82_FR_6368 82 FR 6356 - Recordkeeping

82 FR 6356 - Recordkeeping

COMMODITY FUTURES TRADING COMMISSION

Federal Register Volume 82, Issue 12 (January 19, 2017)

Page Range6356-6367
FR Document2017-01148

The Commodity Futures Trading Commission (the ``Commission'') is proposing to amend the recordkeeping obligations set forth in certain provisions of the Commission's regulations. The proposed amendments would permit recordkeepers to leverage advances in information technology as a means to reduce costs associated with the retention and production of paper and electronic records and to decrease the risks of cybersecurity threats, while maintaining necessary safeguards to ensure the integrity, availability, and accessibility of records required to be kept pursuant to the Commodity Exchange Act (the ``CEA'') or Commission regulations. In addition to providing recordkeepers with greater flexibility regarding the retention and production of regulatory records, the proposed amendments would remove the requirements for electronic records to be kept in their native file format and for recordkeepers to enter into an arrangement with a third-party technical consultant with respect to electronically stored information.

Federal Register, Volume 82 Issue 12 (Thursday, January 19, 2017)
[Federal Register Volume 82, Number 12 (Thursday, January 19, 2017)]
[Proposed Rules]
[Pages 6356-6367]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-01148]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 1 and 23

RIN 3038-AE36


Recordkeeping

AGENCY: Commodity Futures Trading Commission.

ACTION: Proposed rule.

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SUMMARY: The Commodity Futures Trading Commission (the ``Commission'') 
is proposing to amend the recordkeeping obligations set forth in 
certain provisions of the Commission's regulations. The proposed 
amendments would permit recordkeepers to leverage advances in 
information technology as a means to reduce costs associated with the 
retention and production of paper and electronic records and to 
decrease the risks of cybersecurity threats, while maintaining 
necessary safeguards to ensure the integrity, availability, and 
accessibility of records required to be kept pursuant to the Commodity 
Exchange Act (the ``CEA'') or Commission regulations. In addition to 
providing recordkeepers with greater flexibility regarding the 
retention and production of regulatory records, the proposed amendments 
would remove the requirements for electronic records to be kept in 
their native file format and for recordkeepers to enter into an 
arrangement with a third-party technical consultant with respect to 
electronically stored information.

DATES: Comments must be received on or before March 20, 2017.

ADDRESSES: You may submit comments, identified by RIN 3038-AE36, by any 
of the following methods:
     CFTC Web site: https://comments.cftc.gov. Follow the 
instructions for submitting comments through the Comments Online 
process on the Web site.
     Mail: Christopher Kirkpatrick, Secretary of the 
Commission, Commodity Futures Trading

[[Page 6357]]

Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, 
DC 20581.
     Hand Delivery/Courier: Same as Mail, above.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    Please submit your comments using only one method.
    All comments must be submitted in English, or if not, accompanied 
by an English translation. Comments will be posted as received to 
www.cftc.gov. You should submit only information that you wish to make 
available publicly. If you wish the Commission to consider information 
that you believe is exempt from disclosure under the Freedom of 
Information Act (``FOIA''), a petition for confidential treatment of 
the exempt information may be submitted according to the procedures 
established in Sec.  145.9 of the Commission's regulations.\1\
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    \1\ 17 CFR 145.9. Commission regulations referred to herein are 
found at 17 CFR chapter I.
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    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 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 FOIA.

FOR FURTHER INFORMATION CONTACT: Eileen T. Flaherty, Director, (202) 
418-5326, [email protected]; Frank Fisanich, Chief Counsel, (202) 418-
5949, [email protected]; Andrew Chapin, Associate Chief Counsel, (202) 
418-5465, [email protected]; Katherine Driscoll, Associate Chief 
Counsel, (202) 418-5544, [email protected]; C. Barry McCarty, Special 
Counsel, (202) 418-6627, [email protected]; or Jacob Chachkin, Special 
Counsel, (202) 418-5496, [email protected], Division of Swap Dealer 
and Intermediary Oversight, Commodity Futures Trading Commission, 1155 
21st Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Regulation 1.31 Recordkeeping Requirements

    Commission regulation 1.31 sets forth recordkeeping requirements 
for all books and records required to be kept by the CEA and Commission 
regulations, and implements the Commission's inspection and examination 
authority over such records.\2\ Examination of books and records is one 
of the Commission's principal means of determining compliance with the 
CEA and Commission regulations.\3\
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    \2\ Proposed Rule Requiring that Records Subject to Inspection, 
and Copies Thereof, Be Provided to the Commission, 43 FR 50699 (Oct. 
31, 1978).
    \3\ General Regulations; Inspection of Books and Records, 46 FR 
21-01 (Jan. 2, 1981).
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    Paragraph (a) of Sec.  1.31 describes the general requirement that 
books and records must be kept for five years and be readily accessible 
during the first two years. Different retention periods apply to 
certain oral communications and records of any swap or related cash or 
forward transaction. Paragraph (a) also provides that paper records 
shall be kept in their original form and electronic records in the 
format in which they were originally created (referred to as ``native 
file format''), and defines the inspection and production rights of 
representatives of the Commission and the Department of Justice. In 
particular, Sec.  1.31(a)(2) requires that production shall be made in 
a form specified by any representative of the Commission upon the 
representative's request.
    Paragraph (b) of Sec.  1.31 allows books and records to be stored 
on electronic storage or micrographic media, such as microfiche, 
provided that the recordkeeper complies with various technical 
requirements designed to ensure the integrity, availability, and 
accessibility of the electronically stored information. For example, 
this paragraph provides that any digital storage or medium or system 
must preserve the records exclusively in a non-rewritable, non-erasable 
format, known more commonly as the ``write once, read-many,'' or 
``WORM'' requirement. In addition, paragraph (b) requires a 
recordkeeper utilizing electronic storage media to develop and maintain 
an audit system to provide accountability over both the initial entry 
and the entry of each change to any original or duplicate record. 
Further, any person who uses only electronic storage media to preserve 
some or all of its required records shall enter into an arrangement 
with a third-party technical consultant (``Technical Consultant'') 
capable of furnishing to the Commission or its representative any 
information stored electronically promptly upon request.
    Paragraph (c) of Sec.  1.31 requires recordkeepers to provide 
notice and a representation to the Commission prior to the initial use 
of an electronic storage system that the electronic storage system 
satisfies the requirements set forth in Sec.  1.31(b). Lastly, 
paragraph (d) of Sec.  1.31 requires certain paper records, such as 
trading cards and documents with written trading information, to be 
maintained in hard-copy for the applicable retention period.
    The Commission recognizes that the most recent substantive 
amendments to Sec.  1.31 were made in 2012 \4\ and, prior to that, in 
1999.\5\ The 2012 Amendment clarified the retention period for records 
of oral communications leading to the execution of any swap or related 
cash or forward transaction for swap dealers and major swap 
participants, and to require that electronic records be retained in 
their native file format. The 1999 Amendment implemented all of the 
technical provisions regarding the use of electronic storage media in 
Sec.  1.31(b) and (c), including the requirement to retain a Technical 
Consultant.
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    \4\ Adaptation of Regulations to Incorporate Swaps, 77 FR 66288 
(Nov. 2, 2012) (the ``2012 Amendment'').
    \5\ Recordkeeping, 64 FR 28735 (May 27, 1999) (the ``1999 
Amendment'').
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B. Petitions for Rulemaking

    The Commission has received petitions for rulemaking from various 
industry groups requesting that the Commission amend Sec.  1.31.\6\ 
Generally, the Petitioners state that certain requirements set forth in 
Sec.  1.31 that were reasonable and prudent when adopted have become 
outdated and irrelevant. Absent any change, the Petitioners stated that 
recordkeepers must choose between accepted electronic distributed 
storage systems, which are essential for disaster recovery and privacy 
protection, and compliance with the letter of the law.
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    \6\ Petition for Rulemaking to Amend 1.31, 4.7(b) and (c), 4.23 
and 4.33, Managed Funds Association, Investment Adviser Association, 
and Alternative Investment Management Association, dated July 21, 
2014, and Petition for Rulemaking to Amend CFTC Regulations 
4.12(c)(3), 4.23 and 4.33 Investment Company Institute, dated March 
11, 2014 (collectively, the ``Petitioners''). Regulations 4.23 and 
4.33 set forth the recordkeeping requirements for commodity pool 
operators (``CPOs'') and commodity trading advisors (``CTAs''), 
respectively. These regulations require CPOs and CTAs to keep 
certain books and records in accordance with Sec.  1.31.
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    Specifically, the Petitioners have requested the following changes 
to Sec.  1.31:
    1. Amend Sec.  1.31(a) to no longer require electronic records to 
be kept in their native file format;
    2. Amend Sec.  1.31(b) to eliminate the WORM requirement for 
electronic records; and

[[Page 6358]]

    3. Amend Sec.  1.31(b) to eliminate the requirement to enter into 
an agreement with a Technical Consultant.
    With respect to native file format, the Petitioners note that 
programs used to store records electronically routinely become outdated 
and obsolete, and/or are no longer supported by information technology 
manufacturers. As a result, as represented by the Petitioners, 
recordkeepers must bear the burden of retaining these electronic 
records while updating to other, advanced systems for newly created 
records. Accordingly, the Petitioners request that the Commission amend 
Sec.  1.31 in a manner that does not specify the format of any 
particular electronic record, so long as there is demonstrable and 
auditable integrity and fidelity in the preservation of the underlying 
data and contents.
    With respect to the WORM requirement, the Petitioners assert that 
it is based on a concept that was state of the art nearly twenty years 
ago. Records are no longer stored electronically on optical disks or 
CD-ROMs. Currently, state of the art information technology relies on 
storage subject to restricted access and includes storage logs that 
reflect every single change to a file, in addition to archived copies. 
Absent any change, the Petitioners state that recordkeepers will be 
required to maintain dual systems that preserve the WORM requirement 
but also permit them to more properly secure and manage electronic 
records. Accordingly, the Petitioners request that the Commission amend 
Sec.  1.31 to remove the WORM requirement.
    With respect to the Technical Consultant, the Petitioners state 
that the need to retain and train a third-party to serve as a surrogate 
for access and production to electronic records is no longer necessary 
given the in-house technical expertise regarding information technology 
throughout the industry. In addition to the increased costs associated 
with retaining a Technical Consultant, the Petitioners also note that 
providing additional third parties with access to sensitive, 
confidential, and proprietary information greatly increases the risk of 
cybersecurity intrusions. Accordingly, the Petitioners request that the 
Commission amend Sec.  1.31 to remove the requirement to retain a 
Technical Consultant.
    In support of their request, Petitioners note that the Securities 
and Exchange Commission (``SEC'') adopted a recordkeeping rule for 
investment companies and investment advisers consistent with the 
changes they propose.\7\ Rule 204-2(g) under the Investment Advisers 
Act of 1940 sets forth general principles that investment advisers must 
follow when arranging, accessing and reproducing their records. Similar 
provisions apply to the operators of investment companies pursuant to 
Rule 31a-2. In particular, Rule 204-2(g) does not tether advisers to 
any particular format, i.e., native file format, nor does it require 
the use of Technical Consultants. The Petitioners note that in the 1999 
Amendment the Commission expressly stated its intent to track existing 
recordkeeping provisions similar to those adopted by the SEC,\8\ and 
that, more recently in 2013, the Commission acknowledged that there are 
certain advantages to crafting regulations that ``allow the Commission 
to fulfill its regulatory mandate while, at the same time, avoiding 
unnecessary regulatory burdens on dually-regulated [entities] with 
respect to . . . Commission recordkeeping requirements.'' \9\ 
Accordingly, the Petitioners request that the Commission amend Sec.  
1.31 in a manner consistent with SEC Rule 204-2(g).
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    \7\ See Electronic Recordkeeping by Investment Companies and 
Investment Advisers, 66 FR 29224 (May 30, 2001). Given that 
intermediaries may engage in both securities and derivatives 
transactions, operators of investment companies may be required to 
register with the Commission as CPOs, and investment advisers 
similarly may be required to register as CTAs.
    \8\ 64 FR at 28735.
    \9\ See Harmonization of Compliance Obligations for Registered 
Investment Companies Required to Register as Commodity Pool 
Operators, 78 FR 52308 at 52309 (Aug. 22, 2013).
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II. The Proposal

    The Commission noted in the 1999 Amendment the importance of 
conducting an ongoing review of the standards articulated in the 
recordkeeping regulation to ensure that the requirements reflect to the 
extent possible the reality of established technological 
innovation.\10\ At the same time, the Commission recognized the value 
of consultation with the derivatives industry and its participants to 
determine how to best use available information technology that also is 
responsive to the Commission's legitimate need to have access to 
complete and accurate records when necessary.\11\
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    \10\ 64 FR at 28736.
    \11\ Id.
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    As the Petitioners highlighted, the Commission recognizes that 
recordkeeping has evolved significantly in the time since the last 
major revision to Sec.  1.31 in 1999 from a paper-based system to 
electronically stored information systems that leverage computers, 
databases, and even cloud computing. Back then, most records were 
created and maintained on paper, but recordkeepers began to explore 
better ways to store information electronically. Now the paradigm has 
shifted, and most information is produced and stored electronically on 
complex systems tailored to the needs of a given recordkeeper. These 
advances in information technology may have rendered certain technical 
elements of Sec.  1.31 obsolete or outdated.
    Accordingly, the Commission proposes to amend Sec.  1.31 to 
reorganize and update the existing recordkeeping regulation, 
eliminating certain outdated provisions while still maintaining the 
ability of the Commission to examine and inspect required records. The 
Proposal is intended to be technology neutral so as technology develops 
the regulation should withstand such changes. The updates include new 
definitions, deletion of outdated terms, and revision of certain 
provisions to reflect advances in information technology. The 
Commission notes that many of the existing provisions and principles in 
Sec.  1.31 have been retained, albeit in a revised format. The proposed 
regulation is divided into five subsections: (a) Definitions; (b) 
regulatory records policies and procedures; (c) duration of retention; 
(d) form and manner of retention; and (e) inspection and production of 
regulatory records.

A. Regulation 1.31(a): Definitions

    The Commission proposes to reorganize Sec.  1.31 by revising 
paragraph (a) to define certain terms to be referenced elsewhere within 
the revised regulation. Specifically, the Commission proposes to define 
the terms ``electronic regulatory records'', ``records entity'', and 
``regulatory records''. The Commission believes that defining these 
terms will provide greater clarity regarding the recordkeeping 
obligations applicable to all persons subject to Sec.  1.31, 
particularly for those obligations related to electronic records.
    For the ease of understanding and applying the proposed amendments 
to Sec.  1.31, the Commission proposes to define ``records entity'' to 
mean ``any person required by the Act or Commission regulations to keep 
regulatory records.'' The Commission notes that numerous Commission 
regulations set forth particular requirements for CEA Section 1a(40) 
``registered entities''--such as derivatives clearing organizations, 
designated contract markets, swap execution facilities, and swap data

[[Page 6359]]

repositories--and for registrants--such as futures commission 
merchants, introducing brokers, CPOs, CTAs, floor brokers, floor 
traders, retail foreign exchange dealers, swap dealers, and major swap 
participants--to keep certain books and records in accordance with 
Sec.  1.31. The Commission notes, however, that certain persons that 
are neither a registered entity nor a registrant may be required to 
keep certain books and records in accordance with Sec.  1.31, as 
well.\12\
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    \12\ For example, Part 18 of the Commission's regulations 
requires every trader who owns, holds or controls a reportable 
futures or option to ``keep books and records showing all details 
concerning all positions and transactions in the commodity swap. . . 
.'' 17 CFR 18.05. Traders are not limited to any Commission 
registrant or registered entity.
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    The Commission also proposes to replace existing references to 
``books and records'' within Sec.  1.31 with the term ``regulatory 
records'' and to differentiate between electronic and paper regulatory 
records. The Commission proposes to define ``regulatory records'' to 
mean ``all books and records required to be kept by the Act or 
Commission regulations.'' As a subset, the Commission proposes to 
define within Sec.  1.31(a) ``electronic regulatory records'' to mean 
``all regulatory records other than paper regulatory records 
exclusively created and maintained by a records entity on paper.'' The 
Commission has separately proposed Regulation Automated Trading and 
certain requirements regarding source code and manner of production of 
source code.\13\ This proposal does not address source code or the 
production of source code.
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    \13\ See Supplemental notice of proposed rulemaking, Regulation 
Automated Trading, 81 FR 85334 (Nov. 25, 2016).
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    The Commission recognizes that certain regulatory records are not 
created electronically and that certain records entities may elect not 
to convert any paper regulatory records into an electronic format. By 
differentiating between paper and electronic regulatory records, the 
Commission can better preserve existing recordkeeping obligations 
applicable solely to records entities that do not create anything other 
than paper regulatory records.\14\
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    \14\ Records entities who are currently in compliance with 
current Sec.  1.31 will continue to be in compliance with proposed 
Sec.  1.31, provided that they have written policies and procedures 
that meet the requirements of the Proposal.
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    The Commission also believes that the term ``books and records'' in 
the traditional sense may no longer adequately convey that Sec.  1.31 
recordkeeping obligations extend to all associated electronic data. 
However, contrary to prior revisions to Sec.  1.31 where the Commission 
specifically delineated the types of allowable media for electronic 
records storage,\15\ the Commission believes it is now appropriate to 
focus the recordkeeping obligations on the scope of required records, 
rather than a specific storage medium. Accordingly, the Commission 
proposes to further define the term ``regulatory records'' by adding 
the following descriptive language to include: Any record of any 
correction or other amendment to such books and records, provided that, 
with respect to such books and records stored electronically, 
regulatory records shall also include: (i) All data produced and stored 
electronically that describes, directly or indirectly, the 
characteristics of such books and records, including, without 
limitation, data that describes how, when, and, if relevant, by whom 
such electronically stored information was collected, created, 
accessed, modified, or formatted; and (ii) any data necessary to 
access, search, or display any such books and records.
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    \15\ See 36 FR 22286 (Nov. 24, 1971) (permitted the use of 
microfilm as a medium for maintaining certain records); 58 FR 27458 
(May 10, 1993) (permitted the use of optical disk and CD-ROM); 64 FR 
28735 (May 27, 1999) (permitted the use of other micrographic and 
electronic storage media).
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    The proposed language would more clearly state the existing 
requirement to maintain all prior versions of any regulatory record, no 
matter how modified. This is not a new recordkeeping obligation. Since 
1993 the Commission has required electronic records to be created and 
maintained in a non-erasable, non-rewritable format for the retention 
period.\16\ Because the existing regulation requires electronic records 
be preserved exclusively in a non-rewritable, non-erasable format, it 
follows that each version of an electronic record must be created and 
maintained in a non-erasable, non-rewritable format. Therefore, the 
Commission is confirming that both the initial record and all 
subsequent versions are records within the definition and must be 
created, maintained, accessible, and produced consistent with the 
regulation.\17\
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    \16\ See Sec.  1.31(b)(1)(ii)(A).
    \17\ Each version of a record must be retained for the 
applicable retention period which is based off the most recent 
version. For example, the initial record is created on Day 1 and the 
amended record is created on Year 4, Day 359. The amended record 
resets the retention period clock to Day 1 for both the initial 
record and amended record to ensure a comprehensive audit trail.
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    The proposed language also would clarify that electronically stored 
regulatory records are not limited to the data within a particular 
database or application, for example, but includes the electronic 
information that identifies the manner in which any regulatory record 
is altered. The Commission understands that this information is more 
commonly known as ``metadata,'' and, at its core, is data about data. 
Regardless of the label, the Commission understands that metadata 
generally refers to any hidden text, formatting codes, formulae, 
history, tracking, and other information associated with an electronic 
file or data. Metadata is integral to the Commission's ability to carry 
out both the inspection and investigation functions it is charged with 
under the CEA. To fully understand the data within a database, for 
example, requires knowledge of data relationships, what the information 
represents, and how it was generated. Once properly assembled and 
formatted in the form of a report, data within a database is readily 
understandable.
    The Commission does not find it necessary at this time to define 
specific, technical terms related to information technology and 
electronically stored information, such as metadata or databases, as 
these technical terms may change over time. The Commission believes 
these are terms generally understood by practitioners notwithstanding a 
lack of a universal agreement on exact definitions.
    The Commission notes that the requirement to provide data about 
data is not new. As set forth in current Sec.  1.31(a)(2), production 
of any books and records shall be made ``in a form specified by any 
representative of the Commission.'' For the purpose of facilitating 
production requests pursuant Sec.  1.31(a)(2), the Commission's 
Division of Enforcement has developed and continually updates a 
document entitled ``CFTC Data Delivery Standards.'' \18\ Such standards 
describe the technical requirements for electronic document production 
to the Commission and specifically provides for the production of 
metadata associated with electronic records.
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    \18\ The Commission publishes the CFTC Data Delivery Standards 
on its Web site at: http://www.cftc.gov/idc/groups/public/@lrenforcementactions/documents/file/enfdatadeliverystandards052716.pdf. The Commission notes that other 
federal agencies, such as the SEC (https://www.sec.gov/divisions/enforce/datadeliverystandards.pdf), the Department of Justice 
(https://www.justice.gov/atr/case-document/file/494686/download) and 
the Department of Treasury Office of Foreign Asset Control (https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Documents/ofac_data_delivery.pdf) have similar data delivery 
standards.--
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    Finally, the Commission further proposes not to retain within the 
definition section certain definitions in the existing regulation, such 
as ``native

[[Page 6360]]

file format'', ``micrographic media'' and ``electronic storage media.'' 
The Commission believes that the proposed revisions to Sec.  1.31, 
described in greater detail below, obviate the need to retain these 
defined terms.
    Request for comment: The Commission requests comment from all 
interested parties and the general public regarding the proposed 
definitions in Sec.  1.31(a). The Commission encourages all comments 
including background information, actual market examples, best practice 
principles, and estimates of any asserted costs and expenses. Regarding 
the proposed definitions, the Commission specifically requests comment 
on the following questions:
     Should any of the proposed definitions be revised? If yes, 
please provide alternative suggestions.
     Should any of the proposed definitions be deleted?
     Should any previous definitions proposed for deletion, 
e.g., ``micrographic media,'' be included in the revised regulation?
     Should other definitions be added, such as ``metadata'', 
or ``database'', or ``paper regulatory records''?

B. Regulation 1.31(b): Regulatory Records Policies and Procedures

    The Commission proposes to revise and re-state in new Sec.  1.31(b) 
ongoing compliance obligations regarding written regulatory records 
policies and procedures currently set forth in Sec.  1.31(b)(3). 
Specifically, the Commission proposes in revised Sec.  1.31(b) to 
require all records entities to establish, maintain, and implement 
written policies and procedures reasonably designed to ensure that the 
records entity complies with its obligations under Sec.  1.31, 
including without limitation, appropriate training of officers and 
personnel of the records entity regarding their responsibility for 
ensuring compliance with the obligations of the records entity under 
this section, and regular monitoring for such compliance.\19\
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    \19\ SEC Rule 204-2(a)(17) requires each investment adviser to 
maintain as part of its recordkeeping obligations, among other 
things, a copy of the adviser's policies and procedures, and any 
records documenting the adviser's annual review of those policies 
and procedures.
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    The Commission believes that the proposed obligations regarding 
written policies and procedures are generally consistent with the 
existing regulation and accepted industry practices. Currently, Sec.  
1.31(b)(3) requires anyone using electronic storage media to develop 
and maintain written operational procedures and controls (an ``audit 
system'') designed to provide accountability over both the initial 
entry of required records to the electronic storage media and the entry 
of each change made to any original or duplicate record maintained on 
the electronic storage media. Moreover, the written operational 
procedures and controls must be made available for examination at all 
times by any representative of the Commission.
    With respect to training, the Commission does not find it necessary 
to prescribe specific requirements regarding the frequency and format 
of any training. Consistent with its approach towards mandatory ethics 
training for registrants, the Commission views the training on written 
policies and procedures as an ongoing responsibility rather than an 
episodic one.\20\ The obligation to remain current on the legal 
requirements regarding compliance with Sec.  1.31 is one that a records 
entity ignores at its peril. The Commission takes a similar view 
towards the proposed obligation for each records entity to monitor 
compliance with the entity's policies and procedures on a ``regular'' 
basis.
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    \20\ 66 FR 53510 (Oct. 23, 2001) (``Rules Relating to 
Intermediaries of Commodity Interest Transactions''). With respect 
to mandatory ethics training, the Commission replaced prescriptive 
requirements set forth in Sec.  3.34 with a Statement of Acceptable 
Practices.
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    Request for comment: The Commission requests comment from all 
interested parties and the general public regarding the proposed 
obligations regarding regulatory records policies and procedures in 
proposed Sec.  1.31(b). The Commission encourages all comments 
including background information, actual market examples, best practice 
principles, and estimates of any asserted costs and expenses. Regarding 
the written policies and procedures requirements, the Commission 
specifically requests comment on the following questions:
     Should the training requirement be scaled down, phased-in, 
or eliminated depending on the number of employees, or depending on the 
nature of the entity's business?

C. Regulation 1.31(c): Duration of Retention

    The Commission proposes to re-state and clarify in revised Sec.  
1.31(c) the existing retention period requirements for categories of 
regulatory records currently set forth in Sec.  1.31(a). Specifically, 
proposed Sec.  1.31(c)(1) would state that a records entity shall keep 
regulatory records of any swap or related cash or forward transaction 
(as defined in Sec.  23.200(i)), other than regulatory records of oral 
communications, from the date the regulatory record was created until 
the termination, maturity, expiration, transfer, assignment, or 
novation date of the transaction and for a period of not less than five 
years after such date. The Commission proposes to incorporate by 
reference the definition of the term ``related cash or forward 
transaction'' in Sec.  23.200(i).
    Similarly, proposed Sec.  1.31(c)(2) would state that a records 
entity that is required to retain oral communications shall keep 
regulatory records of such oral communications for a period of not less 
than one year from the date of such communication. This is consistent 
with the existing standard. The Commission proposes, however, to 
eliminate references to Sec. Sec.  1.35(a) and 23.202(a)(1) and (b)(1) 
with respect to ``oral communications'' as future changes to those 
regulations, or the promulgation of new types of oral communications 
requirements, would require the Commission to contemporaneously amend 
Sec.  1.31. Based on the foregoing proposed amendments, the Commission 
believes that the existing provision in Sec.  23.203(b)(2) regarding 
the retention period of swaps-related information for swap dealers and 
major swap participants is redundant and therefore should be repealed. 
For all other regulatory records not addressed in proposed Sec.  
1.31(c)(1) and (2), proposed Sec.  1.31(c)(3) would require a records 
entity to keep such records for a period of not less than five years 
from the date on which such record was created. However, proposed Sec.  
1.31(c)(4) would retain the existing retention period for regulatory 
records exclusively created and maintained on paper, i.e., records must 
be readily accessible for no less than two years. This standard is 
consistent with the SEC's standard applicable to investment advisers 
and operators of investment companies.\21\ Consistent with this change, 
the Commission proposes to remove the duplicative language from Sec.  
23.203(b)(1).
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    \21\ SEC Rule 204-2(e) states that all books and records shall 
be maintained and preserved in an easily accessible place for a 
period of not less than five years from the end of the fiscal year 
during which the last entry was made on such record, the first two 
years in an appropriate office of the investment adviser. SEC Rule 
31a-2 similarly requires the operator of an investment company to 
retain records for a minimum of six years the first two years in an 
easily accessible place.
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    Request for comment: The Commission requests comment from all 
interested parties and the general public regarding the proposed 
retention periods in Sec.  1.31(c). The Commission encourages all 
comments including background information, actual market

[[Page 6361]]

examples, best practice principles, and estimates of any asserted costs 
and expenses. Regarding the proposed retention periods, the Commission 
specifically requests comment on the following questions:
     Are the proposed recordkeeping retention periods 
appropriate? If not, what modifications to the retention periods should 
be made?
     Given the advances in information technology, such as 
cloud storage, should the Commission extend the standard five year 
retention period?
     Is there a longer or shorter period of retention that 
would be appropriate for some records, and if so please specify which 
records and such time-frames?

D. Regulation 1.31(d): Form and Manner of Retention

    The Commission proposes to revise Sec.  1.31(d) to describe 
recordkeeping requirements regarding the form and manner in which 
regulatory records are retained by records entities. These proposed 
revisions are designed to ensure the integrity and availability of all 
regulatory records. The Commission is cognizant that other provisions 
of the Act and Commission regulations distinguish between different 
classes of records entities. In particular, the Commission recognizes 
that records entities that are not registered or required to be 
registered with the Commission in any capacity, nor are one of the 
enumerated ``registered entities'' defined in Section 1a(40) of the CEA 
or so required to be registered or designated,\22\ currently are not 
required to comply with the full panoply of recordkeeping 
requirements.\23\ It is the Commission's goal to preserve this 
distinction, especially in those cases where a records entity 
exclusively maintains paper regulatory records.
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    \22\ Section 1a(40) of the Act defines a ``registered entity'' 
to mean: (a) A board of trade designated as a contract market under 
section 5; (b) a derivatives clearing organization registered under 
section 5b; (c) a board of trade designated as a contract market 
under section 5f; (d) a swap execution facility registered under 5h; 
(e) a swap data repository registered under section 21; and (f) with 
respect to a contract that the Commission determines is a 
significant price discovery contract, any electronic trading 
facility on which the contract is executed or traded.
    \23\ For example, part 20 of the Commission's regulations sets 
forth requirements regarding large trader reporting for physical 
commodity swaps. Regulation 20.1 defines a ``reporting entity'' to 
mean a clearing member of a clearing organization or a swap dealer 
in one or more paired swaps or swaptions. Pursuant to Sec.  20.6, 
only clearing organizations and reporting entities must keep all 
books and records in accordance with Sec.  1.31. Any other person 
who exceeds the reportable level in any contract ``shall keep books 
and records . . . in the record retention format that such person 
has developed in the normal course of its business operations.'' All 
books and records kept pursuant to Sec.  20.6, however, shall be 
furnished upon request to any Commission representative.
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    The Commission proposes to re-state and revise in new Sec.  1.31(d) 
certain requirements for regulatory records currently set forth in 
Sec.  1.31(b)(1) through (3). In doing so, the Commission proposes to 
adopt a general standard in Sec.  1.31(d)(1) to require each records 
entity to retain all regulatory records in a form and manner necessary 
to ensure the records' and recordkeeping systems' authenticity and 
reliability. This general requirement would not distinguish between 
paper and non-paper regulatory records.
    With respect to electronic regulatory records, the Commission 
proposes to set forth in new Sec.  1.31(d)(2)(i) through (iii) 
additional controls for records entities retaining electronic 
regulatory records. In particular, each records entity would be 
required to:
    (A) Have systems that maintain security, signature, chain of 
custody elements, and data as necessary to ensure the authenticity of 
the information contained in regulatory records and to monitor 
compliance with the Act and Commission regulations;
    (B) Have systems that ensure the records entity is able to produce 
regulatory records in accordance with this section, and ensure the 
availability of regulatory records in the event of an emergency or 
other disruption of the records entity's record retention systems; and
    (C) Create and maintain an up-to-date inventory that identifies and 
describes each system that maintains information necessary for 
accessing or producing regulatory records.
    The Commission believes that these requirements are not new and are 
consistent with certain SEC requirements.\24\ Currently, Sec.  
1.31(b)(1)(ii)(B) mandates that electronic storage media verifies 
automatically the quality and accuracy of the storage media recording 
process. Existing rules require any records entity that utilizes 
electronic storage media to organize and maintain an accurate index of 
all information such that the location of any record may be immediately 
ascertained. Among other requirements, existing Sec.  1.31(b)(3) 
requires any records entity that utilizes electronic storage media to 
keep current a copy of the physical and logical format of the 
electronic storage media, the file format of all different information 
types maintained, documentation and information necessary to access 
records and indexes maintained on the electronic media.
---------------------------------------------------------------------------

    \24\ With respect to electronic storage media, SEC Rule 204-
2(g)(3) requires investment advisers to establish written procedures 
that: (1) Maintain and preserve the records, so as to reasonably 
safeguard them from loss, alteration, or destruction; (2) limit 
access to the records to properly authorized personnel and the SEC; 
and (3) reasonably ensure that any reproduction of a non-electronic 
original record on electronic storage media is complete, true, and 
legible when retrieved. SEC Rule 31a-2(f) sets forth similar 
requirements for the operators of investment companies.
---------------------------------------------------------------------------

    Finally, based on the foregoing proposed amendments, the Commission 
believes that the existing provision in Sec.  1.35(a)(5)(i) regarding 
the form and manner in which records of commodity interest and cash 
forward transactions should be maintained is redundant and therefore 
should be repealed.
    Request for comment: The Commission requests comment from all 
interested parties and the general public regarding the proposed 
standards for form and manner of retention of regulatory records in 
Sec.  1.31(d). The Commission encourages all comments including 
background information, actual market examples, best practice 
principles, and estimates of any asserted costs and expenses. With 
respect to the authenticity and reliability of regulatory records and 
recordkeeping systems, the Commission specifically requests comment on 
the following questions:
     Should the Commission routinely publish guidelines 
regarding the technical standards for electronic regulatory records?
    With respect to potential impacts of the Proposal, the Commission 
specifically requests comment on the following questions:
     Would the Proposal require market participants to change 
their existing recordkeeping procedures under the Proposal? What, if 
any, transition or ongoing costs would result from such changes? Please 
provide details and estimates regarding any asserted costs.
     For entities who maintain digitized copies of paper 
records, what costs or other impacts would result under the Proposal?

E. Regulation 1.31(e): Inspection and Production of Regulatory Records

1. Inspection
    The Commission proposes to re-state in revised Sec.  1.31(e)(1) the 
right of inspection of the Commission and the United States Department 
of Justice (``DOJ'') in existing Sec.  1.31(a)(1). Specifically, the 
Commission proposes Sec.  1.31(e)(1) to state that all regulatory 
records shall be open to inspection by any representative of the 
Commission or the DOJ. The Commission previously determined that 
production of records is part of the Commission's inspection

[[Page 6362]]

powers.\25\ Accordingly, the Commission has determined to limit 
reference to the DOJ in Sec.  1.31 to a single reference in this 
paragraph. Any requirement for a records entity to produce regulatory 
records extends to DOJ as is currently the requirement.
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    \25\ See 46 FR 21 (Jan. 3, 1981); see also, CFTC Letter 77-4 
(Apr. 14, 1977).
---------------------------------------------------------------------------

    Request for comment: The Commission requests comment from all 
interested parties and the general public regarding the proposed 
regulations set forth in Sec.  1.31(e)(1). The Commission encourages 
all comments including background information, actual market examples, 
best practice principles, and estimates of any asserted costs and 
expenses.
2. Production
    The Commission proposes to revise and re-state in new Sec.  
1.31(e)(2) the existing production requirement currently set forth in 
Sec.  1.31(a)(2) and (b). Currently, a records entity is required to 
produce regulatory records in a form specified by any representative of 
the Commission, including the DOJ, upon the representative's request. 
If the requested book or record is stored either on micrographic media 
or electronic storage media, production shall be immediate.\26\ 
Otherwise, all copies or originals shall be provided promptly.\27\ The 
Commission proposes to amend this requirement in new Sec.  1.31(e)(i) 
and (ii) to differentiate between the production of paper and 
electronic regulatory records, particularly with respect to the form 
and medium of requested electronic regulatory records.
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    \26\ See Sec.  1.31(b)(2)(i) and (ii). In addition, persons 
using electronic storage media must be ready at all times to 
provide, and immediately provide at the expense of the person 
required to keep such records, copies of such records on such 
compatible data processing media as defined in Commission regulation 
15.00(d) which any representative of the Commission or the 
Department of Justice may request. Records must use a format and 
coding structure specified in the request. See Sec.  1.31(b)(3)(i).
    \27\ See Sec.  1.31(a)(2).
---------------------------------------------------------------------------

    With respect to the production of regulatory records exclusively 
created and maintained on paper, proposed Sec.  1.31(e)(2) would 
require a records entity to produce such regulatory records promptly 
upon request. With respect to regulatory records other than paper 
regulatory records, proposed Sec.  1.31(e)(3) would set forth the 
process by which a records entity must respond to a request from a 
Commission representative. In particular, Sec.  1.31(e)(3)(i) would 
require a Commission representative to specify a reasonable form and 
medium in which a records entity must produce such regulatory records. 
Proposed Sec.  1.31(e)(3)(ii) would require a records entity, at its 
own expense, to produce such regulatory records in the form and medium 
requested promptly, upon request, unless otherwise directed by the 
Commission representative.
    The Commission recognizes that production, depending on the 
records, may require the records entity to engage multiple employees, 
officers, or directors in order to satisfy the production request, 
depending upon its size and scope. Historically, Commission staff has 
exercised broad discretion regarding production schedules and 
``typically exhibits flexibility. . . .'' \28\ However, timely 
production is a Commission priority and the proposed ``prompt'' 
standard should not be interpreted as sanctioning any unnecessary 
delay. It is the Commission's understanding that most registrants 
maintain records electronically and therefore would be required under 
existing Sec.  1.31 to produce said records immediately, subject to the 
discretion of Commission staff. The prompt production standard is 
therefore consistent with the existing standard. The Commission notes 
that the standard ``promptly upon request'' is also consistent with SEC 
Rule 17a-4 applicable to broker-dealers thereby maintaining a 
harmonized standard for entities that may be dually registered with the 
SEC and the CFTC.\29\
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    \28\ FIA comment regarding proposed amendments to Sec.  1.31. 64 
FR 28735 at 28739 (May 27, 1999).
    \29\ SEC Rule 17a-1 similarly requires national securities 
exchanges and registered clearing agencies to ``promptly furnish'' 
records to any representative of the SEC upon request.
---------------------------------------------------------------------------

    In adopting this revised regulation, the Commission is cognizant of 
the need to balance the opportunities for recordkeepers to reduce costs 
and improve efficiencies regarding recordkeeping systems with the 
Commission's need for prompt access to complete and accurate records in 
a format that the Commission can process, i.e., a useable format.\30\ 
For the purposes of production, the Commission continues to believe 
that it is not sufficient to simply reduce electronic records to a 
paper format, i.e., printing out data from a database and saving into a 
portable document file, or PDF. This type of production detracts from 
the Commission's ability to properly evaluate the integrity of the 
electronic records by accessing the associated metadata, for example. 
Based upon these principles, the Commission proposes to revise Sec.  
1.31 to permit a records entity that cannot promptly produce electronic 
regulatory records in the form and medium requested by the Commission 
the opportunity to produce records in an alternative manner sufficient 
for the Commission to adequately inspect the records. The ultimate goal 
is not necessarily to obtain records in their ``native file format,'' 
but rather in the most useable form and medium.
---------------------------------------------------------------------------

    \30\ See 77 FR at 66298 (referring to the 1999 Amendment).
---------------------------------------------------------------------------

    Finally, the Commission further proposes to adopt new Sec.  
1.31(e)(4) to preserve the existing right of a records entity to 
provide a representative of the Commission with an original regulatory 
record for reproduction by the representative in lieu of a copy 
currently set forth in Sec.  1.31(a)(2). As with the existing 
provision, the Commission proposes to require the Commission 
representative to issue a receipt for the original regulatory record to 
the records entity upon request.
    Request for comment: The Commission requests comment from all 
interested parties and the general public regarding the proposed 
inspection and production of regulatory records in Sec.  1.31(e). The 
Commission encourages all comments including background information, 
actual market examples, best practice principles, and estimates of any 
asserted costs and expenses. Regarding the production of regulatory 
records, the Commission specifically requests comment on the following 
questions:
     Should the Commission impose a different standard with 
respect to the production of paper regulatory records or other 
regulatory records?
     Are there records entities that retain only paper 
regulatory records?

F. Other Matters

1. Sec.  1.31(b)(4)--Technical Consultant
    Consistent with the foregoing amendments and in response to the 
Petitioners' request, the Commission proposes to amend Sec.  
1.31(b)(4)(i) to remove the requirement for a records entity to enter 
into an arrangement with a Technical Consultant and provide the 
Technical Consultant with access to and the ability to download 
information from the records entity's electronic storage media to any 
acceptable medium. Further, the Commission proposes to remove the 
requirement set forth in Sec.  1.31(b)(4)(ii) which requires the 
Technical Consultant to file with the Commission an acceptable 
undertaking regarding its ability and willingness to provide the 
Commission and DOJ with access to the information contained on the 
record entity's electronic storage media. The Commission concurs with 
the position taken by Petitioners that the information technology 
expertise within

[[Page 6363]]

the derivatives industry obviates the need for the Commission to 
require those records entities electing to store information 
electronically to engage a third party to ensure compliance with all 
applicable electronic recordkeeping obligations. However, to the extent 
that a records entity chose to use a third party or Technical 
Consultant, the records entity would remain responsible for compliance 
with the CEA and Commission regulations thereunder.
2. Sec.  1.31(c)--Representation to the Commission
    Consistent with the foregoing amendments and in response to the 
Petitioners' request, the Commission proposes to amend Sec.  1.31 by 
removing existing Sec.  1.31(c). This provision requires any person 
utilizing electronic storage media to provide a written representation 
to the Commission prior to the use of the system certifying that the 
system satisfies the requirements in existing paragraph (b)(1)(ii) and, 
where applicable, if the system will be using storage media other than 
optical disk or CD-ROM. Further, the written representation must 
include an affirmation from an individual consistent with Sec.  
1.10(d)(4), i.e., the information provided is true and correct to the 
best knowledge and belief of the affirming individual. The Commission 
believes that the requirement set forth in proposed Sec.  1.31(c)(2) 
regarding written policies and procedures for regulatory records 
obviates the need for any records entity to provide notice to the 
Commission regarding its compliance with Sec.  1.31. Moreover, the 
Commission recognizes that references to optical disks and CD-ROM are 
outdated.
3. Sec.  1.31(d)--Other Paper Regulatory Records
    Consistent with the foregoing amendments, the Commission proposes 
to amend Sec.  1.31 by removing current Sec.  1.31(d). This provision 
states that certain paper records, such as trading cards and paper 
copies of electronically filed certified forms, must be retained in 
hard-copy for the required time period. The Commission believes that 
revised Sec.  1.31 provides records entities with sufficient 
flexibility on how to retain regulatory records while maintaining the 
Commission's ability to access reliable regulatory information. Having 
eliminated the requirement for a records entity to retain regulatory 
records in a specific form and manner, the Commission believes that 
Sec.  1.31(d) no longer serves any regulatory purpose.
    Request for comment: The Commission requests comment from all 
interested parties and the general public regarding the proposed 
deletion of existing provisions in Sec.  1.31(b)(4), (c) and (d); and 
Sec.  1.35(a)(5)(i). The Commission encourages all comments including 
background information, actual market examples, best practice 
principles, and estimates of any asserted costs and expenses.
4. Potential Technical Amendments
    In conjunction with the Proposal, the Commission is reviewing its 
regulations for potential technical amendments related to Sec.  1.31, 
including those part 4 regulations cited by Petitioners. This review 
may or may not result in a new proposed rulemaking.
    Request for comment: The Commission requests comment from all 
interested parties and the general public regarding potential technical 
amendments to Commission regulations related to Sec.  1.31. The 
Commission specifically requests comment whether the proposed changes 
to Sec.  1.31 will resolve all outstanding issues regarding compliance 
with part 4 of the Commission's regulations identified by Petitioners. 
The Commission encourages all comments including background 
information, actual market examples, best practice principles, and 
estimates of any asserted costs and expenses.

III. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') \31\ 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.
---------------------------------------------------------------------------

    \31\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

    As discussed above, because the Proposal relates to most 
recordkeeping obligations under the CEA and the Commission's 
regulations, it may affect the full spectrum of Commission registrants, 
all persons required to register but not registered with the 
Commission, and certain persons that are neither registered nor 
required to register with the Commission. The Commission has previously 
determined that certain registrants are not small entities for purposes 
of the RFA and, therefore, the requirements of the RFA do not apply to 
those entities.\32\ For other registrants, however, 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.\33\ As 
certain persons affected by the Proposal, including Commission 
registrants, may be small entities for purposes of the RFA, the 
Commission considered whether this rulemaking would have a significant 
economic impact on any such persons.
---------------------------------------------------------------------------

    \32\ See, e.g., Policy Statement and Establishment of 
Definitions of ``Small Entities'' for Purposes of the Regulatory 
Flexibility Act, 47 FR 18618 (Apr. 30, 1982) (futures commission 
merchants and commodity pool operators); Leverage Transactions, 54 
FR 41068 (Oct. 5, 1989) (leverage transaction merchants); Regulation 
of Off-Exchange Retail Foreign Exchange Transactions and 
Intermediaries, 75 FR 55410, 55416 (Sept. 10, 2010) (retail foreign 
exchange dealers); and Registration of Swap Dealers and Major Swap 
Participants, 77 FR 2613, 2620 (Jan. 19, 2012) (swap dealers and 
major swap participants).
    \33\ See 47 FR at 18620 (commodity trading advisors and floor 
brokers); Registration of Floor Traders; Mandatory Ethics Training 
for Registrants; Suspension of Registrants Charged With Felonies, 58 
FR 19575, 19588 (Apr. 15, 1993) (floor traders); 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) 
(introducing brokers).
---------------------------------------------------------------------------

    As discussed above, the Proposal generally updates and simplifies 
existing Commission regulation 1.31 with new provisions that safeguard 
the same statutory-based principles previously identified by the 
Commission. It accomplishes this by deleting outdated terms and 
revising provisions to reflect advances in information technology, 
allowing records entities to benefit from evolving technological 
developments while maintaining necessary safeguards to ensure the 
reliability of the recordkeeping process.
    The Commission believes that the proposed rules would impose only 
limited additional costs on small entities related to the requirement 
that they establish written recordkeeping policies and procedures. 
However, this new requirement is replacing existing requirements 
applicable to such persons in many cases, including the existing 
similar requirements discussed above to (i) Maintain an audit system 
and (ii) under certain circumstances, retain a Technical Consultant. 
Further, as part of the Proposal, the Commission is proposing to remove 
existing requirements that are expected to lower costs for all records 
entities, including small entities, by removing requirements that 
certain records be kept in paper form.
    In light of the limited scope of the proposed changes and the added 
flexibility and expected cost-savings provided to small entities 
thereby, the Commission does not expect small entities that are records 
entities to incur

[[Page 6364]]

new costs, on a net basis, as a result of the Proposal. Consequently, 
the Commission finds that no significant economic impact on small 
entities will result from the Proposal.
    Accordingly, the Chairman, on behalf of the Commission, hereby 
certifies pursuant to 5 U.S.C. 605(b) that the 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'') \34\ imposes certain 
requirements on Federal agencies (including the Commission) in 
connection with their conducting or sponsoring any collection of 
information as defined by the PRA. The Proposal would result in a 
collection of information within the meaning of the PRA, as discussed 
below. The Commission therefore is submitting the Proposal to the 
Office of Management and Budget (``OMB'') for review.
---------------------------------------------------------------------------

    \34\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    The Proposal contains a collection of information for which the 
Commission has previously received a control number from OMB. The title 
for this collection of information is ``Adaptation of Regulations to 
Incorporate Swaps-Records of Transactions, OMB control number 3038-
0090''.\35\ Collection 3038-0090 is currently in force with its control 
number having been provided by OMB.
---------------------------------------------------------------------------

    \35\ See OMB Control No. 3038-0090, http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0090# (last visited 
Sep. 20, 2016).
---------------------------------------------------------------------------

    The responses to the Proposal's collection 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.
    As discussed above, in respect of collections of information, the 
Proposal would replace the existing audit system requirements with a 
requirement that records entities establish written recordkeeping 
policies and procedures. Such changes would result in revisions to 
collection 3038-0090. Therefore, the Commission proposes to revise 
collection 3038-0090 as described below.
2. Modification of Collection 3038-0090--Recordkeeping Policies and 
Procedures
    The Commission estimates that the Proposal will require 
approximately 15,000 persons to develop and maintain recordkeeping 
policies and procedures. This estimate includes approximately 8,792 
registrants, 15 designated contract markets, 23 swap execution 
facilities, 4 swap data repositories, 15 designated clearing 
organizations, and 3,200 unregistered members of designated contract 
markets or swap execution facilities, with the balance reflecting the 
Commission's estimate of those persons that are required to register 
with the Commission, but have not so registered, and other persons 
neither registered nor required to register with the Commission.\36\
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    \36\ With respect to registrants and registered entities, these 
numbers are based on the number of such persons so registered with 
the Commission as of November 2, 2016. With respect to the number of 
unregistered members of designated contract markets or swap 
execution facilities, see Agency Information Collection Activities: 
Proposed Collection Revision, Comment Request: Final Rule for 
Records of Commodity Interest and Related Cash or Forward 
Transactions, 80 FR 80327 (Dec. 24, 2015).
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    Based on the above, the estimated additional hour burden for 
recordkeeping policies and procedures of 150,000 hours is calculated as 
follows:
    Number of affected persons: 15,000.
    Frequency of collection: Annually.
    Estimated annual responses per registrant: 1.
    Estimated aggregate number of annual responses: 15,000.
    Estimated annual hour burden per registrant: 10.\37\
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    \37\ This burden hour estimate reflects the Commission's 
assumption that many records entities already have policies and 
procedures that, in whole or in part, satisfy the proposed 
recordkeeping policies and procedures requirement.
---------------------------------------------------------------------------

    Estimated aggregate annual hour burden: 150,000 (15,000 registrants 
x 10 hours per registrant).\38\
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    \38\ The Commission will also submit to OMB revisions to 
Collection 3038-0090 to reflect the Proposal's replacement of the 
audit system requirements in current Commission regulation 1.31.
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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.
    Comments may be submitted directly to the Office of Information and 
Regulatory Affairs, by fax at (202) 395-6566, or by email at 
[email protected]. 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 
www.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 CEA\39\ requires the Commission to consider 
the costs and benefits of its actions before issuing a regulation under 
the CEA. 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.
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    \39\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------

1. Costs
    As discussed above in relation to the RFA, the Proposal generally 
updates and simplifies existing Commission regulation 1.31 by deleting 
outdated terms and revising provisions to reflect advances in 
information technology while safeguarding the statutory-based 
principles previously identified by the Commission. The Commission 
preliminarily believes that the Proposal would impose certain costs on 
records entities. These costs are those necessary to establish and 
maintain required written recordkeeping policies and procedures. The 
Commission believes that these costs will be quite limited. At

[[Page 6365]]

the same time, the Commission preliminarily believes that the Proposal 
would also reduce current recordkeeping costs under Commission 
regulation 1.31, because the Proposal would increase flexibility 
provided to records entities and also eliminate certain requirements as 
described above (e.g., removing the requirements to have an audit 
system, to maintain electronic records in limited specified formats, 
and to retain a Technical Consultant).
2. Benefits
    The Commission is committed to reviewing its regulations to ensure 
they keep pace with technological developments and industry trends, and 
reduce regulatory burden. The Commission believes that the Proposal 
will allow records entities to benefit from evolving technology while 
maintaining necessary safeguards to ensure the reliability of the 
recordkeeping process. By deleting outdated terms and revising 
provisions to reflect advances in information technology, the Proposal 
will allow records entities to utilize a wider range of currently 
available technology than previously allowed and remove requirements 
that the Commission believes are now obsolete, allowing records 
entities to reduce their costs. In addition, the Commission believes 
that the flexibility provided by the Proposal will, without further 
Commission rulemaking, allow records entities to adopt new technologies 
as such technologies evolve, allowing such persons to reduce their 
future costs.
    Moreover, the Commission expects that the added flexibility 
provided by the Proposal will encourage records entities to utilize 
electronic storage rather than maintain paper regulatory records. The 
Commission expects that this conversion will benefit the Commission, 
the DOJ, and the commodity interest industry, generally, by making the 
universe of regulatory records more accessible and searchable.
    In addition, as a result of the Proposal codifying industry 
practices to require recordkeeping policies and procedures and, in 
doing so, providing records entities with an opportunity to examine 
their own recordkeeping practices, the Commission expects that records 
entities may improve the quality of such practices and, thus, the 
accuracy and integrity of their regulatory records.
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
    The Proposal will continue to protect the public by maintaining 
necessary safeguards to ensure the reliability of the recordkeeping 
process while allowing records entities to benefit from evolving 
technology.
ii. Efficiency, Competitiveness, and Financial Integrity of Markets
    As discussed above, the Proposal may increase resource allocation 
efficiency by improving the way in which records are maintained. 
Otherwise, the Commission anticipates minimal change to the efficiency, 
competitiveness, and financial integrity of the markets.
iii. Price Discovery
    The Commission believes that the Proposal may increase confidence 
and participation in the markets for the reasons discussed above. 
Nevertheless, the Commission does not anticipate a significant increase 
in liquidity or a significant improvement in price discovery as a 
result of this rulemaking.
iv. Sound Risk Management Practices
    By improving recordkeeping policies and procedures, the Proposal 
may encourage records entities to analyze their recordkeeping practices 
and create or update policies and procedures related thereto.
v. Other Public Interest Considerations
    The Commission has not identified any additional public interest 
considerations.
4. 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 
the Proposal with their comment letters.
    The Commission specifically seeks comment on the following:
     For those market participants with written operational 
procedures and controls that comply with current Commission regulation 
1.31, what transition costs, if any, will the Proposal's requirement 
for written policies and procedures entail?
     Are there any costs or benefits associated with the 
Proposal that the Commission has not considered in the Proposal? Please 
provide details and estimates regarding any asserted costs or benefits.

List of Subjects

17 CFR Part 1

    Commodity futures, Reporting and recordkeeping requirements.

17 CFR Part 23

    Authority delegations (Government agencies), Commodity futures, 
Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, the Commodity Futures 
Trading Commission proposes to amend 17 CFR chapter I as follows:

PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT

0
1. The authority citation for part 1 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 6h, 
6i, 6k, 6l, 6m, 6n, 6o, 6p, 6r, 6s, 7, 7a-1, 7a-2, 7b, 7b-3, 8, 9, 
10a, 12, 12a, 12c, 13a, 13a-1, 16, 16a, 19, 21, 23, and 24 (2012).

0
2. Revise Sec.  1.31 to read as follows:


Sec.  1.31   Regulatory records; retention and production.

    (a) Definitions. For purposes of this section:
    Electronic regulatory records means all regulatory records other 
than regulatory records exclusively created and maintained by a records 
entity on paper.
    Records entity means any person required by the Act or Commission 
regulations in this chapter to keep regulatory records.
    Regulatory records means all books and records required to be kept 
by the Act or Commission regulations in this chapter, including any 
record of any correction or other amendment to such books and records, 
provided that, with respect to such books and records stored 
electronically, regulatory records shall also include:
    (i) All data produced and stored electronically that describes, 
directly or indirectly, the characteristics of such books and records, 
including, without limitation, data that describes how, when, and, if 
relevant, by whom such electronically stored information was collected, 
created, accessed, modified, or formatted; and

[[Page 6366]]

    (ii) Any data necessary to access, search, or display any such 
books and records.
    (b) Regulatory records policies and procedures. Each records entity 
shall establish, maintain, and implement written policies and 
procedures reasonably designed to ensure that the records entity 
complies with its obligations under this section. Such policies and 
procedures shall provide for, without limitation, appropriate training 
of officers and personnel of the records entity regarding their 
responsibility for ensuring compliance with the obligations of the 
records entity under this section, and regular monitoring for such 
compliance.
    (c) Duration of retention. Unless specified elsewhere in the Act or 
Commission regulations in this chapter:
    (1) A records entity shall keep regulatory records of any swap or 
related cash or forward transaction (as defined in Sec.  23.200(i) of 
this chapter), other than regulatory records of oral communications, 
from the date the regulatory record was created until the termination, 
maturity, expiration, transfer, assignment, or novation date of the 
transaction and for a period of not less than five years after such 
date.
    (2) A records entity that is required to retain oral 
communications, shall keep regulatory records of oral communications 
for a period of not less than one year from the date of such 
communication.
    (3) A records entity shall keep each regulatory record other than 
the records described in paragraph (c)(1) or (2) of this section for a 
period of not less than five years from the date on which the record 
was created.
    (4) A records entity shall keep regulatory records exclusively 
created and maintained on paper readily accessible for no less than two 
years. A records entity shall keep electronic regulatory records 
readily accessible for the duration of the required record keeping 
period.
    (d) Form and manner of retention. Unless specified elsewhere in the 
Act or Commission regulations in this chapter, all regulatory records 
must be created and retained by a records entity in accordance with the 
following requirements:
    (1) Generally. Each records entity shall retain regulatory records 
in a form and manner that ensures the authenticity and reliability of 
such regulatory records in accordance with the Act and Commission 
regulations in this chapter.
    (2) Electronic regulatory records. Each records entity maintaining 
electronic regulatory records shall establish appropriate systems and 
controls that ensure the authenticity and reliability of electronic 
regulatory records, including, without limitation:
    (i) Systems that maintain the security, signature, chain of custody 
elements, and data as necessary to ensure the authenticity of the 
information contained in electronic regulatory records and to monitor 
compliance with the Act and Commission regulations in this chapter;
    (ii) Systems that ensure the records entity is able to produce 
electronic regulatory records in accordance with this section, and 
ensure the availability of such regulatory records in the event of an 
emergency or other disruption of the records entity's electronic record 
retention systems; and
    (iii) The creation and maintenance of an up-to-date inventory that 
identifies and describes each system that maintains information 
necessary for accessing or producing electronic regulatory records.
    (e) Inspection and production of regulatory records. Unless 
specified elsewhere in the Act or Commission regulations in this 
chapter, a records entity, at its own expense, must produce or make 
accessible for inspection all regulatory records in accordance with the 
following requirements:
    (1) Inspection. All regulatory records shall be open to inspection 
by any representative of the Commission or the United States Department 
of Justice.
    (2) Production of paper regulatory records. A records entity must 
produce regulatory records exclusively created and maintained on paper 
promptly upon request of a Commission representative.
    (3) Production of electronic regulatory records. (i) A request from 
a Commission representative for electronic regulatory records will 
specify a reasonable form and medium in which a records entity must 
produce such regulatory records.
    (ii) A records entity must produce such regulatory records in the 
form and medium requested promptly, upon request, unless otherwise 
directed by the Commission representative.
    (4) Production of original regulatory records. A records entity may 
provide an original regulatory record for reproduction, which a 
Commission representative may temporarily remove from such entity's 
premises for this purpose. Upon request of the records entity, the 
Commission representative shall issue a receipt for any original 
regulatory record received. At the request of a Commission 
representative, a records entity shall, upon the return thereof, issue 
a receipt for the original regulatory record returned by such 
representative.
0
3. In Sec.  1.35, revise paragraph (a)(5) to read as follows:


Sec.  1.35   Records of commodity interest and related cash or forward 
transactions.

    (a) * * *
    (5) Form and manner. All records required to be kept pursuant to 
paragraphs (a)(1), (2), (3), and (4) of this section, other than pre-
trade communications, shall be kept in a form and manner that allows 
for the identification of a particular transaction.
* * * * *

PART 23--SWAP DEALERS AND MAJOR SWAP PARTICIPANTS

0
4. The authority citation for part 23 continues to read as follows:

    Authority:  7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1, 6c, 6p, 6r, 6s, 6t, 
9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 21.
    Section 23.160 also issued under 7 U.S.C. 2(i); Sec. 721(b), 
Pub. L. 111-203, 124 Stat. 1641 (2010).

0
5. In Sec.  23.203, amend paragraph (b) as follows:
0
a. Revise paragraph (b)(1); and
0
b. Remove and reserve paragraph (b)(2).
    The revisions to read as follows:


Sec.  23.203  Records; retention and inspection.

* * * * *
    (b) * * * (1) The records required to be maintained by this chapter 
shall be maintained in accordance with the provisions of Sec.  1.31 of 
this chapter, except as provided in paragraph (b)(3) of this section. 
All such records shall be open to inspection by any representative of 
the Commission, the United States Department of Justice, or any 
applicable prudential regulator. Records relating to swaps defined in 
section 1a(47)(A)(v) shall be open to inspection by any representative 
of the Commission, the United States Department of Justice, the 
Securities and Exchange Commission, or any applicable prudential 
regulator.
* * * * *

    Issued in Washington, DC, on January 12, 2017, by the 
Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.

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


[[Page 6367]]



Appendices to Recordkeeping--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 have said many times that it is important for the CFTC to ensure 
its rules are up-to-date in light of technological changes, as outdated 
rules can create unnecessary burdens. That is why I'm pleased we are 
unanimously issuing this proposed rulemaking, which is in keeping with 
that goal.
    Today's proposal will modernize recordkeeping and storage 
obligations set forth in CFTC rules, and make them technology neutral. 
By doing so, it will reduce costs for businesses and improve the 
quality of record preservation and production. Among other things, the 
proposal will provide greater flexibility when it comes to how records 
must be retained and produced. In this age where terabytes of storage 
easily fit in one's pocket, our rules should not refer to microfiche or 
require paper records.
    Today's proposal is also an example of how the Commission is 
focusing on issues related to technological change generally in our 
markets. In this regard, there is much talk today about innovations 
that may come from financial technology. While it is the role of the 
private sector to develop innovations, I believe it is our role to 
ensure that the Commission's rules do not stand in the way of their 
potential. Today's proposal is a way to do just that.
    I thank the CFTC staff for their work on this proposal and my 
fellow Commissioners for their support.

[FR Doc. 2017-01148 Filed 1-18-17; 8:45 am]
 BILLING CODE 6351-01-P



                                                      6356                     Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Proposed Rules

                                                      effective September 15, 2016, is                        Pullman, MI; Muskegon, MI; INT                         Napoleon, MO; Lamoni, IA; Des Moines,
                                                      amended as follows:                                     Muskegon 327° and Green Bay, WI, 116°                  IA; Mason City, IA; Rochester, MN;
                                                      Paragraph 2004      Jet Routes.                         radials; Green Bay; Stevens Point, WI;                 Farmington, MN; to Gopher, MN. From
                                                                                                              INT Stevens Point 281° and Eau Claire,                 International Falls, MN; to Winnipeg,
                                                      *      *     *       *      *                           WI, 107° radials; Eau Claire; to Siren,                MB, Canada, excluding the airspace
                                                      J–25    [Amended]                                       WI. From Park Rapids, MN; Grand                        within Canada.
                                                        From INT United States/Mexico                         Forks, ND; INT Grand Forks 239° and                    *     *    *     *    *
                                                      border and Brownsville, TX, 221° radial;                Bismarck, ND, 067° radials; to Bismarck.
                                                      Brownsville; INT Brownsville 358° and                   *     *     *    *     *                               V–218       [Amended]
                                                      Corpus Christi, TX, 178° radials; Corpus                                                                         From International Falls, MN; Grand
                                                                                                              V–82     [Amended]
                                                      Christi; INT Corpus Christi 311° and                                                                           Rapids, MN; Gopher, MN; Waukon, IA;
                                                      San Antonio, TX, 174° radials; San                        From Baudette, MN; to INT Baudette                   to Rockford, IL. From Keeler, MI; to
                                                      Antonio; Centex, TX; Waco, TX; Ranger,                  194° and Park Rapids, MN, 003°T/                       Lansing, MI.
                                                      TX; Tulsa, OK; Kansas City, MO; Des                     359°M radials. From Gopher, MN;                        *    *     *     *    *
                                                      Moines, IA; Mason City, IA; to Gopher,                  Farmington, MN; Rochester, MN;
                                                      MN.                                                     Nodine, MN; to Dells, WI.                              V–413       [Amended]
                                                      *    *     *     *    *                                 *    *    *     *     *                                  From Gopher, MN; INT Gopher 109°
                                                      Paragraph 6010      Domestic VOR Federal                V–161     [Amended]                                    and Eau Claire, WI, 269° radials; Eau
                                                      Airways.                                                                                                       Claire; to Ironwood, MI.
                                                      *      *     *       *      *                             From Three Rivers, TX; Center Point,                 *     *      *   *    *
                                                                                                              TX; Llano, TX; INT Llano 026° and
                                                      V–55    [Amended]                                       Millsap, TX, 193° radials; Millsap;                    Paragraph 6011 United States Area
                                                        From Dayton, OH; Fort Wayne, IN;                      Bowie, TX; Ardmore, OK; Okmulgee,                      Navigation Routes.
                                                      Goshen, IN; Gipper, MI; Keeler, MI;                     OK; Tulsa, OK; Oswego, KS; Butler, MO;                 *       *      *    *   *

                                                                                T–330 Grand Forks, ND (GFK) to Gopher,              MN (GEP) [New]
                                                                                Grand Forks, ND (GFK)   VOR/DME                     (Lat. 47°57’17.39’’ N., long. 097°11’07.33’’ W.)
                                                                                BYZIN, ND               WP                          (Lat. 47°29’03.97’’N., long. 096°13’28.09’’W.)
                                                                                TAMMR, MN               WP                          (Lat. 46°53’33.48’’N., long. 095°42’56.42’’W.)
                                                                                WATAM, MN               FIX                         (Lat. 46°25’52.91’’N., long. 095°09’06.92’’W.)
                                                                                MAFLN, MN               WP                          (Lat. 46°02’22.73’’N., long. 094°37’21.86’’W.)
                                                                                DAYLE, MN               FIX                         (Lat. 45°37’24.75’’N., long. 093°55’34.20’’W.)
                                                                                Gopher, MN (GEP)        VORTAC                      (Lat. 45°08’44.47’’N., long. 093°22’23.45’’W.)

                                                                                                *      *         *        *         *                          *         *
                                                                                T–354 Park Rapids, MN (PKD) to Siren, WI (RZN) [New]
                                                                                Park Rapids, MN (PKD)    VOR/DME       (Lat. 46°53’53.34’’N.,                 long. 095°04’15.21’’W.)
                                                                                BRNRD, MN                WP            (Lat. 46°20’53.81’’N.,                 long. 094°01’33.54’’W.)
                                                                                Siren, WI (RZN)          VOR/DME       (Lat. 45°49’13.60’’N.,                 long. 092°22’28.26’’W.)

                                                                                               *       *       *       *          *          *        *
                                                                                T–383 Gopher, MN (GEP) to BLUOX, MN [New]
                                                                                Gopher, MN (GEP)         VORTAC      (Lat. 45°08’44.47’’N., long. 093°22’23.45’’W.)
                                                                                BRNRD, MN                WP          (Lat. 46°20’53.81’’N., long. 094°01’33.54’’W.)
                                                                                BLUOX, MN                FIX         (Lat. 47°34’33.13’’ N., long. 095°01’29.11’’ W.)

                                                                                                     *          *           *          *           *           *         *


                                                        Issued in Washington, DC, on January 10,              SUMMARY:    The Commodity Futures                      production of regulatory records, the
                                                      2017.                                                   Trading Commission (the                                proposed amendments would remove
                                                      Leslie M. Swann,                                        ‘‘Commission’’) is proposing to amend                  the requirements for electronic records
                                                      Acting Manager, Airspace Policy Group.                  the recordkeeping obligations set forth                to be kept in their native file format and
                                                      [FR Doc. 2017–01034 Filed 1–18–17; 8:45 am]             in certain provisions of the                           for recordkeepers to enter into an
                                                      BILLING CODE 4910–13–P                                  Commission’s regulations. The                          arrangement with a third-party technical
                                                                                                              proposed amendments would permit                       consultant with respect to electronically
                                                                                                              recordkeepers to leverage advances in                  stored information.
                                                                                                              information technology as a means to                   DATES: Comments must be received on
                                                      COMMODITY FUTURES TRADING                               reduce costs associated with the                       or before March 20, 2017.
                                                      COMMISSION                                              retention and production of paper and                  ADDRESSES: You may submit comments,
                                                                                                              electronic records and to decrease the                 identified by RIN 3038–AE36, by any of
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS




                                                      17 CFR Parts 1 and 23                                   risks of cybersecurity threats, while                  the following methods:
                                                                                                              maintaining necessary safeguards to                      • CFTC Web site: https://
                                                      RIN 3038–AE36                                           ensure the integrity, availability, and                comments.cftc.gov. Follow the
                                                                                                              accessibility of records required to be                instructions for submitting comments
                                                      Recordkeeping                                           kept pursuant to the Commodity                         through the Comments Online process
                                                      AGENCY:  Commodity Futures Trading                      Exchange Act (the ‘‘CEA’’) or                          on the Web site.
                                                      Commission.                                             Commission regulations. In addition to                   • Mail: Christopher Kirkpatrick,
                                                                                                              providing recordkeepers with greater                   Secretary of the Commission,
                                                      ACTION: Proposed rule.
                                                                                                              flexibility regarding the retention and                Commodity Futures Trading


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                                                                             Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Proposed Rules                                                     6357

                                                      Commission, Three Lafayette Centre,                     and implements the Commission’s                        system that the electronic storage
                                                      1155 21st Street NW., Washington, DC                    inspection and examination authority                   system satisfies the requirements set
                                                      20581.                                                  over such records.2 Examination of                     forth in § 1.31(b). Lastly, paragraph (d)
                                                        • Hand Delivery/Courier: Same as                      books and records is one of the                        of § 1.31 requires certain paper records,
                                                      Mail, above.                                            Commission’s principal means of                        such as trading cards and documents
                                                        • Federal eRulemaking Portal: http://                 determining compliance with the CEA                    with written trading information, to be
                                                      www.regulations.gov. Follow the                         and Commission regulations.3                           maintained in hard-copy for the
                                                      instructions for submitting comments.                      Paragraph (a) of § 1.31 describes the               applicable retention period.
                                                         Please submit your comments using                    general requirement that books and                       The Commission recognizes that the
                                                      only one method.                                        records must be kept for five years and                most recent substantive amendments to
                                                         All comments must be submitted in                    be readily accessible during the first two             § 1.31 were made in 2012 4 and, prior to
                                                      English, or if not, accompanied by an                   years. Different retention periods apply               that, in 1999.5 The 2012 Amendment
                                                      English translation. Comments will be                   to certain oral communications and                     clarified the retention period for records
                                                      posted as received to www.cftc.gov. You                 records of any swap or related cash or                 of oral communications leading to the
                                                      should submit only information that                     forward transaction. Paragraph (a) also                execution of any swap or related cash or
                                                      you wish to make available publicly. If                 provides that paper records shall be                   forward transaction for swap dealers
                                                      you wish the Commission to consider                     kept in their original form and                        and major swap participants, and to
                                                      information that you believe is exempt                  electronic records in the format in                    require that electronic records be
                                                      from disclosure under the Freedom of                    which they were originally created                     retained in their native file format. The
                                                      Information Act (‘‘FOIA’’), a petition for              (referred to as ‘‘native file format’’), and           1999 Amendment implemented all of
                                                      confidential treatment of the exempt                    defines the inspection and production                  the technical provisions regarding the
                                                      information may be submitted according                  rights of representatives of the                       use of electronic storage media in
                                                      to the procedures established in § 145.9                Commission and the Department of                       § 1.31(b) and (c), including the
                                                      of the Commission’s regulations.1                       Justice. In particular, § 1.31(a)(2)                   requirement to retain a Technical
                                                         The Commission reserves the right,                   requires that production shall be made                 Consultant.
                                                      but shall have no obligation, to review,                in a form specified by any
                                                      pre-screen, filter, redact, refuse or                   representative of the Commission upon                  B. Petitions for Rulemaking
                                                      remove any or all of your submission                    the representative’s request.                             The Commission has received
                                                      from www.cftc.gov that it may deem to                      Paragraph (b) of § 1.31 allows books                petitions for rulemaking from various
                                                      be inappropriate for publication, such as               and records to be stored on electronic                 industry groups requesting that the
                                                      obscene language. All submissions that                  storage or micrographic media, such as                 Commission amend § 1.31.6 Generally,
                                                      have been redacted or removed that                      microfiche, provided that the                          the Petitioners state that certain
                                                      contain comments on the merits of the                   recordkeeper complies with various                     requirements set forth in § 1.31 that
                                                      rulemaking will be retained in the                      technical requirements designed to                     were reasonable and prudent when
                                                      public comment file and will be                         ensure the integrity, availability, and                adopted have become outdated and
                                                      considered as required under the                        accessibility of the electronically stored             irrelevant. Absent any change, the
                                                      Administrative Procedure Act and other                  information. For example, this                         Petitioners stated that recordkeepers
                                                      applicable laws, and may be accessible                  paragraph provides that any digital                    must choose between accepted
                                                      under the FOIA.                                         storage or medium or system must                       electronic distributed storage systems,
                                                      FOR FURTHER INFORMATION CONTACT:                        preserve the records exclusively in a                  which are essential for disaster recovery
                                                      Eileen T. Flaherty, Director, (202) 418–                non-rewritable, non-erasable format,                   and privacy protection, and compliance
                                                      5326, eflaherty@cftc.gov; Frank                         known more commonly as the ‘‘write                     with the letter of the law.
                                                      Fisanich, Chief Counsel, (202) 418–                     once, read-many,’’ or ‘‘WORM’’                            Specifically, the Petitioners have
                                                      5949, ffisanich@cftc.gov; Andrew                        requirement. In addition, paragraph (b)                requested the following changes to
                                                      Chapin, Associate Chief Counsel, (202)                  requires a recordkeeper utilizing                      § 1.31:
                                                      418–5465, achapin@cftc.gov; Katherine                   electronic storage media to develop and                   1. Amend § 1.31(a) to no longer
                                                      Driscoll, Associate Chief Counsel, (202)                maintain an audit system to provide                    require electronic records to be kept in
                                                      418–5544, kdriscoll@cftc.gov; C. Barry                  accountability over both the initial entry             their native file format;
                                                      McCarty, Special Counsel, (202) 418–                    and the entry of each change to any
                                                      6627, cmccarty@cftc.gov; or Jacob                                                                                 2. Amend § 1.31(b) to eliminate the
                                                                                                              original or duplicate record. Further,
                                                      Chachkin, Special Counsel, (202) 418–                                                                          WORM requirement for electronic
                                                                                                              any person who uses only electronic
                                                      5496, jchachkin@cftc.gov, Division of                                                                          records; and
                                                                                                              storage media to preserve some or all of
                                                      Swap Dealer and Intermediary                            its required records shall enter into an                  4 Adaptation of Regulations to Incorporate Swaps,
                                                      Oversight, Commodity Futures Trading                    arrangement with a third-party technical               77 FR 66288 (Nov. 2, 2012) (the ‘‘2012
                                                      Commission, 1155 21st Street NW.,                       consultant (‘‘Technical Consultant’’)                  Amendment’’).
                                                      Washington, DC 20581.                                   capable of furnishing to the Commission                   5 Recordkeeping, 64 FR 28735 (May 27, 1999) (the

                                                      SUPPLEMENTARY INFORMATION:                              or its representative any information                  ‘‘1999 Amendment’’).
                                                                                                                                                                        6 Petition for Rulemaking to Amend 1.31, 4.7(b)
                                                                                                              stored electronically promptly upon
                                                      I. Background                                           request.                                               and (c), 4.23 and 4.33, Managed Funds Association,
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS




                                                                                                                                                                     Investment Adviser Association, and Alternative
                                                      A. Regulation 1.31        Recordkeeping                    Paragraph (c) of § 1.31 requires                    Investment Management Association, dated July 21,
                                                      Requirements                                            recordkeepers to provide notice and a                  2014, and Petition for Rulemaking to Amend CFTC
                                                                                                              representation to the Commission prior                 Regulations 4.12(c)(3), 4.23 and 4.33 Investment
                                                        Commission regulation 1.31 sets forth                                                                        Company Institute, dated March 11, 2014
                                                                                                              to the initial use of an electronic storage
                                                      recordkeeping requirements for all                                                                             (collectively, the ‘‘Petitioners’’). Regulations 4.23
                                                      books and records required to be kept by                                                                       and 4.33 set forth the recordkeeping requirements
                                                                                                                2 Proposed Rule Requiring that Records Subject to
                                                                                                                                                                     for commodity pool operators (‘‘CPOs’’) and
                                                      the CEA and Commission regulations,                     Inspection, and Copies Thereof, Be Provided to the     commodity trading advisors (‘‘CTAs’’), respectively.
                                                                                                              Commission, 43 FR 50699 (Oct. 31, 1978).               These regulations require CPOs and CTAs to keep
                                                        1 17 CFR 145.9. Commission regulations referred         3 General Regulations; Inspection of Books and       certain books and records in accordance with
                                                      to herein are found at 17 CFR chapter I.                Records, 46 FR 21–01 (Jan. 2, 1981).                   § 1.31.



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                                                      6358                   Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Proposed Rules

                                                         3. Amend § 1.31(b) to eliminate the                  propose.7 Rule 204–2(g) under the                      information systems that leverage
                                                      requirement to enter into an agreement                  Investment Advisers Act of 1940 sets                   computers, databases, and even cloud
                                                      with a Technical Consultant.                            forth general principles that investment               computing. Back then, most records
                                                         With respect to native file format, the              advisers must follow when arranging,                   were created and maintained on paper,
                                                      Petitioners note that programs used to                  accessing and reproducing their records.               but recordkeepers began to explore
                                                      store records electronically routinely                  Similar provisions apply to the                        better ways to store information
                                                      become outdated and obsolete, and/or                    operators of investment companies                      electronically. Now the paradigm has
                                                      are no longer supported by information                  pursuant to Rule 31a–2. In particular,                 shifted, and most information is
                                                      technology manufacturers. As a result,                  Rule 204–2(g) does not tether advisers to              produced and stored electronically on
                                                      as represented by the Petitioners,                      any particular format, i.e., native file               complex systems tailored to the needs of
                                                      recordkeepers must bear the burden of                   format, nor does it require the use of                 a given recordkeeper. These advances in
                                                      retaining these electronic records while                Technical Consultants. The Petitioners                 information technology may have
                                                      updating to other, advanced systems for                 note that in the 1999 Amendment the                    rendered certain technical elements of
                                                      newly created records. Accordingly, the                 Commission expressly stated its intent                 § 1.31 obsolete or outdated.
                                                                                                              to track existing recordkeeping                          Accordingly, the Commission
                                                      Petitioners request that the Commission
                                                                                                              provisions similar to those adopted by                 proposes to amend § 1.31 to reorganize
                                                      amend § 1.31 in a manner that does not
                                                                                                              the SEC,8 and that, more recently in                   and update the existing recordkeeping
                                                      specify the format of any particular
                                                                                                              2013, the Commission acknowledged                      regulation, eliminating certain outdated
                                                      electronic record, so long as there is
                                                                                                              that there are certain advantages to                   provisions while still maintaining the
                                                      demonstrable and auditable integrity
                                                                                                              crafting regulations that ‘‘allow the                  ability of the Commission to examine
                                                      and fidelity in the preservation of the
                                                                                                              Commission to fulfill its regulatory                   and inspect required records. The
                                                      underlying data and contents.
                                                                                                              mandate while, at the same time,                       Proposal is intended to be technology
                                                         With respect to the WORM                             avoiding unnecessary regulatory                        neutral so as technology develops the
                                                      requirement, the Petitioners assert that                burdens on dually-regulated [entities]                 regulation should withstand such
                                                      it is based on a concept that was state                 with respect to . . . Commission                       changes. The updates include new
                                                      of the art nearly twenty years ago.                     recordkeeping requirements.’’ 9                        definitions, deletion of outdated terms,
                                                      Records are no longer stored                            Accordingly, the Petitioners request that              and revision of certain provisions to
                                                      electronically on optical disks or CD–                  the Commission amend § 1.31 in a                       reflect advances in information
                                                      ROMs. Currently, state of the art                       manner consistent with SEC Rule 204–                   technology. The Commission notes that
                                                      information technology relies on storage                2(g).                                                  many of the existing provisions and
                                                      subject to restricted access and includes                                                                      principles in § 1.31 have been retained,
                                                      storage logs that reflect every single                  II. The Proposal                                       albeit in a revised format. The proposed
                                                      change to a file, in addition to archived                  The Commission noted in the 1999                    regulation is divided into five
                                                      copies. Absent any change, the                          Amendment the importance of                            subsections: (a) Definitions; (b)
                                                      Petitioners state that recordkeepers will               conducting an ongoing review of the                    regulatory records policies and
                                                      be required to maintain dual systems                    standards articulated in the                           procedures; (c) duration of retention; (d)
                                                      that preserve the WORM requirement                      recordkeeping regulation to ensure that                form and manner of retention; and (e)
                                                      but also permit them to more properly                   the requirements reflect to the extent                 inspection and production of regulatory
                                                      secure and manage electronic records.                   possible the reality of established                    records.
                                                      Accordingly, the Petitioners request that               technological innovation.10 At the same                A. Regulation 1.31(a): Definitions
                                                      the Commission amend § 1.31 to remove                   time, the Commission recognized the
                                                      the WORM requirement.                                   value of consultation with the                            The Commission proposes to
                                                         With respect to the Technical                        derivatives industry and its participants              reorganize § 1.31 by revising paragraph
                                                      Consultant, the Petitioners state that the              to determine how to best use available                 (a) to define certain terms to be
                                                      need to retain and train a third-party to               information technology that also is                    referenced elsewhere within the revised
                                                      serve as a surrogate for access and                     responsive to the Commission’s                         regulation. Specifically, the Commission
                                                      production to electronic records is no                  legitimate need to have access to                      proposes to define the terms ‘‘electronic
                                                                                                              complete and accurate records when                     regulatory records’’, ‘‘records entity’’,
                                                      longer necessary given the in-house
                                                                                                              necessary.11                                           and ‘‘regulatory records’’. The
                                                      technical expertise regarding
                                                                                                                 As the Petitioners highlighted, the                 Commission believes that defining these
                                                      information technology throughout the
                                                                                                              Commission recognizes that                             terms will provide greater clarity
                                                      industry. In addition to the increased
                                                                                                              recordkeeping has evolved significantly                regarding the recordkeeping obligations
                                                      costs associated with retaining a
                                                                                                              in the time since the last major revision              applicable to all persons subject to
                                                      Technical Consultant, the Petitioners
                                                                                                              to § 1.31 in 1999 from a paper-based                   § 1.31, particularly for those obligations
                                                      also note that providing additional third
                                                                                                              system to electronically stored                        related to electronic records.
                                                      parties with access to sensitive,
                                                                                                                                                                        For the ease of understanding and
                                                      confidential, and proprietary
                                                                                                                 7 See Electronic Recordkeeping by Investment        applying the proposed amendments to
                                                      information greatly increases the risk of
                                                                                                              Companies and Investment Advisers, 66 FR 29224         § 1.31, the Commission proposes to
                                                      cybersecurity intrusions. Accordingly,                  (May 30, 2001). Given that intermediaries may          define ‘‘records entity’’ to mean ‘‘any
                                                      the Petitioners request that the                        engage in both securities and derivatives              person required by the Act or
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                                                      Commission amend § 1.31 to remove the                   transactions, operators of investment companies
                                                                                                              may be required to register with the Commission as
                                                                                                                                                                     Commission regulations to keep
                                                      requirement to retain a Technical
                                                                                                              CPOs, and investment advisers similarly may be         regulatory records.’’ The Commission
                                                      Consultant.                                             required to register as CTAs.                          notes that numerous Commission
                                                         In support of their request, Petitioners                8 64 FR at 28735.
                                                                                                                                                                     regulations set forth particular
                                                      note that the Securities and Exchange                      9 See Harmonization of Compliance Obligations
                                                                                                                                                                     requirements for CEA Section 1a(40)
                                                      Commission (‘‘SEC’’) adopted a                          for Registered Investment Companies Required to
                                                                                                              Register as Commodity Pool Operators, 78 FR 52308
                                                                                                                                                                     ‘‘registered entities’’—such as
                                                      recordkeeping rule for investment                       at 52309 (Aug. 22, 2013).                              derivatives clearing organizations,
                                                      companies and investment advisers                          10 64 FR at 28736.                                  designated contract markets, swap
                                                      consistent with the changes they                           11 Id.                                              execution facilities, and swap data


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                                                                             Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Proposed Rules                                                   6359

                                                      repositories—and for registrants—such                   where the Commission specifically                      the electronic information that identifies
                                                      as futures commission merchants,                        delineated the types of allowable media                the manner in which any regulatory
                                                      introducing brokers, CPOs, CTAs, floor                  for electronic records storage,15 the                  record is altered. The Commission
                                                      brokers, floor traders, retail foreign                  Commission believes it is now                          understands that this information is
                                                      exchange dealers, swap dealers, and                     appropriate to focus the recordkeeping                 more commonly known as ‘‘metadata,’’
                                                      major swap participants—to keep                         obligations on the scope of required                   and, at its core, is data about data.
                                                      certain books and records in accordance                 records, rather than a specific storage                Regardless of the label, the Commission
                                                      with § 1.31. The Commission notes,                      medium. Accordingly, the Commission                    understands that metadata generally
                                                      however, that certain persons that are                  proposes to further define the term                    refers to any hidden text, formatting
                                                      neither a registered entity nor a                       ‘‘regulatory records’’ by adding the                   codes, formulae, history, tracking, and
                                                      registrant may be required to keep                      following descriptive language to                      other information associated with an
                                                      certain books and records in accordance                 include: Any record of any correction or               electronic file or data. Metadata is
                                                      with § 1.31, as well.12                                 other amendment to such books and                      integral to the Commission’s ability to
                                                         The Commission also proposes to                      records, provided that, with respect to                carry out both the inspection and
                                                      replace existing references to ‘‘books                  such books and records stored                          investigation functions it is charged
                                                      and records’’ within § 1.31 with the                    electronically, regulatory records shall               with under the CEA. To fully
                                                      term ‘‘regulatory records’’ and to                      also include: (i) All data produced and                understand the data within a database,
                                                      differentiate between electronic and                    stored electronically that describes,                  for example, requires knowledge of data
                                                      paper regulatory records. The                           directly or indirectly, the characteristics            relationships, what the information
                                                      Commission proposes to define                           of such books and records, including,                  represents, and how it was generated.
                                                      ‘‘regulatory records’’ to mean ‘‘all books              without limitation, data that describes                Once properly assembled and formatted
                                                      and records required to be kept by the                  how, when, and, if relevant, by whom                   in the form of a report, data within a
                                                      Act or Commission regulations.’’ As a                   such electronically stored information                 database is readily understandable.
                                                      subset, the Commission proposes to                      was collected, created, accessed,                         The Commission does not find it
                                                      define within § 1.31(a) ‘‘electronic                    modified, or formatted; and (ii) any data              necessary at this time to define specific,
                                                      regulatory records’’ to mean ‘‘all                      necessary to access, search, or display                technical terms related to information
                                                      regulatory records other than paper                     any such books and records.                            technology and electronically stored
                                                      regulatory records exclusively created                     The proposed language would more                    information, such as metadata or
                                                      and maintained by a records entity on                   clearly state the existing requirement to              databases, as these technical terms may
                                                      paper.’’ The Commission has separately                  maintain all prior versions of any                     change over time. The Commission
                                                      proposed Regulation Automated                           regulatory record, no matter how                       believes these are terms generally
                                                      Trading and certain requirements                        modified. This is not a new                            understood by practitioners
                                                      regarding source code and manner of                     recordkeeping obligation. Since 1993                   notwithstanding a lack of a universal
                                                      production of source code.13 This                       the Commission has required electronic                 agreement on exact definitions.
                                                      proposal does not address source code                   records to be created and maintained in                   The Commission notes that the
                                                      or the production of source code.                       a non-erasable, non-rewritable format                  requirement to provide data about data
                                                         The Commission recognizes that                       for the retention period.16 Because the                is not new. As set forth in current
                                                      certain regulatory records are not                      existing regulation requires electronic                § 1.31(a)(2), production of any books
                                                      created electronically and that certain                 records be preserved exclusively in a                  and records shall be made ‘‘in a form
                                                      records entities may elect not to convert               non-rewritable, non-erasable format, it                specified by any representative of the
                                                      any paper regulatory records into an                    follows that each version of an                        Commission.’’ For the purpose of
                                                      electronic format. By differentiating                   electronic record must be created and                  facilitating production requests
                                                      between paper and electronic regulatory                 maintained in a non-erasable, non-                     pursuant § 1.31(a)(2), the Commission’s
                                                      records, the Commission can better                      rewritable format. Therefore, the                      Division of Enforcement has developed
                                                      preserve existing recordkeeping                         Commission is confirming that both the                 and continually updates a document
                                                      obligations applicable solely to records                initial record and all subsequent                      entitled ‘‘CFTC Data Delivery
                                                      entities that do not create anything other              versions are records within the                        Standards.’’ 18 Such standards describe
                                                      than paper regulatory records.14                        definition and must be created,                        the technical requirements for electronic
                                                         The Commission also believes that the                maintained, accessible, and produced                   document production to the
                                                      term ‘‘books and records’’ in the                       consistent with the regulation.17                      Commission and specifically provides
                                                      traditional sense may no longer                            The proposed language also would                    for the production of metadata
                                                      adequately convey that § 1.31                           clarify that electronically stored                     associated with electronic records.
                                                      recordkeeping obligations extend to all                 regulatory records are not limited to the                 Finally, the Commission further
                                                      associated electronic data. However,                    data within a particular database or                   proposes not to retain within the
                                                      contrary to prior revisions to § 1.31                   application, for example, but includes                 definition section certain definitions in
                                                                                                                                                                     the existing regulation, such as ‘‘native
                                                         12 For example, Part 18 of the Commission’s             15 See 36 FR 22286 (Nov. 24, 1971) (permitted the

                                                      regulations requires every trader who owns, holds       use of microfilm as a medium for maintaining              18 The Commission publishes the CFTC Data
                                                      or controls a reportable futures or option to ‘‘keep    certain records); 58 FR 27458 (May 10, 1993)           Delivery Standards on its Web site at: http://
                                                      books and records showing all details concerning        (permitted the use of optical disk and CD–ROM); 64
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                                                                                                                                                                     www.cftc.gov/idc/groups/public/@
                                                      all positions and transactions in the commodity         FR 28735 (May 27, 1999) (permitted the use of other    lrenforcementactions/documents/file/
                                                      swap. . . .’’ 17 CFR 18.05. Traders are not limited     micrographic and electronic storage media).            enfdatadeliverystandards052716.pdf. The
                                                      to any Commission registrant or registered entity.         16 See § 1.31(b)(1)(ii)(A).
                                                                                                                                                                     Commission notes that other federal agencies, such
                                                         13 See Supplemental notice of proposed                  17 Each version of a record must be retained for    as the SEC (https://www.sec.gov/divisions/enforce/
                                                      rulemaking, Regulation Automated Trading, 81 FR         the applicable retention period which is based off     datadeliverystandards.pdf), the Department of
                                                      85334 (Nov. 25, 2016).                                  the most recent version. For example, the initial      Justice (https://www.justice.gov/atr/case-document/
                                                         14 Records entities who are currently in             record is created on Day 1 and the amended record      file/494686/download) and the Department of
                                                      compliance with current § 1.31 will continue to be      is created on Year 4, Day 359. The amended record      Treasury Office of Foreign Asset Control (https://
                                                      in compliance with proposed § 1.31, provided that       resets the retention period clock to Day 1 for both    www.treasury.gov/resource-center/sanctions/OFAC-
                                                      they have written policies and procedures that meet     the initial record and amended record to ensure a      Enforcement/Documents/ofac_data_delivery.pdf)
                                                      the requirements of the Proposal.                       comprehensive audit trail.                             have similar data delivery standards.



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                                                      6360                   Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Proposed Rules

                                                      file format’’, ‘‘micrographic media’’ and               accountability over both the initial entry             communications, from the date the
                                                      ‘‘electronic storage media.’’ The                       of required records to the electronic                  regulatory record was created until the
                                                      Commission believes that the proposed                   storage media and the entry of each                    termination, maturity, expiration,
                                                      revisions to § 1.31, described in greater               change made to any original or                         transfer, assignment, or novation date of
                                                      detail below, obviate the need to retain                duplicate record maintained on the                     the transaction and for a period of not
                                                      these defined terms.                                    electronic storage media. Moreover, the                less than five years after such date. The
                                                         Request for comment: The                             written operational procedures and                     Commission proposes to incorporate by
                                                      Commission requests comment from all                    controls must be made available for                    reference the definition of the term
                                                      interested parties and the general public               examination at all times by any                        ‘‘related cash or forward transaction’’ in
                                                      regarding the proposed definitions in                   representative of the Commission.                      § 23.200(i).
                                                      § 1.31(a). The Commission encourages                       With respect to training, the                          Similarly, proposed § 1.31(c)(2) would
                                                      all comments including background                       Commission does not find it necessary                  state that a records entity that is
                                                      information, actual market examples,                    to prescribe specific requirements                     required to retain oral communications
                                                      best practice principles, and estimates                 regarding the frequency and format of                  shall keep regulatory records of such
                                                      of any asserted costs and expenses.                     any training. Consistent with its                      oral communications for a period of not
                                                      Regarding the proposed definitions, the                 approach towards mandatory ethics                      less than one year from the date of such
                                                      Commission specifically requests                        training for registrants, the Commission               communication. This is consistent with
                                                      comment on the following questions:                     views the training on written policies                 the existing standard. The Commission
                                                         • Should any of the proposed                         and procedures as an ongoing                           proposes, however, to eliminate
                                                      definitions be revised? If yes, please                  responsibility rather than an episodic                 references to §§ 1.35(a) and 23.202(a)(1)
                                                      provide alternative suggestions.                        one.20 The obligation to remain current                and (b)(1) with respect to ‘‘oral
                                                         • Should any of the proposed                         on the legal requirements regarding                    communications’’ as future changes to
                                                      definitions be deleted?                                 compliance with § 1.31 is one that a                   those regulations, or the promulgation
                                                         • Should any previous definitions                    records entity ignores at its peril. The               of new types of oral communications
                                                      proposed for deletion, e.g.,                            Commission takes a similar view                        requirements, would require the
                                                      ‘‘micrographic media,’’ be included in                  towards the proposed obligation for                    Commission to contemporaneously
                                                      the revised regulation?                                 each records entity to monitor                         amend § 1.31. Based on the foregoing
                                                         • Should other definitions be added,                 compliance with the entity’s policies                  proposed amendments, the Commission
                                                      such as ‘‘metadata’’, or ‘‘database’’, or               and procedures on a ‘‘regular’’ basis.                 believes that the existing provision in
                                                      ‘‘paper regulatory records’’?                              Request for comment: The                            § 23.203(b)(2) regarding the retention
                                                      B. Regulation 1.31(b): Regulatory                       Commission requests comment from all                   period of swaps-related information for
                                                                                                              interested parties and the general public              swap dealers and major swap
                                                      Records Policies and Procedures
                                                                                                              regarding the proposed obligations                     participants is redundant and therefore
                                                         The Commission proposes to revise                    regarding regulatory records policies                  should be repealed. For all other
                                                      and re-state in new § 1.31(b) ongoing                   and procedures in proposed § 1.31(b).                  regulatory records not addressed in
                                                      compliance obligations regarding                        The Commission encourages all                          proposed § 1.31(c)(1) and (2), proposed
                                                      written regulatory records policies and                 comments including background                          § 1.31(c)(3) would require a records
                                                      procedures currently set forth in                       information, actual market examples,                   entity to keep such records for a period
                                                      § 1.31(b)(3). Specifically, the                         best practice principles, and estimates                of not less than five years from the date
                                                      Commission proposes in revised                          of any asserted costs and expenses.                    on which such record was created.
                                                      § 1.31(b) to require all records entities to            Regarding the written policies and                     However, proposed § 1.31(c)(4) would
                                                      establish, maintain, and implement                      procedures requirements, the                           retain the existing retention period for
                                                      written policies and procedures                         Commission specifically requests                       regulatory records exclusively created
                                                      reasonably designed to ensure that the                  comment on the following questions:                    and maintained on paper, i.e., records
                                                      records entity complies with its                           • Should the training requirement be                must be readily accessible for no less
                                                      obligations under § 1.31, including                     scaled down, phased-in, or eliminated                  than two years. This standard is
                                                      without limitation, appropriate training                depending on the number of employees,                  consistent with the SEC’s standard
                                                      of officers and personnel of the records                or depending on the nature of the                      applicable to investment advisers and
                                                      entity regarding their responsibility for               entity’s business?                                     operators of investment companies.21
                                                      ensuring compliance with the                                                                                   Consistent with this change, the
                                                      obligations of the records entity under                 C. Regulation 1.31(c): Duration of
                                                                                                                                                                     Commission proposes to remove the
                                                      this section, and regular monitoring for                Retention
                                                                                                                                                                     duplicative language from
                                                      such compliance.19                                        The Commission proposes to re-state                  § 23.203(b)(1).
                                                         The Commission believes that the                     and clarify in revised § 1.31(c) the                      Request for comment: The
                                                      proposed obligations regarding written                  existing retention period requirements                 Commission requests comment from all
                                                      policies and procedures are generally                   for categories of regulatory records                   interested parties and the general public
                                                      consistent with the existing regulation                 currently set forth in § 1.31(a).                      regarding the proposed retention
                                                      and accepted industry practices.                        Specifically, proposed § 1.31(c)(1)                    periods in § 1.31(c). The Commission
                                                      Currently, § 1.31(b)(3) requires anyone                 would state that a records entity shall                encourages all comments including
                                                      using electronic storage media to                       keep regulatory records of any swap or                 background information, actual market
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                                                      develop and maintain written                            related cash or forward transaction (as
                                                      operational procedures and controls (an                 defined in § 23.200(i)), other than                       21 SEC Rule 204–2(e) states that all books and

                                                      ‘‘audit system’’) designed to provide                   regulatory records of oral                             records shall be maintained and preserved in an
                                                                                                                                                                     easily accessible place for a period of not less than
                                                                                                                                                                     five years from the end of the fiscal year during
                                                        19 SEC Rule 204–2(a)(17) requires each                   20 66 FR 53510 (Oct. 23, 2001) (‘‘Rules Relating
                                                                                                                                                                     which the last entry was made on such record, the
                                                      investment adviser to maintain as part of its           to Intermediaries of Commodity Interest                first two years in an appropriate office of the
                                                      recordkeeping obligations, among other things, a        Transactions’’). With respect to mandatory ethics      investment adviser. SEC Rule 31a–2 similarly
                                                      copy of the adviser’s policies and procedures, and      training, the Commission replaced prescriptive         requires the operator of an investment company to
                                                      any records documenting the adviser’s annual            requirements set forth in § 3.34 with a Statement of   retain records for a minimum of six years the first
                                                      review of those policies and procedures.                Acceptable Practices.                                  two years in an easily accessible place.



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                                                                             Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Proposed Rules                                              6361

                                                      examples, best practice principles, and                  where a records entity exclusively                      entity that utilizes electronic storage
                                                      estimates of any asserted costs and                      maintains paper regulatory records.                     media to keep current a copy of the
                                                      expenses. Regarding the proposed                           The Commission proposes to re-state                   physical and logical format of the
                                                      retention periods, the Commission                        and revise in new § 1.31(d) certain                     electronic storage media, the file format
                                                      specifically requests comment on the                     requirements for regulatory records                     of all different information types
                                                      following questions:                                     currently set forth in § 1.31(b)(1)                     maintained, documentation and
                                                        • Are the proposed recordkeeping                       through (3). In doing so, the                           information necessary to access records
                                                      retention periods appropriate? If not,                   Commission proposes to adopt a general                  and indexes maintained on the
                                                      what modifications to the retention                      standard in § 1.31(d)(1) to require each                electronic media.
                                                      periods should be made?                                  records entity to retain all regulatory                   Finally, based on the foregoing
                                                        • Given the advances in information                    records in a form and manner necessary                  proposed amendments, the Commission
                                                      technology, such as cloud storage,                       to ensure the records’ and                              believes that the existing provision in
                                                      should the Commission extend the                         recordkeeping systems’ authenticity and                 § 1.35(a)(5)(i) regarding the form and
                                                      standard five year retention period?                     reliability. This general requirement                   manner in which records of commodity
                                                        • Is there a longer or shorter period of               would not distinguish between paper                     interest and cash forward transactions
                                                      retention that would be appropriate for                  and non-paper regulatory records.                       should be maintained is redundant and
                                                      some records, and if so please specify                     With respect to electronic regulatory                 therefore should be repealed.
                                                      which records and such time-frames?                      records, the Commission proposes to set                   Request for comment: The
                                                                                                               forth in new § 1.31(d)(2)(i) through (iii)              Commission requests comment from all
                                                      D. Regulation 1.31(d): Form and Manner
                                                                                                               additional controls for records entities                interested parties and the general public
                                                      of Retention
                                                                                                               retaining electronic regulatory records.                regarding the proposed standards for
                                                         The Commission proposes to revise                     In particular, each records entity would
                                                      § 1.31(d) to describe recordkeeping                                                                              form and manner of retention of
                                                                                                               be required to:                                         regulatory records in § 1.31(d). The
                                                      requirements regarding the form and                        (A) Have systems that maintain
                                                      manner in which regulatory records are                                                                           Commission encourages all comments
                                                                                                               security, signature, chain of custody
                                                      retained by records entities. These                                                                              including background information,
                                                                                                               elements, and data as necessary to
                                                      proposed revisions are designed to                                                                               actual market examples, best practice
                                                                                                               ensure the authenticity of the
                                                      ensure the integrity and availability of                                                                         principles, and estimates of any asserted
                                                                                                               information contained in regulatory
                                                      all regulatory records. The Commission                                                                           costs and expenses. With respect to the
                                                                                                               records and to monitor compliance with
                                                      is cognizant that other provisions of the                                                                        authenticity and reliability of regulatory
                                                                                                               the Act and Commission regulations;
                                                      Act and Commission regulations                             (B) Have systems that ensure the                      records and recordkeeping systems, the
                                                      distinguish between different classes of                 records entity is able to produce                       Commission specifically requests
                                                      records entities. In particular, the                     regulatory records in accordance with                   comment on the following questions:
                                                      Commission recognizes that records                       this section, and ensure the availability                 • Should the Commission routinely
                                                      entities that are not registered or                      of regulatory records in the event of an                publish guidelines regarding the
                                                      required to be registered with the                       emergency or other disruption of the                    technical standards for electronic
                                                      Commission in any capacity, nor are                      records entity’s record retention                       regulatory records?
                                                      one of the enumerated ‘‘registered                       systems; and                                              With respect to potential impacts of
                                                      entities’’ defined in Section 1a(40) of the                (C) Create and maintain an up-to-date                 the Proposal, the Commission
                                                      CEA or so required to be registered or                   inventory that identifies and describes                 specifically requests comment on the
                                                      designated,22 currently are not required                 each system that maintains information                  following questions:
                                                      to comply with the full panoply of                       necessary for accessing or producing                      • Would the Proposal require market
                                                      recordkeeping requirements.23 It is the                  regulatory records.                                     participants to change their existing
                                                      Commission’s goal to preserve this                         The Commission believes that these                    recordkeeping procedures under the
                                                      distinction, especially in those cases                   requirements are not new and are                        Proposal? What, if any, transition or
                                                                                                               consistent with certain SEC                             ongoing costs would result from such
                                                         22 Section 1a(40) of the Act defines a ‘‘registered   requirements.24 Currently,                              changes? Please provide details and
                                                      entity’’ to mean: (a) A board of trade designated as     § 1.31(b)(1)(ii)(B) mandates that                       estimates regarding any asserted costs.
                                                      a contract market under section 5; (b) a derivatives
                                                      clearing organization registered under section 5b;
                                                                                                               electronic storage media verifies                         • For entities who maintain digitized
                                                      (c) a board of trade designated as a contract market     automatically the quality and accuracy                  copies of paper records, what costs or
                                                      under section 5f; (d) a swap execution facility          of the storage media recording process.                 other impacts would result under the
                                                      registered under 5h; (e) a swap data repository          Existing rules require any records entity               Proposal?
                                                      registered under section 21; and (f) with respect to
                                                                                                               that utilizes electronic storage media to
                                                      a contract that the Commission determines is a
                                                                                                               organize and maintain an accurate index                 E. Regulation 1.31(e): Inspection and
                                                      significant price discovery contract, any electronic                                                             Production of Regulatory Records
                                                      trading facility on which the contract is executed       of all information such that the location
                                                      or traded.                                               of any record may be immediately                        1. Inspection
                                                         23 For example, part 20 of the Commission’s
                                                                                                               ascertained. Among other requirements,
                                                      regulations sets forth requirements regarding large                                                                 The Commission proposes to re-state
                                                      trader reporting for physical commodity swaps.           existing § 1.31(b)(3) requires any records
                                                                                                                                                                       in revised § 1.31(e)(1) the right of
                                                      Regulation 20.1 defines a ‘‘reporting entity’’ to
                                                                                                                                                                       inspection of the Commission and the
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                                                      mean a clearing member of a clearing organization          24 With respect to electronic storage media, SEC

                                                      or a swap dealer in one or more paired swaps or          Rule 204–2(g)(3) requires investment advisers to        United States Department of Justice
                                                      swaptions. Pursuant to § 20.6, only clearing             establish written procedures that: (1) Maintain and     (‘‘DOJ’’) in existing § 1.31(a)(1).
                                                      organizations and reporting entities must keep all       preserve the records, so as to reasonably safeguard     Specifically, the Commission proposes
                                                      books and records in accordance with § 1.31. Any         them from loss, alteration, or destruction; (2) limit
                                                      other person who exceeds the reportable level in         access to the records to properly authorized
                                                                                                                                                                       § 1.31(e)(1) to state that all regulatory
                                                      any contract ‘‘shall keep books and records . . .        personnel and the SEC; and (3) reasonably ensure        records shall be open to inspection by
                                                      in the record retention format that such person has      that any reproduction of a non-electronic original      any representative of the Commission or
                                                      developed in the normal course of its business           record on electronic storage media is complete,         the DOJ. The Commission previously
                                                      operations.’’ All books and records kept pursuant to     true, and legible when retrieved. SEC Rule 31a–2(f)
                                                      § 20.6, however, shall be furnished upon request to      sets forth similar requirements for the operators of
                                                                                                                                                                       determined that production of records is
                                                      any Commission representative.                           investment companies.                                   part of the Commission’s inspection


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                                                      6362                    Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Proposed Rules

                                                      powers.25 Accordingly, the Commission                      § 1.31(e)(3)(ii) would require a records             the form and medium requested by the
                                                      has determined to limit reference to the                   entity, at its own expense, to produce               Commission the opportunity to produce
                                                      DOJ in § 1.31 to a single reference in this                such regulatory records in the form and              records in an alternative manner
                                                      paragraph. Any requirement for a                           medium requested promptly, upon                      sufficient for the Commission to
                                                      records entity to produce regulatory                       request, unless otherwise directed by                adequately inspect the records. The
                                                      records extends to DOJ as is currently                     the Commission representative.                       ultimate goal is not necessarily to obtain
                                                      the requirement.                                              The Commission recognizes that                    records in their ‘‘native file format,’’ but
                                                        Request for comment: The                                 production, depending on the records,                rather in the most useable form and
                                                      Commission requests comment from all                       may require the records entity to engage             medium.
                                                      interested parties and the general public                  multiple employees, officers, or                        Finally, the Commission further
                                                      regarding the proposed regulations set                     directors in order to satisfy the                    proposes to adopt new § 1.31(e)(4) to
                                                      forth in § 1.31(e)(1). The Commission                      production request, depending upon its               preserve the existing right of a records
                                                      encourages all comments including                          size and scope. Historically,                        entity to provide a representative of the
                                                      background information, actual market                      Commission staff has exercised broad                 Commission with an original regulatory
                                                      examples, best practice principles, and                    discretion regarding production                      record for reproduction by the
                                                      estimates of any asserted costs and                        schedules and ‘‘typically exhibits                   representative in lieu of a copy
                                                      expenses.                                                  flexibility. . . .’’ 28 However, timely              currently set forth in § 1.31(a)(2). As
                                                                                                                 production is a Commission priority                  with the existing provision, the
                                                      2. Production
                                                                                                                 and the proposed ‘‘prompt’’ standard                 Commission proposes to require the
                                                         The Commission proposes to revise                       should not be interpreted as sanctioning             Commission representative to issue a
                                                      and re-state in new § 1.31(e)(2) the                       any unnecessary delay. It is the                     receipt for the original regulatory record
                                                      existing production requirement                            Commission’s understanding that most                 to the records entity upon request.
                                                      currently set forth in § 1.31(a)(2) and (b).               registrants maintain records                            Request for comment: The
                                                      Currently, a records entity is required to                 electronically and therefore would be                Commission requests comment from all
                                                      produce regulatory records in a form                       required under existing § 1.31 to                    interested parties and the general public
                                                      specified by any representative of the                     produce said records immediately,                    regarding the proposed inspection and
                                                      Commission, including the DOJ, upon                        subject to the discretion of Commission              production of regulatory records in
                                                      the representative’s request. If the                       staff. The prompt production standard is             § 1.31(e). The Commission encourages
                                                      requested book or record is stored either                  therefore consistent with the existing               all comments including background
                                                      on micrographic media or electronic                        standard. The Commission notes that                  information, actual market examples,
                                                      storage media, production shall be                         the standard ‘‘promptly upon request’’               best practice principles, and estimates
                                                      immediate.26 Otherwise, all copies or                      is also consistent with SEC Rule 17a–4               of any asserted costs and expenses.
                                                      originals shall be provided promptly.27                    applicable to broker-dealers thereby                 Regarding the production of regulatory
                                                      The Commission proposes to amend                           maintaining a harmonized standard for                records, the Commission specifically
                                                      this requirement in new § 1.31(e)(i) and                   entities that may be dually registered               requests comment on the following
                                                      (ii) to differentiate between the                          with the SEC and the CFTC.29                         questions:
                                                      production of paper and electronic                            In adopting this revised regulation,                 • Should the Commission impose a
                                                      regulatory records, particularly with                      the Commission is cognizant of the need              different standard with respect to the
                                                      respect to the form and medium of                          to balance the opportunities for                     production of paper regulatory records
                                                      requested electronic regulatory records.                   recordkeepers to reduce costs and                    or other regulatory records?
                                                         With respect to the production of                       improve efficiencies regarding                          • Are there records entities that retain
                                                      regulatory records exclusively created                     recordkeeping systems with the                       only paper regulatory records?
                                                      and maintained on paper, proposed                          Commission’s need for prompt access to
                                                      § 1.31(e)(2) would require a records                       complete and accurate records in a                   F. Other Matters
                                                      entity to produce such regulatory                          format that the Commission can process,              1. § 1.31(b)(4)—Technical Consultant
                                                      records promptly upon request. With                        i.e., a useable format.30 For the purposes
                                                      respect to regulatory records other than                   of production, the Commission                           Consistent with the foregoing
                                                      paper regulatory records, proposed                         continues to believe that it is not                  amendments and in response to the
                                                      § 1.31(e)(3) would set forth the process                   sufficient to simply reduce electronic               Petitioners’ request, the Commission
                                                      by which a records entity must respond                     records to a paper format, i.e., printing            proposes to amend § 1.31(b)(4)(i) to
                                                      to a request from a Commission                             out data from a database and saving into             remove the requirement for a records
                                                      representative. In particular,                             a portable document file, or PDF. This               entity to enter into an arrangement with
                                                      § 1.31(e)(3)(i) would require a                            type of production detracts from the                 a Technical Consultant and provide the
                                                      Commission representative to specify a                     Commission’s ability to properly                     Technical Consultant with access to and
                                                      reasonable form and medium in which                        evaluate the integrity of the electronic             the ability to download information
                                                      a records entity must produce such                         records by accessing the associated                  from the records entity’s electronic
                                                      regulatory records. Proposed                               metadata, for example. Based upon                    storage media to any acceptable
                                                                                                                 these principles, the Commission                     medium. Further, the Commission
                                                         25 See 46 FR 21 (Jan. 3, 1981); see also, CFTC
                                                                                                                 proposes to revise § 1.31 to permit a                proposes to remove the requirement set
                                                      Letter 77–4 (Apr. 14, 1977).                                                                                    forth in § 1.31(b)(4)(ii) which requires
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                                                                                                                 records entity that cannot promptly
                                                         26 See § 1.31(b)(2)(i) and (ii). In addition, persons
                                                                                                                 produce electronic regulatory records in             the Technical Consultant to file with the
                                                      using electronic storage media must be ready at all                                                             Commission an acceptable undertaking
                                                      times to provide, and immediately provide at the
                                                      expense of the person required to keep such                  28 FIA comment regarding proposed amendments       regarding its ability and willingness to
                                                      records, copies of such records on such compatible         to § 1.31. 64 FR 28735 at 28739 (May 27, 1999).      provide the Commission and DOJ with
                                                      data processing media as defined in Commission               29 SEC Rule 17a–1 similarly requires national
                                                                                                                                                                      access to the information contained on
                                                      regulation 15.00(d) which any representative of the        securities exchanges and registered clearing         the record entity’s electronic storage
                                                      Commission or the Department of Justice may                agencies to ‘‘promptly furnish’’ records to any
                                                      request. Records must use a format and coding              representative of the SEC upon request.              media. The Commission concurs with
                                                      structure specified in the request. See § 1.31(b)(3)(i).     30 See 77 FR at 66298 (referring to the 1999       the position taken by Petitioners that the
                                                         27 See § 1.31(a)(2).                                    Amendment).                                          information technology expertise within


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                                                                             Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Proposed Rules                                                    6363

                                                      the derivatives industry obviates the                   regarding the proposed deletion of                      other registrants, however, the
                                                      need for the Commission to require                      existing provisions in § 1.31(b)(4), (c)                Commission has found it appropriate to
                                                      those records entities electing to store                and (d); and § 1.35(a)(5)(i). The                       consider whether such registrants
                                                      information electronically to engage a                  Commission encourages all comments                      should be deemed small entities for
                                                      third party to ensure compliance with                   including background information,                       purposes of the RFA on a case-by-case
                                                      all applicable electronic recordkeeping                 actual market examples, best practice                   basis, in the context of the particular
                                                      obligations. However, to the extent that                principles, and estimates of any asserted               Commission regulation at issue.33 As
                                                      a records entity chose to use a third                   costs and expenses.                                     certain persons affected by the Proposal,
                                                      party or Technical Consultant, the                                                                              including Commission registrants, may
                                                                                                              4. Potential Technical Amendments
                                                      records entity would remain responsible                                                                         be small entities for purposes of the
                                                      for compliance with the CEA and                            In conjunction with the Proposal, the                RFA, the Commission considered
                                                      Commission regulations thereunder.                      Commission is reviewing its regulations                 whether this rulemaking would have a
                                                                                                              for potential technical amendments                      significant economic impact on any
                                                      2. § 1.31(c)—Representation to the                      related to § 1.31, including those part 4
                                                      Commission                                                                                                      such persons.
                                                                                                              regulations cited by Petitioners. This                     As discussed above, the Proposal
                                                         Consistent with the foregoing                        review may or may not result in a new                   generally updates and simplifies
                                                      amendments and in response to the                       proposed rulemaking.                                    existing Commission regulation 1.31
                                                      Petitioners’ request, the Commission                       Request for comment: The                             with new provisions that safeguard the
                                                      proposes to amend § 1.31 by removing                    Commission requests comment from all                    same statutory-based principles
                                                      existing § 1.31(c). This provision                      interested parties and the general public               previously identified by the
                                                      requires any person utilizing electronic                regarding potential technical                           Commission. It accomplishes this by
                                                      storage media to provide a written                      amendments to Commission regulations                    deleting outdated terms and revising
                                                      representation to the Commission prior                  related to § 1.31. The Commission                       provisions to reflect advances in
                                                      to the use of the system certifying that                specifically requests comment whether                   information technology, allowing
                                                      the system satisfies the requirements in                the proposed changes to § 1.31 will                     records entities to benefit from evolving
                                                      existing paragraph (b)(1)(ii) and, where                resolve all outstanding issues regarding                technological developments while
                                                      applicable, if the system will be using                 compliance with part 4 of the                           maintaining necessary safeguards to
                                                      storage media other than optical disk or                Commission’s regulations identified by                  ensure the reliability of the
                                                      CD–ROM. Further, the written                            Petitioners. The Commission encourages                  recordkeeping process.
                                                      representation must include an                          all comments including background                          The Commission believes that the
                                                      affirmation from an individual                          information, actual market examples,                    proposed rules would impose only
                                                      consistent with § 1.10(d)(4), i.e., the                 best practice principles, and estimates                 limited additional costs on small
                                                      information provided is true and correct                of any asserted costs and expenses.                     entities related to the requirement that
                                                      to the best knowledge and belief of the
                                                                                                              III. Related Matters                                    they establish written recordkeeping
                                                      affirming individual. The Commission
                                                                                                                                                                      policies and procedures. However, this
                                                      believes that the requirement set forth in              A. Regulatory Flexibility Act                           new requirement is replacing existing
                                                      proposed § 1.31(c)(2) regarding written                    The Regulatory Flexibility Act                       requirements applicable to such persons
                                                      policies and procedures for regulatory                  (‘‘RFA’’) 31 requires Federal agencies, in              in many cases, including the existing
                                                      records obviates the need for any                       promulgating regulations, to consider                   similar requirements discussed above to
                                                      records entity to provide notice to the                 whether the rules they propose will                     (i) Maintain an audit system and (ii)
                                                      Commission regarding its compliance                     have a significant economic impact on                   under certain circumstances, retain a
                                                      with § 1.31. Moreover, the Commission                   a substantial number of small entities                  Technical Consultant. Further, as part of
                                                      recognizes that references to optical                   and, if so, to provide a regulatory                     the Proposal, the Commission is
                                                      disks and CD–ROM are outdated.                          flexibility analysis regarding the                      proposing to remove existing
                                                      3. § 1.31(d)—Other Paper Regulatory                     economic impact on those entities.                      requirements that are expected to lower
                                                      Records                                                    As discussed above, because the                      costs for all records entities, including
                                                                                                              Proposal relates to most recordkeeping                  small entities, by removing
                                                         Consistent with the foregoing
                                                                                                              obligations under the CEA and the                       requirements that certain records be
                                                      amendments, the Commission proposes
                                                                                                              Commission’s regulations, it may affect                 kept in paper form.
                                                      to amend § 1.31 by removing current
                                                                                                              the full spectrum of Commission                            In light of the limited scope of the
                                                      § 1.31(d). This provision states that
                                                                                                              registrants, all persons required to                    proposed changes and the added
                                                      certain paper records, such as trading
                                                                                                              register but not registered with the                    flexibility and expected cost-savings
                                                      cards and paper copies of electronically
                                                                                                              Commission, and certain persons that                    provided to small entities thereby, the
                                                      filed certified forms, must be retained in
                                                                                                              are neither registered nor required to                  Commission does not expect small
                                                      hard-copy for the required time period.
                                                                                                              register with the Commission. The                       entities that are records entities to incur
                                                      The Commission believes that revised
                                                                                                              Commission has previously determined
                                                      § 1.31 provides records entities with
                                                                                                              that certain registrants are not small                  75 FR 55410, 55416 (Sept. 10, 2010) (retail foreign
                                                      sufficient flexibility on how to retain
                                                                                                              entities for purposes of the RFA and,                   exchange dealers); and Registration of Swap Dealers
                                                      regulatory records while maintaining                                                                            and Major Swap Participants, 77 FR 2613, 2620
                                                                                                              therefore, the requirements of the RFA
                                                      the Commission’s ability to access
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                                                                                                                                                                      (Jan. 19, 2012) (swap dealers and major swap
                                                                                                              do not apply to those entities.32 For                   participants).
                                                      reliable regulatory information. Having
                                                                                                                                                                         33 See 47 FR at 18620 (commodity trading
                                                      eliminated the requirement for a records                  31 5U.S.C. 601 et seq.                                advisors and floor brokers); Registration of Floor
                                                      entity to retain regulatory records in a                  32 See,e.g., Policy Statement and Establishment of    Traders; Mandatory Ethics Training for Registrants;
                                                      specific form and manner, the                           Definitions of ‘‘Small Entities’’ for Purposes of the   Suspension of Registrants Charged With Felonies,
                                                      Commission believes that § 1.31(d) no                   Regulatory Flexibility Act, 47 FR 18618 (Apr. 30,       58 FR 19575, 19588 (Apr. 15, 1993) (floor traders);
                                                      longer serves any regulatory purpose.                   1982) (futures commission merchants and                 and Introducing Brokers and Associated Persons of
                                                                                                              commodity pool operators); Leverage Transactions,       Introducing Brokers, Commodity Trading Advisors
                                                         Request for comment: The                             54 FR 41068 (Oct. 5, 1989) (leverage transaction        and Commodity Pool Operators; Registration and
                                                      Commission requests comment from all                    merchants); Regulation of Off-Exchange Retail           Other Regulatory Requirements, 48 FR 35248,
                                                      interested parties and the general public               Foreign Exchange Transactions and Intermediaries,       35276 (Aug. 3, 1983) (introducing brokers).



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                                                      6364                   Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Proposed Rules

                                                      new costs, on a net basis, as a result of               recordkeeping policies and procedures.                 (4) minimize the burden of the
                                                      the Proposal. Consequently, the                         This estimate includes approximately                   collection of information on those who
                                                      Commission finds that no significant                    8,792 registrants, 15 designated contract              are to respond, including through the
                                                      economic impact on small entities will                  markets, 23 swap execution facilities, 4               use of automated collection techniques
                                                      result from the Proposal.                               swap data repositories, 15 designated                  or other forms of information
                                                        Accordingly, the Chairman, on behalf                  clearing organizations, and 3,200                      technology.
                                                      of the Commission, hereby certifies                     unregistered members of designated                       Comments may be submitted directly
                                                      pursuant to 5 U.S.C. 605(b) that the                    contract markets or swap execution                     to the Office of Information and
                                                      Proposal will not have a significant                    facilities, with the balance reflecting the            Regulatory Affairs, by fax at (202) 395–
                                                      economic impact on a substantial                        Commission’s estimate of those persons                 6566, or by email at OIRAsubmissions@
                                                      number of small entities.                               that are required to register with the                 omb.eop.gov. Please provide the
                                                                                                              Commission, but have not so registered,                Commission with a copy of submitted
                                                      B. Paperwork Reduction Act                              and other persons neither registered nor               comments so that all comments can be
                                                      1. Background                                           required to register with the                          summarized and addressed in the final
                                                                                                              Commission.36                                          rule preamble. Refer to the ADDRESSES
                                                         The Paperwork Reduction Act of 1995
                                                                                                                Based on the above, the estimated                    section of this notice of proposed
                                                      (‘‘PRA’’) 34 imposes certain
                                                                                                              additional hour burden for                             rulemaking for comment submission
                                                      requirements on Federal agencies
                                                                                                              recordkeeping policies and procedures                  instructions to the Commission. A copy
                                                      (including the Commission) in
                                                                                                              of 150,000 hours is calculated as                      of the supporting statements for the
                                                      connection with their conducting or
                                                                                                              follows:                                               collection of information discussed
                                                      sponsoring any collection of                              Number of affected persons: 15,000.                  above may be obtained by visiting
                                                      information as defined by the PRA. The                    Frequency of collection: Annually.                   www.RegInfo.gov. OMB is required to
                                                      Proposal would result in a collection of                  Estimated annual responses per                       make a decision concerning the
                                                      information within the meaning of the                   registrant: 1.                                         collection of information between 30
                                                      PRA, as discussed below. The                              Estimated aggregate number of                        and 60 days after publication of this
                                                      Commission therefore is submitting the                  annual responses: 15,000.                              document in the Federal Register.
                                                      Proposal to the Office of Management                      Estimated annual hour burden per                     Therefore, a comment is best assured of
                                                      and Budget (‘‘OMB’’) for review.                        registrant: 10.37                                      having its full effect if OMB receives it
                                                         The Proposal contains a collection of                  Estimated aggregate annual hour                      within 30 days of publication.
                                                      information for which the Commission                    burden: 150,000 (15,000 registrants × 10
                                                      has previously received a control                       hours per registrant).38                               C. Cost-Benefit Considerations
                                                      number from OMB. The title for this                                                                               Section 15(a) of the CEA39 requires
                                                                                                              3. Information Collection Comments
                                                      collection of information is ‘‘Adaptation                                                                      the Commission to consider the costs
                                                      of Regulations to Incorporate Swaps-                       The Commission invites the public                   and benefits of its actions before issuing
                                                      Records of Transactions, OMB control                    and other Federal agencies to comment                  a regulation under the CEA. Section
                                                      number 3038–0090’’.35 Collection 3038–                  on any aspect of the proposed                          15(a) further specifies that the costs and
                                                      0090 is currently in force with its                     information collection requirements                    benefits shall be evaluated in light of the
                                                      control number having been provided                     discussed above. Pursuant to 44 U.S.C.                 following five broad areas of market and
                                                      by OMB.                                                 3506(c)(2)(B), the Commission solicits                 public concern: (i) Protection of market
                                                         The responses to the Proposal’s                      comments in order to: (1) Evaluate                     participants and the public; (ii)
                                                      collection of information are mandatory.                whether the proposed collection of                     efficiency, competitiveness and
                                                      An agency may not conduct or sponsor,                   information is necessary for the proper                financial integrity of futures markets;
                                                      and a person is not required to respond                 performance of the functions of the                    (iii) price discovery; (iv) sound risk
                                                      to, a collection of information unless it               Commission, including whether the                      management practices; and (v) other
                                                      displays a currently valid control                      information will have practical utility;               public interest considerations. The
                                                      number issued by OMB.                                   (2) evaluate the accuracy of the                       Commission considers the costs and
                                                         As discussed above, in respect of                    Commission’s estimate of the burden of                 benefits resulting from its discretionary
                                                      collections of information, the Proposal                the proposed collection of information;                determinations with respect to the
                                                      would replace the existing audit system                 (3) determine whether there are ways to                Section 15(a) considerations.
                                                      requirements with a requirement that                    enhance the quality, utility, and clarity
                                                      records entities establish written                      of the information to be collected; and                1. Costs
                                                      recordkeeping policies and procedures.                                                                            As discussed above in relation to the
                                                      Such changes would result in revisions                    36 With respect to registrants and registered
                                                                                                                                                                     RFA, the Proposal generally updates
                                                      to collection 3038–0090. Therefore, the                 entities, these numbers are based on the number of
                                                                                                              such persons so registered with the Commission as      and simplifies existing Commission
                                                      Commission proposes to revise                           of November 2, 2016. With respect to the number        regulation 1.31 by deleting outdated
                                                      collection 3038–0090 as described                       of unregistered members of designated contract         terms and revising provisions to reflect
                                                      below.                                                  markets or swap execution facilities, see Agency       advances in information technology
                                                                                                              Information Collection Activities: Proposed
                                                      2. Modification of Collection 3038–                     Collection Revision, Comment Request: Final Rule       while safeguarding the statutory-based
                                                      0090—Recordkeeping Policies and                         for Records of Commodity Interest and Related Cash     principles previously identified by the
                                                                                                              or Forward Transactions, 80 FR 80327 (Dec. 24,         Commission. The Commission
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                                                      Procedures                                              2015).                                                 preliminarily believes that the Proposal
                                                         The Commission estimates that the                      37 This burden hour estimate reflects the
                                                                                                                                                                     would impose certain costs on records
                                                      Proposal will require approximately                     Commission’s assumption that many records
                                                                                                              entities already have policies and procedures that,    entities. These costs are those necessary
                                                      15,000 persons to develop and maintain                  in whole or in part, satisfy the proposed              to establish and maintain required
                                                                                                              recordkeeping policies and procedures requirement.     written recordkeeping policies and
                                                        34 44U.S.C. 3501 et seq.                                38 The Commission will also submit to OMB
                                                        35 See
                                                                                                                                                                     procedures. The Commission believes
                                                              OMB Control No. 3038–0090, http://              revisions to Collection 3038–0090 to reflect the
                                                      www.reginfo.gov/public/do/PRAOMBHistory?omb             Proposal’s replacement of the audit system             that these costs will be quite limited. At
                                                      ControlNumber=3038-0090# (last visited Sep. 20,         requirements in current Commission regulation
                                                      2016).                                                  1.31.                                                    39 7   U.S.C. 19(a).



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                                                                             Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Proposed Rules                                                 6365

                                                      the same time, the Commission                           Section 15(a) further specifies that the               transition costs, if any, will the
                                                      preliminarily believes that the Proposal                costs and benefits shall be evaluated in               Proposal’s requirement for written
                                                      would also reduce current                               light of five broad areas of market and                policies and procedures entail?
                                                      recordkeeping costs under Commission                    public concern: (i) Protection of market                  • Are there any costs or benefits
                                                      regulation 1.31, because the Proposal                   participants and the public; (ii)                      associated with the Proposal that the
                                                      would increase flexibility provided to                  efficiency, competitiveness, and                       Commission has not considered in the
                                                      records entities and also eliminate                     financial integrity of futures markets;                Proposal? Please provide details and
                                                      certain requirements as described above                 (iii) price discovery; (iv) sound risk                 estimates regarding any asserted costs or
                                                      (e.g., removing the requirements to have                management practices; and (v) other                    benefits.
                                                      an audit system, to maintain electronic                 public interest considerations.                        List of Subjects
                                                      records in limited specified formats, and
                                                      to retain a Technical Consultant).                      i. Protection of Market Participants and               17 CFR Part 1
                                                                                                              the Public
                                                      2. Benefits                                                                                                      Commodity futures, Reporting and
                                                                                                                 The Proposal will continue to protect               recordkeeping requirements.
                                                         The Commission is committed to                       the public by maintaining necessary
                                                      reviewing its regulations to ensure they                safeguards to ensure the reliability of                17 CFR Part 23
                                                      keep pace with technological                            the recordkeeping process while                          Authority delegations (Government
                                                      developments and industry trends, and                   allowing records entities to benefit from              agencies), Commodity futures,
                                                      reduce regulatory burden. The                           evolving technology.                                   Reporting and recordkeeping
                                                      Commission believes that the Proposal                                                                          requirements.
                                                      will allow records entities to benefit                  ii. Efficiency, Competitiveness, and
                                                      from evolving technology while                          Financial Integrity of Markets                           For the reasons stated in the
                                                      maintaining necessary safeguards to                                                                            preamble, the Commodity Futures
                                                                                                                 As discussed above, the Proposal may
                                                      ensure the reliability of the                                                                                  Trading Commission proposes to amend
                                                                                                              increase resource allocation efficiency
                                                      recordkeeping process. By deleting                                                                             17 CFR chapter I as follows:
                                                                                                              by improving the way in which records
                                                      outdated terms and revising provisions                  are maintained. Otherwise, the                         PART 1—GENERAL REGULATIONS
                                                      to reflect advances in information                      Commission anticipates minimal change                  UNDER THE COMMODITY EXCHANGE
                                                      technology, the Proposal will allow                     to the efficiency, competitiveness, and                ACT
                                                      records entities to utilize a wider range               financial integrity of the markets.
                                                      of currently available technology than                                                                         ■ 1. The authority citation for part 1
                                                      previously allowed and remove                           iii. Price Discovery
                                                                                                                                                                     continues to read as follows:
                                                      requirements that the Commission                          The Commission believes that the
                                                                                                                                                                       Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c,
                                                      believes are now obsolete, allowing                     Proposal may increase confidence and                   6d, 6e, 6f, 6g, 6h, 6i, 6k, 6l, 6m, 6n, 6o, 6p,
                                                      records entities to reduce their costs. In              participation in the markets for the                   6r, 6s, 7, 7a–1, 7a–2, 7b, 7b–3, 8, 9, 10a, 12,
                                                      addition, the Commission believes that                  reasons discussed above. Nevertheless,                 12a, 12c, 13a, 13a–1, 16, 16a, 19, 21, 23, and
                                                      the flexibility provided by the Proposal                the Commission does not anticipate a                   24 (2012).
                                                      will, without further Commission                        significant increase in liquidity or a                 ■   2. Revise § 1.31 to read as follows:
                                                      rulemaking, allow records entities to                   significant improvement in price
                                                      adopt new technologies as such                          discovery as a result of this rulemaking.              § 1.31 Regulatory records; retention and
                                                      technologies evolve, allowing such                                                                             production.
                                                                                                              iv. Sound Risk Management Practices                      (a) Definitions. For purposes of this
                                                      persons to reduce their future costs.
                                                         Moreover, the Commission expects                       By improving recordkeeping policies                  section:
                                                      that the added flexibility provided by                  and procedures, the Proposal may                          Electronic regulatory records means
                                                      the Proposal will encourage records                     encourage records entities to analyze                  all regulatory records other than
                                                      entities to utilize electronic storage                  their recordkeeping practices and create               regulatory records exclusively created
                                                      rather than maintain paper regulatory                   or update policies and procedures                      and maintained by a records entity on
                                                      records. The Commission expects that                    related thereto.                                       paper.
                                                      this conversion will benefit the                                                                                  Records entity means any person
                                                                                                              v. Other Public Interest Considerations                required by the Act or Commission
                                                      Commission, the DOJ, and the
                                                      commodity interest industry, generally,                   The Commission has not identified                    regulations in this chapter to keep
                                                      by making the universe of regulatory                    any additional public interest                         regulatory records.
                                                      records more accessible and searchable.                 considerations.                                           Regulatory records means all books
                                                         In addition, as a result of the Proposal                                                                    and records required to be kept by the
                                                                                                              4. Request for Comments                                Act or Commission regulations in this
                                                      codifying industry practices to require
                                                      recordkeeping policies and procedures                     The Commission invites public                        chapter, including any record of any
                                                      and, in doing so, providing records                     comment on its cost-benefit                            correction or other amendment to such
                                                      entities with an opportunity to examine                 considerations, including the Section                  books and records, provided that, with
                                                      their own recordkeeping practices, the                  15(a) factors described above.                         respect to such books and records stored
                                                      Commission expects that records                         Commenters are also invited to submit                  electronically, regulatory records shall
                                                      entities may improve the quality of such                any data or other information that they                also include:
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                                                      practices and, thus, the accuracy and                   may have quantifying or qualifying the                    (i) All data produced and stored
                                                      integrity of their regulatory records.                  costs and benefits of the Proposal with                electronically that describes, directly or
                                                                                                              their comment letters.                                 indirectly, the characteristics of such
                                                      3. Section 15(a) Factors                                  The Commission specifically seeks                    books and records, including, without
                                                         Section 15(a) of the CEA requires the                comment on the following:                              limitation, data that describes how,
                                                      Commission to consider the costs and                      • For those market participants with                 when, and, if relevant, by whom such
                                                      benefits of its actions before                          written operational procedures and                     electronically stored information was
                                                      promulgating a regulation under the                     controls that comply with current                      collected, created, accessed, modified,
                                                      CEA or issuing certain orders. CEA                      Commission regulation 1.31, what                       or formatted; and


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                                                      6366                   Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Proposed Rules

                                                         (ii) Any data necessary to access,                   appropriate systems and controls that                  regulatory record returned by such
                                                      search, or display any such books and                   ensure the authenticity and reliability of             representative.
                                                      records.                                                electronic regulatory records, including,              ■ 3. In § 1.35, revise paragraph (a)(5) to
                                                         (b) Regulatory records policies and                  without limitation:                                    read as follows:
                                                      procedures. Each records entity shall                      (i) Systems that maintain the security,
                                                      establish, maintain, and implement                      signature, chain of custody elements,                  § 1.35 Records of commodity interest and
                                                      written policies and procedures                         and data as necessary to ensure the                    related cash or forward transactions.
                                                      reasonably designed to ensure that the                  authenticity of the information
                                                      records entity complies with its                        contained in electronic regulatory                       (a) * * *
                                                      obligations under this section. Such                    records and to monitor compliance with                   (5) Form and manner. All records
                                                      policies and procedures shall provide                   the Act and Commission regulations in                  required to be kept pursuant to
                                                      for, without limitation, appropriate                    this chapter;                                          paragraphs (a)(1), (2), (3), and (4) of this
                                                      training of officers and personnel of the                  (ii) Systems that ensure the records                section, other than pre-trade
                                                      records entity regarding their                          entity is able to produce electronic                   communications, shall be kept in a form
                                                      responsibility for ensuring compliance                  regulatory records in accordance with                  and manner that allows for the
                                                      with the obligations of the records entity              this section, and ensure the availability              identification of a particular transaction.
                                                      under this section, and regular                         of such regulatory records in the event
                                                                                                              of an emergency or other disruption of                 *     *     *     *     *
                                                      monitoring for such compliance.
                                                         (c) Duration of retention. Unless                    the records entity’s electronic record
                                                                                                                                                                     PART 23—SWAP DEALERS AND
                                                      specified elsewhere in the Act or                       retention systems; and
                                                                                                                 (iii) The creation and maintenance of               MAJOR SWAP PARTICIPANTS
                                                      Commission regulations in this chapter:
                                                         (1) A records entity shall keep                      an up-to-date inventory that identifies
                                                                                                                                                                     ■ 4. The authority citation for part 23
                                                      regulatory records of any swap or                       and describes each system that
                                                      related cash or forward transaction (as                 maintains information necessary for                    continues to read as follows:
                                                      defined in § 23.200(i) of this chapter),                accessing or producing electronic                         Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6b–
                                                      other than regulatory records of oral                   regulatory records.                                    1, 6c, 6p, 6r, 6s, 6t, 9, 9a, 12, 12a, 13b, 13c,
                                                      communications, from the date the                          (e) Inspection and production of                    16a, 18, 19, 21.
                                                      regulatory record was created until the                 regulatory records. Unless specified                      Section 23.160 also issued under 7 U.S.C.
                                                      termination, maturity, expiration,                      elsewhere in the Act or Commission                     2(i); Sec. 721(b), Pub. L. 111–203, 124 Stat.
                                                      transfer, assignment, or novation date of               regulations in this chapter, a records                 1641 (2010).
                                                      the transaction and for a period of not                 entity, at its own expense, must produce
                                                      less than five years after such date.                   or make accessible for inspection all                  ■ 5. In § 23.203, amend paragraph (b) as
                                                         (2) A records entity that is required to             regulatory records in accordance with                  follows:
                                                      retain oral communications, shall keep                  the following requirements:                            ■ a. Revise paragraph (b)(1); and
                                                      regulatory records of oral                                 (1) Inspection. All regulatory records              ■ b. Remove and reserve paragraph
                                                      communications for a period of not less                 shall be open to inspection by any
                                                                                                                                                                     (b)(2).
                                                      than one year from the date of such                     representative of the Commission or the
                                                      communication.                                          United States Department of Justice.                     The revisions to read as follows:
                                                         (3) A records entity shall keep each                    (2) Production of paper regulatory
                                                                                                                                                                     § 23.203 Records; retention and
                                                      regulatory record other than the records                records. A records entity must produce
                                                                                                                                                                     inspection.
                                                      described in paragraph (c)(1) or (2) of                 regulatory records exclusively created
                                                      this section for a period of not less than              and maintained on paper promptly                       *     *     *     *    *
                                                      five years from the date on which the                   upon request of a Commission                             (b) * * * (1) The records required to
                                                      record was created.                                     representative.                                        be maintained by this chapter shall be
                                                         (4) A records entity shall keep                         (3) Production of electronic regulatory             maintained in accordance with the
                                                      regulatory records exclusively created                  records. (i) A request from a                          provisions of § 1.31 of this chapter,
                                                      and maintained on paper readily                         Commission representative for                          except as provided in paragraph (b)(3) of
                                                      accessible for no less than two years. A                electronic regulatory records will                     this section. All such records shall be
                                                      records entity shall keep electronic                    specify a reasonable form and medium                   open to inspection by any representative
                                                      regulatory records readily accessible for               in which a records entity must produce
                                                                                                                                                                     of the Commission, the United States
                                                      the duration of the required record                     such regulatory records.
                                                                                                                 (ii) A records entity must produce                  Department of Justice, or any applicable
                                                      keeping period.                                                                                                prudential regulator. Records relating to
                                                         (d) Form and manner of retention.                    such regulatory records in the form and
                                                      Unless specified elsewhere in the Act or                medium requested promptly, upon                        swaps defined in section 1a(47)(A)(v)
                                                      Commission regulations in this chapter,                 request, unless otherwise directed by                  shall be open to inspection by any
                                                      all regulatory records must be created                  the Commission representative.                         representative of the Commission, the
                                                      and retained by a records entity in                        (4) Production of original regulatory               United States Department of Justice, the
                                                      accordance with the following                           records. A records entity may provide                  Securities and Exchange Commission,
                                                      requirements:                                           an original regulatory record for                      or any applicable prudential regulator.
                                                         (1) Generally. Each records entity                   reproduction, which a Commission                       *     *     *     *    *
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                                                      shall retain regulatory records in a form               representative may temporarily remove
                                                                                                                                                                       Issued in Washington, DC, on January 12,
                                                      and manner that ensures the                             from such entity’s premises for this
                                                                                                                                                                     2017, by the Commission.
                                                      authenticity and reliability of such                    purpose. Upon request of the records
                                                      regulatory records in accordance with                   entity, the Commission representative                  Christopher J. Kirkpatrick,
                                                      the Act and Commission regulations in                   shall issue a receipt for any original                 Secretary of the Commission.
                                                      this chapter.                                           regulatory record received. At the
                                                                                                                                                                       NOTE: The following appendices will not
                                                         (2) Electronic regulatory records. Each              request of a Commission representative,
                                                                                                                                                                     appear in the Code of Federal Regulations.
                                                      records entity maintaining electronic                   a records entity shall, upon the return
                                                      regulatory records shall establish                      thereof, issue a receipt for the original


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                                                                             Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Proposed Rules                                           6367

                                                      Appendices to Recordkeeping—                            DEPARTMENT OF HEALTH AND                               Electronic Submissions
                                                      Commission Voting Summary and                           HUMAN SERVICES                                           Submit electronic comments in the
                                                      Chairman’s Statement                                                                                           following way:
                                                                                                              Food and Drug Administration
                                                      Appendix 1—Commission Voting                                                                                     • Federal eRulemaking Portal:
                                                      Summary                                                                                                        https://www.regulations.gov. Follow the
                                                                                                              21 CFR Part 15
                                                                                                                                                                     instructions for submitting comments.
                                                        On this matter, Chairman Massad and                   [Docket No. FDA–2016–N–1149]                           Comments submitted electronically,
                                                      Commissioners Bowen and Giancarlo                                                                              including attachments, to https://
                                                      voted in the affirmative. No                            Manufacturer Communications                            www.regulations.gov will be posted to
                                                      Commissioner voted in the negative.                     Regarding Unapproved Uses of                           the docket unchanged. Because your
                                                                                                              Approved or Cleared Medical                            comment will be made public, you are
                                                      Appendix 2—Statement of Chairman                        Products; Availability of Memorandum;                  solely responsible for ensuring that your
                                                      Timothy G. Massad                                       Reopening of the Comment Period                        comment does not include any
                                                         I have said many times that it is                    AGENCY:    Food and Drug Administration,               confidential information that you or a
                                                                                                              HHS.                                                   third party may not wish to be posted,
                                                      important for the CFTC to ensure its
                                                                                                              ACTION:  Reopening of comment period                   such as medical information, your or
                                                      rules are up-to-date in light of
                                                                                                              related to public hearing; availability of             anyone else’s Social Security number, or
                                                      technological changes, as outdated rules
                                                                                                              memorandum.                                            confidential business information, such
                                                      can create unnecessary burdens. That is                                                                        as a manufacturing process. Please note
                                                      why I’m pleased we are unanimously                      SUMMARY:    The Food and Drug                          that if you include your name, contact
                                                      issuing this proposed rulemaking,                       Administration (FDA) is reopening the                  information, or other information that
                                                      which is in keeping with that goal.                     comment period for the notification of                 identifies you in the body of your
                                                         Today’s proposal will modernize                      public hearing, published in the Federal               comments, that information will be
                                                      recordkeeping and storage obligations                   Register of September 1, 2016 (81 FR                   posted on https://www.regulations.gov.
                                                      set forth in CFTC rules, and make them                  60299) concerning our comprehensive                      • If you want to submit a comment
                                                      technology neutral. By doing so, it will                review of our regulations and policies                 with confidential information that you
                                                      reduce costs for businesses and improve                 governing manufacturer                                 do not wish to be made available to the
                                                      the quality of record preservation and                  communications regarding unapproved                    public, submit the comment as a
                                                      production. Among other things, the                     uses of approved or cleared medical                    written/paper submission and in the
                                                                                                              products. FDA is also announcing that                  manner detailed (see ‘‘Written/Paper
                                                      proposal will provide greater flexibility
                                                                                                              it has added a document to the docket                  Submissions’’ and ‘‘Instructions’’).
                                                      when it comes to how records must be
                                                                                                              for the public hearing entitled
                                                      retained and produced. In this age                      ‘‘Memorandum: Public Health Interests                  Written/Paper Submissions
                                                      where terabytes of storage easily fit in                and First Amendment Considerations                        Submit written/paper submissions as
                                                      one’s pocket, our rules should not refer                Related to Manufacturer                                follows:
                                                      to microfiche or require paper records.                 Communications Regarding                                  • Mail/Hand delivery/Courier (for
                                                         Today’s proposal is also an example                  Unapproved Uses of Approved or                         written/paper submissions): Division of
                                                      of how the Commission is focusing on                    Cleared Medical Products’’                             Dockets Management (HFA–305), Food
                                                      issues related to technological change                  (Memorandum). The Memorandum                           and Drug Administration, 5630 Fishers
                                                      generally in our markets. In this regard,               provides additional background on the                  Lane, Rm. 1061, Rockville, MD 20852.
                                                      there is much talk today about                          issues FDA is considering as part of its                  • For written/paper comments
                                                      innovations that may come from                          comprehensive review, including a                      submitted to the Division of Dockets
                                                      financial technology. While it is the role              discussion of First Amendment                          Management, FDA will post your
                                                      of the private sector to develop                        considerations. In addition, elsewhere                 comment, as well as any attachments,
                                                                                                              in this issue of the Federal Register,                 except for information submitted,
                                                      innovations, I believe it is our role to
                                                                                                              FDA is announcing the availability of                  marked and identified, as confidential,
                                                      ensure that the Commission’s rules do
                                                                                                              two draft guidance for industry that                   if submitted as detailed in
                                                      not stand in the way of their potential.                address manufacturer communications,
                                                      Today’s proposal is a way to do just                                                                           ‘‘Instructions.’’
                                                                                                              one entitled ‘‘Drug and Device                            Instructions: All submissions received
                                                      that.                                                   Manufacturer Communications With                       must include the Docket No. FDA–
                                                         I thank the CFTC staff for their work                Payors, Formulary Committees, and                      2016–N–1149 for ‘‘Manufacturer
                                                      on this proposal and my fellow                          Similar Entities—Questions and                         Communications Regarding
                                                      Commissioners for their support.                        Answers,’’ and the other entitled                      Unapproved Uses of Approved or
                                                      [FR Doc. 2017–01148 Filed 1–18–17; 8:45 am]             ‘‘Medical Product Communications That                  Cleared Medical Products; Public
                                                                                                              Are Consistent With the FDA-Required                   Hearing; Requests for Comments.’’
                                                      BILLING CODE 6351–01–P
                                                                                                              Labeling—Questions and Answers.’’                      Received comments will be placed in
                                                                                                              FDA is reopening the comment period                    the docket and, except for those
                                                                                                              to provide the public an opportunity to                submitted as ‘‘Confidential
                                                                                                              review the Memorandum as it relates to                 Submissions,’’ publicly viewable at
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                                                                                                              the specific questions and issues                      https://www.regulations.gov or at the
                                                                                                              identified in the notification of public               Division of Dockets Management
                                                                                                              hearing as well as review the two draft                between 9 a.m. and 4 p.m., Monday
                                                                                                              guidances and provide additional or                    through Friday.
                                                                                                              new comments.                                             • Confidential Submissions—To
                                                                                                              DATES: Submit either electronic or                     submit a comment with confidential
                                                                                                              written comments by April 19, 2017.                    information that you do not wish to be
                                                                                                              ADDRESSES: You may submit comments                     made publicly available, submit your
                                                                                                              as follows:                                            comments only as a written/paper


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Document Created: 2018-02-01 15:16:22
Document Modified: 2018-02-01 15:16:22
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionProposed Rules
ActionProposed rule.
DatesComments must be received on or before March 20, 2017.
ContactEileen T. Flaherty, Director, (202) 418-5326, [email protected]; Frank Fisanich, Chief Counsel, (202) 418- 5949, [email protected]; Andrew Chapin, Associate Chief Counsel, (202) 418-5465, [email protected]; Katherine Driscoll, Associate Chief Counsel, (202) 418-5544, [email protected]; C. Barry McCarty, Special Counsel, (202) 418-6627, [email protected]; or Jacob Chachkin, Special Counsel, (202) 418-5496, [email protected], Division of Swap Dealer and Intermediary Oversight, Commodity Futures Trading Commission, 1155 21st Street NW., Washington, DC 20581.
FR Citation82 FR 6356 
RIN Number3038-AE36
CFR Citation17 CFR 1
17 CFR 23
CFR AssociatedCommodity Futures; Reporting and Recordkeeping Requirements and Authority Delegations (government Agencies)

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