83 FR 46976 - Self-Regulatory Organizations; National Futures Association; Notice of Filing and Immediate Effectiveness of Proposed Change to the Interpretive Notice to National Futures Association Compliance Rule 2-30(b): Risk Disclosure Statement for Security Futures Contracts

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 180 (September 17, 2018)

[Federal Register Volume 83, Number 180 (Monday, September 17, 2018)]
[Notices]
[Pages 46976-46977]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-20075]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84076; File No. SR-NFA-2018-04]


Self-Regulatory Organizations; National Futures Association; 
Notice of Filing and Immediate Effectiveness of Proposed Change to the 
Interpretive Notice to National Futures Association Compliance Rule 2-
30(b): Risk Disclosure Statement for Security Futures Contracts

September 11, 2018.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Exchange Act''),\1\ and Rule 19b-7 thereunder,\2\ notice is hereby 
given that on August 31, 2018, National Futures Association (``NFA'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change described in Items I, II, and 
III below, which Items have been prepared by NFA. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
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    On August 21, 2018, NFA also filed this proposed rule change with 
the Commodity Futures Trading Commission (``CFTC'') and requested that 
the CFTC make a determination that review of the proposed rule change 
of NFA is not necessary.\3\ The CFTC has not yet made such 
determination.
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    \3\ See Letter dated August 21, 2018 from Carol A. Wooding, 
NFA's Vice President and General Counsel to Christopher J. 
Kirkpatrick, Office of the Secretariat, CFTC.
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I. Self-Regulatory Organization's Description and Text of the Proposed 
Rule Change

    NFA's Interpretive Notice 9050 entitled ``NFA Compliance Rule 2-
30(b): Risk Disclosure Statement for Security Futures Contracts'' 
(``Interpretive Notice 9050'') requires NFA Members and Associates 
(``Member'') who are registered as brokers or dealers under Section 
15(b)(11) of the Exchange Act \4\ to provide a disclosure statement for 
security futures products (``SFPs'') to a customer at or before the 
time the Member approves the account to trade SFPs. The risk disclosure 
statement contains, among other things, a section on Securities 
Investor Protection Corporation (``SIPC'') coverage for cash 
protection. NFA is amending Section 6.1 of Interpretive Notice 9050 to 
reflect that SIPC coverage for cash protection has increased from 
$100,000 to $250,000.
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    \4\ 15 U.S.C. 78o(b)(11).
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    NFA is also amending Interpretive Notice 9050 to incorporate one 
other non-substantive change. The text of the proposed rule changes to 
Interpretive Notice 9050 is found in Exhibit 4.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for the Proposed Rule Change

    In its filing with the Commission, NFA included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NFA has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for the Proposed Rule Change

1. Purpose
    Section 15A(k) of the Exchange Act \5\ makes NFA a national 
securities association for the limited purpose of regulating the 
activities of Members who are registered as brokers or dealers in SFPs 
under Section 15(b)(11) of the Exchange Act.\6\ NFA's Interpretive 
Notice 9050 applies to all Members who meet the criteria outlined in 
Interpretive Notice 9050, including those that are registered as 
security futures brokers or dealers under Section 15(b)(11) of the 
Exchange Act.\7\
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    \5\ 15 U.S.C. 78o-3(k).
    \6\ 15 U.S.C. 78o(b)(11).
    \7\ Id.
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    The risk disclosure statement for SFPs is a uniform statement that 
was jointly developed in 2002 by NFA, FINRA, and a number of securities 
and futures exchanges. SEC staff recently contacted NFA and requested a 
change to Section 6.1 of the Risk Disclosure Statement to reflect that 
SIPC coverage for cash protection has increased from $100,000 to 
$250,000. Accordingly, NFA's amendment to Section 6.1 of Interpretive 
Notice 9050 is a minor amendment to correct the limit of SIPC cash 
protection.
    NFA is also amending Section 5.2 of Interpretive Notice 9050 to 
make a stylistic change to delete a set of quotation marks around the 
qualifying abbreviation for National Securities Clearing Corporation--
NSCC. FINRA staff notified NFA that it also intends to make the same 
modifications to its risk disclosure statement to cover its members.
    Amendments to NFA Interpretive Notice 9050 were previously filed 
with the SEC in SR-NFA-2002-05, Exchange Act Release No. 34-46613 (Oct. 
7, 2002), 67 FR 64176 (Oct. 17, 2002); SR-NFA-2002-06, Exchange Act 
Release No. 34-47150 (Jan. 9, 2003), 68 FR 2381 (Jan. 16, 2003); SR-
NFA-2007-07, Exchange Act Release No. 34-57142 (Jan. 14, 2008), 73 FR 
3502 (Jan. 18, 2008); SR-NFA-2010-02, Exchange Act Release No. 34-62624 
(Aug. 2, 2010), 75 FR 47666 (Aug. 6, 2010); SR-NFA-2010-03, Exchange 
Act Release No. 34-62651 (Aug. 4, 2010), 75 FR 48393 (Aug. 10, 2010); 
and [sic] SR-NFA-2014-02, Exchange Act Release No. 34-71980 (Apr. 21, 
2014), 79 FR 23027 (Apr. 25, 2014); and SR-NFA-2018-03, Exchange Act 
Release No. 34-83589 (July 3, 2018), 83 FR 31804 (July 9, 2018).
2. Statutory Basis
    The proposed rule change is authorized by, and consistent with, 
Section 15A(k)(2)(B) of the Exchange Act.\8\ That Section requires NFA 
to have rules that are designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
and, in general, to

[[Page 46977]]

protect investors and the public interest, in connection with SFPs. The 
proposed rule change accomplishes this by requiring Members to provide 
customers trading in SFPs with a risk disclosure statement which 
correctly reflects the SIPC coverage for cash protection. Accordingly, 
NFA is amending Interpretive Notice 9050 to update the risk disclosure 
statement to reflect that SIPC coverage for cash protection has 
increased from $100,000 to $250,000. Further, NFA is amending 
Interpretive Notice 9050 to reflect one other non-substantive stylistic 
change. This proposal is not designed to regulate, by virtue of any 
authority conferred by the Exchange Act, matters not related to the 
purposes of the Exchange Act or the administration of the association.
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    \8\ 15 U.S.C. 78o-3(k)(2)(B).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NFA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed change would not 
impose any additional reporting requirements or costs on Members.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    NFA did not publish the rule change to the membership for comment. 
NFA did not receive comment letters concerning the rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    On August 21, 2018, NFA requested that the CFTC make a 
determination that review of the proposed rule change of NFA is not 
necessary. The CFTC has not yet made such determination. At any time 
within 60 days of the date of effectiveness of the proposed rule 
change, the Commission, after consultation with the CFTC, may summarily 
abrogate the proposed rule change and require that the proposed rule 
change be refiled in accordance with the provisions of Section 19(b)(1) 
of the Exchange Act.\9\
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    \9\ 15 U.S.C. 78s(b)(1).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NFA-2018-04 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NFA-2018-04. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10 a.m. and 3 
p.m. Copies of the filing also will be available for inspection and 
copying at the principal office of NFA. All comments received will be 
posted without change. Persons submitting comments are cautioned that 
we do not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-NFA-
2018-04 and should be submitted on or before October 9, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Eduardo A. Aleman,
Assistant Secretary.
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    \10\ 17 CFR 200.30-3(a)(73).
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[FR Doc. 2018-20075 Filed 9-14-18; 8:45 am]
 BILLING CODE 8011-01-P