81 FR 18743 - Alternative to Fingerprinting Requirement for Foreign Natural Persons

COMMODITY FUTURES TRADING COMMISSION

Federal Register Volume 81, Issue 63 (April 1, 2016)

Page Range		18743-18747
FR Document		2016-07304
The Commodity Futures Trading Commission (``Commission'' or ``CFTC'') is amending 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 (``Final Rule'').
Federal Register, Volume 81 Issue 63 (Friday, April 1, 2016)
[Federal Register Volume 81, Number 63 (Friday, April 1, 2016)]
[Rules and Regulations]
[Pages 18743-18747]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-07304]


=======================================================================
-----------------------------------------------------------------------

COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 3

RIN 3038-AE16


Alternative to Fingerprinting Requirement for Foreign Natural 
Persons

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is amending 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 (``Final Rule'').

DATES: The Final Rule is effective on May 2, 2016.

FOR FURTHER INFORMATION CONTACT: Katherine Driscoll, Associate Chief 
Counsel, 202-418-5544, [email protected]; Jacob Chachkin, Special 
Counsel, 202-418-5496, [email protected]; or Adam Kezsbom, Special 
Counsel, 202-418-5372, [email protected], Division of Swap Dealer and 
Intermediary Oversight, Commodity Futures Trading Commission, Three 
Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Proposal

    On January 12, 2016, the Commission published a Notice of Proposed 
Rulemaking (``Proposal'') \1\ to amend the requirement that, pursuant 
to the registration process for determining a registrant's fitness in 
part 3 of the Commission's regulations, natural persons \2\ that wish 
to be principals \3\ or associated persons \4\ of Commission 
registrants,\5\ or who are responsible for entry of orders from an FB's 
or FT's own account, submit their fingerprints (the ``Fingerprinting 
Requirement'').\6\ The Proposal contemplated adding a new paragraph (e) 
to the existing list of exemptions from the Fingerprinting Requirement 
in Sec.  3.21 \7\ to, among other things, codify and clarify the 
alternative to the Fingerprinting Requirement provided by CFTC Staff 
Letter No. 12-49 \8\ and CFTC Staff Letter No. 13-29 \9\ (``DSIO No-
Action Letters''). In particular, the Commission proposed

[[Page 18744]]

adding an alternative to the requirement to provide fingerprints when 
applying for Commission registration for natural persons who have not 
resided in the United States since reaching 18 years of age. The 
Proposal allowed any such person's registered firm to complete a 
criminal history background check in lieu of submitting fingerprints 
for such person.\10\
---------------------------------------------------------------------------

    \1\ Alternative to Fingerprinting Requirement for Foreign 
Natural Persons, 81 FR 1359 (Jan. 12, 2016).
    \2\ As used herein, the terms ``natural person'' and 
``individual'' have the same meaning.
    \3\ See the definition of principal in Commission regulation 
3.1(a). 17 CFR 3.1(a).
    \4\ An ``associated person'' is any natural person who is 
associated in certain capacities with 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 swap 
participant (``MSP''), or leverage transaction merchant (``LTM''). 
17 CFR 1.3(aa).
    For the definitions of these registration categories (other than 
RFED), see Section 1a of the Commodity Exchange Act (``CEA'' or 
``Act'') 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).
    \5\ Subject to certain exceptions and exclusions, persons 
engaging in specified activities involving commodity interests are 
required pursuant to the CEA and/or Commission regulations to 
register with the Commission in certain registration categories. 
These include registration as an FCM, RFED, IB, CPO, CTA, SD, MSP, 
LTM, floor broker (``FB''), and floor trader (``FT''). For the 
definitions of FB and FT, see Section 1a of the CEA and Commission 
regulation 1.3. 7 U.S.C. 1a and 17 CFR 1.3.
    \6\ 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).
    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).
    \7\ 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 National Futures Association 
(``NFA''), and for principals that are outside directors. 17 CFR 
3.21.
    \8\ CFTC Staff Letter No. 12-49 (Dec. 11, 2012), available at 
http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/12-49.pdf.
    \9\ CFTC Staff Letter No. 13-29 (Jun. 21, 2013), available at 
http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-29.pdf.
    \10\ The Commission has delegated to 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 and related fingerprint submissions from each natural person 
completing a Form 8-R. See 17 CFR 3.2(a).
---------------------------------------------------------------------------

    The Commission generally requested comments on the Proposal and 
also solicited comments on a number of specific matters.\11\ For 
example, the Commission solicited comments on potential changes to its 
proposed definition of a foreign natural person, on the scope and 
effectiveness of the criminal history background check required by the 
Proposal and any alternatives thereto, and on the Commission's analysis 
of the costs and benefits of the Proposal. The comment period for the 
Proposal ended on February 11, 2016.
---------------------------------------------------------------------------

    \11\ Proposal, 81 FR at 1361.
---------------------------------------------------------------------------

II. Summary of Comments

    The Commission received two relevant comments in response to the 
Proposal--one from Sutherland Asbill & Brennan LLP on behalf of The 
Commercial Energy Working Group (``The Working Group'') and one from 
Joyce Dillard (``Dillard'').\12\ The Working Group supported the 
Proposal as a means of alleviating some of, what The Working Group 
described as, ``the undue burdens associated with providing a 
fingerprint card pursuant to Part 3 of the Commission's regulations.'' 
However, The Working Group requested that the Commission expand the 
Proposal to all natural persons that are principals or associated 
persons of registrants subject to the Fingerprinting Requirement. The 
Working Group stated that ``[t]his approach, rooted in fairness, would 
provide equal treatment to U.S. residents and non-U.S. residents 
alike,'' but provided no further rationale for its approach. 
Conversely, Dillard did not support the Proposal, and stated that 
fingerprinting should be required without alternative.
---------------------------------------------------------------------------

    \12\ The Commission also received two comments that were not 
relevant to the Proposal. All of the comments are available at 
http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1657.
---------------------------------------------------------------------------

III. Final Rule

    After careful consideration, the Commission is adopting the Final 
Rule as proposed. The Commission is not expanding the Final Rule to 
cover persons other than Foreign Natural Persons (as defined below) as 
requested by The Working Group because, while there are limitations on 
the usefulness of fingerprints of foreign nationals, fingerprinting is 
an expedient way to investigate whether someone has a criminal record 
in the United States. For instance, in the United States, fingerprints 
may be checked for possible matches against existing repositories of 
fingerprints quickly and efficiently.
    As discussed in the Proposal, the Commission believes the Final 
Rule, in providing certainty to market participants by way of 
Commission regulation, makes 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 
removes an impediment to participation in United States' markets by 
Foreign Natural Persons while also ensuring the continued protection of 
market participants and the public. Further, the Commission believes 
that, by providing an alternative for Foreign Natural Persons, the 
Final Rule is consistent with the principles of international comity.
    Section 3.21(e)(2) provides that the obligation to provide a 
fingerprint card for a Foreign Natural Person under part 3 of the 
Commission's regulations shall be deemed satisfied for a Certifying 
Firm (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,\13\ 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.
---------------------------------------------------------------------------

    \13\ 7 U.S.C. 12a(2) and (3).
---------------------------------------------------------------------------

    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 \14\ 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 Final 
Rule.
---------------------------------------------------------------------------

    \14\ 7 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.
---------------------------------------------------------------------------

    In terms of definitions, Sec.  3.21(e)(1)(i) defines 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, Sec.  3.21(e)(1)(ii) defines 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, Sec.  3.21(e)(3) requires that the 
Certifying Firm maintain, in accordance with Commission regulation 
1.31, records documenting each criminal history background check and 
the results thereof.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 1.31.
---------------------------------------------------------------------------

    As discussed in the Proposal, the Final Rule supersedes the DSIO 
No-Action Letters without prejudice to those that were relying on 
either of the DSIO No-Action Letters and had satisfied the requirements 
thereof prior to January 12, 2016, the date the Proposal was published 
in the Federal Register.

V. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') \16\ 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. 
In the Proposal, the Commission certified that the Proposal would not 
have a significant economic impact on a substantial number of small 
entities. The Commission received no comments with respect to the RFA.
---------------------------------------------------------------------------

    \16\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

    As discussed in the Proposal, the Final Rule affects 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.\17\ The Commission has previously

[[Page 18745]]

determined that FCMs, RFEDS, CPOs, SDs, MSPs, and LTMs are not small 
entities for purposes of the RFA.\18\ 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.\19\ As certain of these registrants may 
be small entities for purposes of the RFA, the Commission considered 
whether the Final Rule would have a significant economic impact on such 
registrants. As discussed in the Proposal, the Final Rule solely 
provides an optional alternative to complying with the Fingerprinting 
Requirement, which already applies to such registrants, and will, 
therefore, not impose any new regulatory obligations on affected 
registrants. The Final Rule is not expected to impose any new burdens 
on market participants. Rather, to the extent that the Final Rule 
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 the 
Final Rule. Consequently, the Commission finds that no significant 
economic impact on small entities will result from the Final Rule.
---------------------------------------------------------------------------

    \17\ The Final Rule also directly affects 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.
    \18\ 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 Off-Exchange 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).
    \19\ 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).
---------------------------------------------------------------------------

    Accordingly, for the reasons stated above, the Commission believes 
that the Final Rule will not have a significant economic impact on a 
substantial number of small entities. Therefore, the Chairman, on 
behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 
605(b), that the Final Rule being published today by this Federal 
Register release 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'') \20\ imposes certain 
requirements on Federal agencies (including the Commission) in 
connection with conducting or sponsoring any collection of information 
as defined by the PRA.
---------------------------------------------------------------------------

    \20\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    As discussed in the Proposal, the Final Rule contains collections 
of information for which the Commission has previously received control 
numbers from the Office of Management and Budget (``OMB''). The titles 
for these collections of information are ``Registration under the 
Commodity Exchange Act, OMB control number 3038-0023'' \21\ and 
``Registration of Swap Dealers and Major Swap Participants, OMB control 
number 3038-0072.'' \22\
---------------------------------------------------------------------------

    \21\ See OMB Control No. 3038-0023, http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0023# (last visited 
Feb. 24, 2016).
    \22\ See OMB Control No. 3038-0072, http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0072# (last visited 
Feb. 24, 2016).
---------------------------------------------------------------------------

    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 the Final Rule provides an 
optional alternative to complying with the Fingerprinting Requirement 
(as described above). Eligible persons have the option to elect the 
certification process, but no obligation to do so. For this reason, 
except to the extent that the Commission has amended the subject OMB 
control numbers for PRA purposes to reflect the alternative 
certification process, the Final Rule is not expected to impose any new 
burdens on market participants. Rather, to the extent that the Final 
Rule 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, the Final Rule incorporates an alternative to 
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 the Final Rule, including 
submitting the required certification to NFA and maintaining records of 
the criminal history background check and the results thereof. 
Requiring such actions requires revisions to collections 3038-0023 and 
3038-0072. Accordingly, the Commission submitted a request to amend 
each of collections 3038-0023 and 3038-0072 to OMB and invited public 
comment on its paperwork burdens in the Proposal. In particular, as 
further described in the Proposal, the Commission estimates that 
approximately 198 FCMs, RFEDs, IBs, CPOs, CTAs, LTMs, FBs, and FTs and 
2 SDs and MSPs will submit the required certification \23\ and, 
accordingly, estimates the additional hour burdens below.
---------------------------------------------------------------------------

    \23\ Proposal, 81 FR at 1362.
---------------------------------------------------------------------------

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. The estimated 
additional hour burden for collection 3038-0023 of 495 hours is 
calculated as follows:
    Number of registrants: 198.
    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.\24\
---------------------------------------------------------------------------

    \24\ 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.
---------------------------------------------------------------------------

    Estimated aggregate annual hour burden: 495 (198 registrants x 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. The estimated additional hour

[[Page 18746]]

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.\25\
---------------------------------------------------------------------------

    \25\ See n. 24, supra.
---------------------------------------------------------------------------

    Estimated aggregate annual hour burden: 5 (2 registrants x 2.5 
hours per registrant).
3. Information Collection Comments
    In the Proposal, the Commission invited the public and other 
Federal agencies to comment on any aspect of the information collection 
requirements discussed above. The Commission did not receive any such 
comments.

C. Cost-Benefit Considerations

    Section 15(a) of the Act \26\ 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.
---------------------------------------------------------------------------

    \26\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------

1. Costs
a. Costs to FCMs, RFEDs, IBs, CPOs, CTAs, SDs, MSPs, LTMs, FBs, FTs, 
Associated Persons, and Other Foreign Natural Persons
    The Final Rule provides an 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. As such, the Commission believes that the 
Final Rule does not impose any net cost on such persons, because the 
Commission presumes that such persons will elect the alternative only 
if they assess it to have a lower or equal net cost.
b. Other Costs
    Because the Final Rule allows 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 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 alternative to the 
Fingerprinting Requirement. The Commission expects that the costs of 
such activities will not be significant, because NFA has been 
processing and retaining requests under the DSIO No-Action Letters 
since their issuance and the changes to NFA's applications and/or other 
forms to take into account the Final Rule would likely be minimal and 
could be included in other future unrelated updates.
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, the Final Rule helps 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 Foreign 
Natural Persons 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, the 
Final Rule is consistent with the principles of international comity.
3. Commenter's Request
    As discussed above, The Working Group requested that the Commission 
expand the alternative provided in the Proposal to include all natural 
persons that are principals or associated persons of registrants 
subject to the Fingerprinting Requirement. The Commission is not making 
such an expansion, because, while there are limitations on the 
usefulness of fingerprints of foreign nationals, fingerprinting is an 
expedient way to investigate whether someone has a criminal record in 
the United States.
4. 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
    The Final Rule continues 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
    The Final Rule may increase the efficiency and competitiveness of 
the markets by encouraging more participation in United States markets 
by Foreign Natural Persons. The Commission does not believe that the 
integrity of financial markets is harmed because the Final Rule 
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 cross-border basis, 
increasing participation in commodity interest markets. The Commission 
believes that such increased participation and the resulting increased 
liquidity may help to facilitate price discovery.
iv. Sound Risk Management Practices
    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.\27\ 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

[[Page 18747]]

the Commission.\28\ 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.
---------------------------------------------------------------------------

    \27\ 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).
    \28\ See http://www.nfa.futures.org/NFA-registration/index.HTML 
(last visited Feb. 24, 2016), 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.
---------------------------------------------------------------------------

v. Other Public Interest Considerations
    The Commission believes that, by providing an alternative for 
persons outside the United States, the Final Rule is consistent with 
the principles of international comity.

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 amends part 3 as follows:

PART 3--REGISTRATION

0
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.


0
2. In Sec.  3.21, add paragraph (e) to read as follows:


Sec.  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
    (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 Sec.  
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 March 28, 2016, by the Commission.
Robert N. Sidman,
Deputy Secretary of the Commission.

    Note: The following appendices will not appear in the Code of 
Federal Regulations.

Appendices to Alternative to Fingerprinting Requirement for Foreign 
Natural Persons--Commission Voting Summary and Chairman's Statement

Appendix 1--Commission Voting Summary

    On this matter, Chairman Massad and Commissioners Bowen and 
Giancarlo voted in the affirmative. No Commissioner voted in the 
negative.

Appendix 2--Statement of Chairman Timothy G. Massad

    I support the rule being finalized today, which provides foreign 
natural persons with an alternative to the fingerprinting 
requirement that applies to certain participants in our markets. 
This will reduce unnecessary burdens on foreign individuals while 
maintaining appropriate standards of fitness and competency. This 
final rule also continues the Commission's ongoing efforts to 
codify, where appropriate, and through notice-and-comment 
rulemaking, no-action relief that previously had been provided by 
Commission staff.

[FR Doc. 2016-07304 Filed 3-31-16; 8:45 am]
BILLING CODE 6351-01-P
Federal Register / Vol. 81, No. 63 / Friday, April 1, 2016 / Rules and Regulations 18745

determined that FCMs, RFEDS, CPOs, Register release will not have a control numbers having been provided
SDs, MSPs, and LTMs are not small significant economic impact on a by OMB.
entities for purposes of the RFA.18 substantial number of small entities. As discussed above, the Final Rule
Therefore, the requirements of the RFA incorporates an alternative to
B. Paperwork Reduction Act
do not apply to those entities. With fingerprinting to evaluate the fitness of
respect to CTAs, FBs, FTs, and IBs, the 1. Background certain Foreign Natural Persons. In
Commission has found it appropriate to order to qualify for this alternative, the
The Paperwork Reduction Act of 1995
consider whether such registrants Certifying Firm must take the steps
(‘‘PRA’’) 20 imposes certain
should be deemed small entities for required pursuant to the Final Rule,
requirements on Federal agencies
purposes of the RFA on a case-by-case including submitting the required
(including the Commission) in
basis, in the context of the particular certification to NFA and maintaining
connection with conducting or
Commission regulation at issue.19 As records of the criminal history
certain of these registrants may be small sponsoring any collection of
information as defined by the PRA. background check and the results
entities for purposes of the RFA, the thereof. Requiring such actions requires
Commission considered whether the As discussed in the Proposal, the
revisions to collections 3038–0023 and
Final Rule would have a significant Final Rule contains collections of
3038–0072. Accordingly, the
economic impact on such registrants. As information for which the Commission
Commission submitted a request to
discussed in the Proposal, the Final has previously received control
amend each of collections 3038–0023
Rule solely provides an optional numbers from the Office of Management
and 3038–0072 to OMB and invited
alternative to complying with the and Budget (‘‘OMB’’). The titles for
public comment on its paperwork
Fingerprinting Requirement, which these collections of information are
burdens in the Proposal. In particular,
already applies to such registrants, and ‘‘Registration under the Commodity
as further described in the Proposal, the
will, therefore, not impose any new Exchange Act, OMB control number
Commission estimates that
regulatory obligations on affected 3038–0023’’ 21 and ‘‘Registration of
approximately 198 FCMs, RFEDs, IBs,
registrants. The Final Rule is not Swap Dealers and Major Swap
CPOs, CTAs, LTMs, FBs, and FTs and
expected to impose any new burdens on Participants, OMB control number
2 SDs and MSPs will submit the
market participants. Rather, to the 3038–0072.’’ 22
required certification 23 and,
extent that the Final Rule provides an The responses to these collections of
accordingly, estimates the additional
alternative means to comply with the information are mandatory. An agency
hour burdens below.
Fingerprinting Requirement and is may not conduct or sponsor, and a
elected by a market participant, the person is not required to respond to, a a. Estimated Additional Hour Burden
Commission believes it is reasonable to collection of information unless it for Collection 3038–0023
infer that the alternative is less displays a currently valid control Collection 3038–0023 relates to
burdensome to such participant. The number issued by OMB. collections of information from FCMs,
Commission does not, therefore, expect The collection of information in the RFEDs, IBs, CPOs, CTAs, LTMs, FBs,
small entities to incur any additional Final Rule provides an optional and FTs. The estimated additional hour
costs as a result of the Final Rule. alternative to complying with the burden for collection 3038–0023 of 495
Consequently, the Commission finds Fingerprinting Requirement (as hours is calculated as follows:
that no significant economic impact on described above). Eligible persons have Number of registrants: 198.
small entities will result from the Final the option to elect the certification Frequency of collection: As needed.
Rule. process, but no obligation to do so. For Estimated annual responses per
Accordingly, for the reasons stated this reason, except to the extent that the registrant: 1.
above, the Commission believes that the Commission has amended the subject Estimated aggregate number of
Final Rule will not have a significant OMB control numbers for PRA purposes annual responses: 198.
economic impact on a substantial to reflect the alternative certification Estimated annual hour burden per
number of small entities. Therefore, the process, the Final Rule is not expected registrant: 2.5.24
Chairman, on behalf of the Commission, to impose any new burdens on market Estimated aggregate annual hour
hereby certifies, pursuant to 5 U.S.C. participants. Rather, to the extent that burden: 495 (198 registrants × 2.5 hours
605(b), that the Final Rule being the Final Rule provides an alternative per registrant).
published today by this Federal means to comply with the
Fingerprinting Requirement and is b. Estimated Additional Hour Burden
1983). Therefore, no analysis on the economic elected by market participants, it is for Collection 3038–0072
impact of this rule on individuals is provided.
18 See Policy Statement and Establishment of
reasonable for the Commission to infer Collection 3038–0072 relates to
Definitions of ‘‘Small Entities’’ for Purposes of the that the alternative is less burdensome collections of information from SDs and
Regulatory Flexibility Act, 47 FR 18618 (Apr. 30, to such participants. MSPs. The estimated additional hour
1982) (FCMs and CPOs); Leverage Transactions, 54
FR 41068 (Oct. 5, 1989) (LTMs); Regulation of Off- 2. Revisions to Collections 3038–0023
23 Proposal, 81 FR at 1362.
Exchange Retail Foreign Exchange Transactions and and 3038–0072
Intermediaries, 75 FR 55410, 55416 (Sept. 10, 2010) 24 This collection’s burdens are restricted to (i)
(RFEDs); and Registration of Swap Dealers and Collections 3038–0023 and 3038– registrants providing necessary information to
Major Swap Participants, 77 FR 2613, 2620 (Jan. 19, 0072 are currently in force with their commercial service provider(s) to conduct a
2012) (SDs and MSPs). criminal history background check for a Foreign
19 See 47 FR at 18620 (CTAs and FBs); Natural Person; (ii) registrants preparing and
20 44 U.S.C. 3501 et seq.
Registration of Floor Traders; Mandatory Ethics submitting the certification described herein; and
Lhorne on DSK5TPTVN1PROD with RULES

21 See OMB Control No. 3038–0023, http://
Training for Registrants; Suspension of Registrants (iii) registrants maintaining, in accordance with
Charged With Felonies, 58 FR 19575, 19588 (Apr. www.reginfo.gov/public/do/ Commission regulation 1.31, records documenting
15, 1993) (FTs); and Introducing Brokers and PRAOMBHistory?ombControlNumber=3038-0023# that the criminal history background check was
Associated Persons of Introducing Brokers, (last visited Feb. 24, 2016). completed and the results thereof. To the extent
Commodity Trading Advisors and Commodity Pool 22 See OMB Control No. 3038–0072, http:// that a market participant instead elects to conduct
Operators; Registration and Other Regulatory www.reginfo.gov/public/do/ the background check internally, it is reasonable for
Requirements, 48 FR 35248, 35276 (Aug. 3, 1983) PRAOMBHistory?ombControlNumber=3038-0072# the Commission to infer that doing so is less
(IBs). (last visited Feb. 24, 2016). burdensome to such participant.

VerDate Sep<11>2014 14:14 Mar 31, 2016 Jkt 238001 PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 E:\FR\FM\01APR1.SGM 01APR1
Document Created: 2016-04-06 00:08:47
Document Modified: 2016-04-06 00:08:47
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Rules and Regulations
Action		Final rule.
Dates		The Final Rule is effective on May 2, 2016.
Contact		Katherine Driscoll, Associate Chief Counsel, 202-418-5544, [email protected]; Jacob Chachkin, Special Counsel, 202-418-5496, [email protected]; or Adam Kezsbom, Special Counsel, 202-418-5372, [email protected], Division of Swap Dealer and Intermediary Oversight, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.
FR Citation		81 FR 18743
RIN Number		3038-AE16
CFR Associated		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 and Swaps