to (i)
registrants providing necessary information to
commercial service provider(s) to conduct a
criminal history background check for a Foreign
Natural Person; (ii) registrants preparing and
submitting the certification described herein; and
(iii) registrants maintaining, in accordance with
Commission regulation 1.31, records documenting
that the criminal history background check was
completed and the results thereof. To the extent
that a market participant instead elects to conduct
the background check internally, it is reasonable for
the Commission to infer that doing so is less
burdensome to such participant.
34 See n.33, supra.

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Comments may be submitted directly
to the Office of Information and
Regulatory Affairs, by fax at (202) 395–
6566, or by email at OIRAsubmissions@
omb.eop.gov. Please provide the
Commission with a copy of submitted
comments so that all comments can be
summarized and addressed in the final
rule preamble. Refer to the ADDRESSES
section of this notice of proposed
rulemaking for comment submission
instructions to the Commission. A copy
of the supporting statements for the
collection of information discussed
above may be obtained by visiting
http://RegInfo.gov. OMB is required to
make a decision concerning the
collection of information between 30
and 60 days after publication of this
document in the Federal Register.
Therefore, a comment is best assured of
having its full effect if OMB receives it
within 30 days of publication.
C. Cost-Benefit Considerations
Section 15(a) of the Act 35 requires the
Commission to consider the costs and
benefits of its actions before issuing a
regulation under the Act. Section 15(a)
further specifies that the costs and
benefits shall be evaluated in light of the
following five broad areas of market and
public concern: (i) Protection of market
participants and the public; (ii)
efficiency, competitiveness and
financial integrity of futures markets;
(iii) price discovery; (iv) sound risk
management practices; and (v) other
public interest considerations. The
Commission considers the costs and
benefits resulting from its discretionary
determinations with respect to the
Section 15(a) considerations.
1. Costs
a. Costs to FCMs, RFEDs, IBs, CPOs,
CTAs, SDs, MSPs, LTMs, FBs, FTs,
Associated Persons, and Other Foreign
Natural Persons
Because this Proposal will solely
provide an optional alternative to
complying with the Fingerprinting
Requirement, which alternative no
FCM, RFED, IB, CPO, CTA, SD, MSP,
LTM, FB, FT, associated person, or
other Foreign Natural Person is required
to elect, the Commission believes that
this Proposal will not impose any costs
on such persons.
b. Other Costs
Because the amendment to
Commission regulation will allow
FCMs, RFEDs, IBs, CPOs, CTAs, SDs,
MSPs, LTMs, FBs, and FTs to submit,
subject to the terms and conditions
herein, a certification in lieu of a
35 7

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1363

fingerprint card for Foreign Natural
Persons, NFA will need to develop a
process to review and retain such
certifications and consider amending its
applications and/or other forms to
reflect the availability of this exception
from the Fingerprinting Requirement.
The Commission expects that the costs
of such activities will not be significant.
2. Benefits
The Commission believes that, by
establishing an alternative method for
evaluating the fitness of Foreign Natural
Persons for whom a fingerprint card
must currently be submitted, this
Proposal would help keep the United
States’ commodity interest markets
accessible and competitive with other
markets around the world by removing
an impediment to participation in
United States’ markets by persons
located outside of the United States
while also ensuring the continued
protection of market participants and
the public. Further, the Commission
believes that, by providing an
alternative for persons outside the
United States, this Proposal is
consistent with the principles of
international comity.
3. 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. CEA
Section 15(a) further specifies that the
costs and benefits shall be evaluated in
light of five broad areas of market and
public concern: (i) Protection of market
participants and the public; (ii)
efficiency, competitiveness, and
financial integrity of futures markets;
(iii) price discovery; (iv) sound risk
management practices; and (v) other
public interest considerations.
i. Protection of Market Participants and
the Public
This Proposal will continue to protect
the public by ensuring that persons who
are currently subject to the
Fingerprinting Requirement, whether or
not they reside in the United States,
must have their fitness reviewed
through the completion of a background
check.
ii. Efficiency, Competitiveness, and
Financial Integrity of Markets
This Proposal may increase the
efficiency and competitiveness of the
markets by encouraging more
participation in United States markets
by persons located outside of the United
States. The Commission does not
believe that the integrity of financial

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Federal Register / Vol. 81, No. 7 / Tuesday, January 12, 2016 / Proposed Rules

markets would be harmed, because this
proposal requires that the background
check meet the objective standards
which rely on the clearly-stated matters
under Sections 8a(2)(D) and 8a(3)(D),
(E), and (H) of the CEA.
iii. Price Discovery
The Commission generally believes
that providing an alternative means of
ensuring the fitness of a person who
resides outside the United States for
purposes of Commission registration, by
reducing the burden that the
Fingerprinting Requirement could
impose on such persons, could reduce
impediments to transact on a crossborder basis.
iv. Sound Risk Management Practices
As explained above, one of the
critically important functions of
registration is to allow the Commission
to ensure that all futures and swaps
industry professionals who deal with
the public meet minimum standards of
fitness and competency.36 The fitness
investigations that are part of the
registration process permit the
Commission and/or its delegatees to (a)
uncover past misconduct that may
disqualify an individual or entity from
registration and (b) help determine if
such persons have disclosed all matters
required to be disclosed in their
applications to become registered with
the Commission.37 Having futures and
swaps market participants that are not
subject to any of the matters that would
lead to a disqualification of registration
under Sections 8a(2) or (3) of the CEA
is one way to help ensure that a
Commission registrant will not be a risk
to its customers or to the market in
general.
v. Other Public Interest Considerations
The Commission believes that, by
providing an alternative for persons
outside the United States, this Proposal
is consistent with the principles of
international comity.

tkelley on DSK3SPTVN1PROD with PROPOSALS

vi. Request for Comments
The Commission invites public
comment on its cost-benefit
considerations, including the Section
15(a) factors described above.
Commenters are also invited to submit
any data or other information that they
may have quantifying or qualifying the
costs and benefits of this Proposal with
their comment letters.
36 See
37 See

n.6, supra.
n.7, supra.

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List of Subjects in 17 CFR Part 3
Associated persons, Brokers,
Commodity futures, Commodity pool
operators, Commodity trading advisors,
Customer protection, Fingerprinting,
Foreign exchange, Futures commission
merchants, Introducing brokers,
Leverage transaction merchants,
Leverage transactions, Major swap
participants, Principals, Registration,
Reporting and recordkeeping
requirements, Retail foreign exchange
dealers, Swap dealers, Swaps.
For the reasons set forth in the
preamble, the Commodity Futures
Trading Commission proposes to amend
part 3 as follows:
PART 3—REGISTRATION
1. The authority citation for part 3
continues to read as follows:

■

Authority: 5 U.S.C. 552, 552b; 7 U.S.C. 1a,
2, 6, 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, 23.

2. In § 3.21, add paragraph (e) to read
as follows:

■

§ 3.21 Exemption from fingerprinting
requirement in certain cases.

*

*
*
*
*
(e) Foreign Natural Persons. (1) For
purposes of this paragraph (e):
(i) The term foreign natural person
means any natural person who has not
resided in the United States since
reaching the age of 18 years.
(ii) The term certifying firm means:
(A) For any natural person that is a
principal or associated person of a
futures commission merchant, retail
foreign exchange dealer, swap dealer,
major swap participant, introducing
broker, commodity pool operator,
commodity trading advisor, leverage
transaction merchant, floor broker, or
floor trader, such futures commission
merchant, retail foreign exchange
dealer, swap dealer, major swap
participant, introducing broker,
commodity pool operator, commodity
trading advisor, leverage transaction
merchant, floor broker, or floor trader;
and
(B) For any natural person that is
responsible for, or directs, the entry of
orders from a floor broker’s or floor
trader’s own account, such floor broker
or floor trader.
(2) Any obligation in this part to
provide a fingerprint card for a foreign
natural person shall be deemed satisfied
with respect to a certifying firm if:
(i) Such certifying firm causes a
criminal history background check of
such foreign natural person to be
performed; and

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(ii) The criminal history background
check:
(A) Is of a type that would reveal all
matters listed under Sections 8a(2)(D) or
8a(3)(D), (E), or (H) of the Act relating
to such foreign natural person;
(B) Does not reveal any matters that
constitute a disqualification under
Sections 8a(2) or 8a(3) of the Act, other
than those disclosed to the National
Futures Association; and
(C) Is completed not more than one
calendar year prior to the date that such
certifying firm submits the certification
described in paragraph (e)(2)(iii) of this
section;
(iii) A person authorized by such
certifying firm submits, in reliance on
such criminal history background
check, a certification by such certifying
firm to the National Futures
Association, that:
(A) States that the conditions of
paragraphs (e)(2)(i) and (ii) of this
section have been satisfied; and
(B) Is signed by a person authorized
by such certifying firm to make such
certification.
(3) The certifying firm shall maintain,
in accordance with § 1.31 of this
chapter, records documenting that the
criminal history background check
performed pursuant to paragraph
(e)(2)(i) of this section was completed
and the results thereof.
Issued in Washington, DC, on January 4,
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.

Appendix to Alternative to
Fingerprinting Requirement for Foreign
Natural Persons—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. 2016–00045 Filed 1–11–16; 8:45 am]
BILLING CODE 6351–01–P

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1, 20, 25, 26, 31, and 301
[REG–148998–13]
RIN 1545–BM10

Definitions of Terms Relating to Marital
Status; Hearing
Internal Revenue Service (IRS),
Treasury.

AGENCY:

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