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Rules Relating To Review of National Futures Association Decisions in Disciplinary, Membership Denial, Registration and Member Responsibility Actions

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Commodity Futures Trading Commission.


Final Rule.


The Commodity Futures Trading Commission (“Commission” or “CFTC”) hereby amends 17 CFR Part 171, by adding language to Commission Rule § 171.9(b) (manner of service), allowing for service by facsimile (“fax”) or by electronic means (“e-mail”), making either means of service effective upon receipt. The amendment will also indicate that parties who consent to accepting service of documents by electronic means or fax in the underlying NFA action also consent to accepting service by the same means in proceedings under Part 171.


August 2, 2007.

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Thuy Dinh, Office of the General Counsel, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581. Telephone: (202) 418-5128.

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On October 9, 1990, the Commission adopted Part 171 to establish standards and procedures for its review of decisions of registered futures associations such as the National Futures Association (“NFA”) in disciplinary actions, membership denial actions, registration actions and member responsibility actions. 55 FR 41061. From the time Part 171 was promulgated until now, Commission Rule 171.9(b) provides only for service by personal delivery (effective upon receipt) or service by mail (effective upon deposit). On May 22, 2007, the NFA asked the Commission to amend language to Rule 171.9(b), to allow service by fax and e-mail. In proposing the amendment, NFA cited three supporting arguments: (1) To avoid undue delay (due to cautionary procedures adopted in the post-September 11 climate, postal mail to U.S. government agencies is often delayed and thus is not as effective as it used to be prior to September 11); (2) to take advantage of technological means of service, which will be faster and less costly than the mails; (3) to Start Printed Page 42277streamline procedures. NFA cites Commission Rules under 17 CFR Part 10, which allows for service of documents by fax in enforcement proceedings. In addition, it cites its own rules governing arbitration, compliance and disciplinary cases as allowing service by both fax and e-mail. Thus, NFA asserts, to allow service by fax and e-mail in Part 171 would make the process more efficient.

After reviewing NFA's proposed amended language and its justifications for the proposal, the Commission has decided to adopt NFA's request in its entirety. Amending the 17 CFR 171.9(b) to allow for service by fax and e-mail will(a) enhance the efficiency of proceedings under Part 171; and (b) comport with the various capabilities of today's changing world.

Related Matters

A. No Notice Is Required Under 5 U.S.C. 553

The Commission has determined that this amendment to Part 171 is exempt from the provisions of the Administrative Procedure Act, 5 U.S.C. 553, which generally require notice of proposed rulemaking and provide other opportunities for public participation. However, 5 U.S.C. 553 gives an agency discretion not to provide notice for “rules of agency organization, procedure, or practice.” Notice and public procedure are unnecessary in this case. The proposed amendment, if made effective immediately, will actually promote efficiency and facilitate the Commission's core mission. For the above reasons, the notice requirements under 5 U.S.C. 553 are inapplicable.

B. Regulatory Flexibility Act

The Regulatory Flexibility Act (“RFA”), 5 U.S.C. 601 et seq., requires agencies with rulemaking authority to consider the impact those rules will have on small businesses. With respect to persons seeking Commission reviews of NFA adjudicatory decisions, the amendments will impose no additional regulatory burden. Commission review of NFA disciplinary and membership denial actions has been carried out pursuant to 17 CFR Part 171 since 1990. These amendments to 17 CFR 171.9(b) do not present any significant changes and will in fact ease the regulatory burden by providing more options, greater certainty and predictability concerning manners of service under Part 171. Accordingly, the Acting Chairman, on behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that the amendments will not have a significant economic impact on a substantial number of small businesses.

C. Paperwork Reduction Act

The amendments to Part 171 rules do not impose a burden within the meaning and intent of the Paperwork Reduction Act of 1980, 44 U.S.C. 3501, et seq.

D. Cost-Benefit Analysis

Section 15(a) of the Commodity Exchange Act, 7 U.S.C. 19(a), requires the Commission to consider the costs and benefits of its action before issuing a new regulation. Section 15(a) further specifies that costs and benefits shall be evaluated in light of five broad areas of market and public concern: (1) Protection of market participants and the public; (2) efficiency, competitiveness, and financial integrity of futures markets; (3) price discovery; (4) sound risk management practices; and (5) other public interest considerations. Accordingly, the Commission can, in its discretion, give greater weight to any one of the five enumerated areas of concern and can, in its discretion, determine that notwithstanding its costs, a particular rule is necessary or appropriate to protect the public interest or to effectuate any of the provisions, or accomplish any of the purposes, of the Commodity Exchange Act.

The amendments to Part 171 will not create any significant change in the Commission's appellate process or impose new burdens or costs thereon. In fact, the amendments should enhance the protection of market participants and the public by making service more certain, faster and cheaper.

After considering these above factors, the Commission has determined to amend Part 171, as set forth below.

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List of Subjects in 17 CFR Part 171

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In consideration of the following, and pursuant to authority contained in the Commodity Exchange Act, the Commission hereby amends chapter I of title 17 of the Code of Federal Regulations to read as follows:

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1. The authority citation for Part 171 continues to read as follows:

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Authority: 7 U.S.C. 4a, 12a, and 21.

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2. Section 171.9 is amended by revising paragraph (b) to read as follows:

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(b) Manner of Service: Service may be made by personal delivery (effective upon receipt), mail (effective upon deposit), facsimile (effective upon receipt) or electronic mail (effective upon receipt). When service is effected by mail, the time within which the person served may respond thereto shall be increased by five days. Parties who consent to accepting service of documents by electronic means in the underlying NFA action also consent to accepting service by the same means in proceedings under this Part 171.

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Issued in Washington, DC on the 26th of July 2007, by the Commission.

Eileen A. Donovan,

Acting Secretary of the Commission.

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[FR Doc. E7-14922 Filed 8-1-07; 8:45 am]