7 U.S.C. § 21 — Registered futures associations

submitted 104 years ago by Pub. L. 93-463 to r/title-7-AGRICULTURE · 5,270 words · no verdicts yet

in plain englishAI-generated · not legal advice

This law lets groups register with the Commodity Futures Trading Commission as futures associations. It sets rules for membership, discipline, dues, and customer dispute processes. The Commission oversees these associations and can suspend, revoke, or review their actions.

(a) Any group of people can apply to register with the Commission as a "registered futures association." To apply, they must file a registration statement that includes: (1) information about the group's organization, membership, and rules of procedure, plus anything else the Commission requires as necessary in the public interest; and (2) copies of the group's constitution, charter, articles of incorporation, bylaws, and any amendments — together called the "rules of the association." (b) The Commission won't register an association unless it finds: (1) The association serves the public interest and can follow this section's rules. (2) The association's rules must let any properly registered person join as a member, unless excluded under (3) or (4). The association may limit membership based on the type of business a member does, or other reasonable criteria the Commission approves. The association may deny or end membership for anyone who has been suspended, expelled, or barred from a registered entity for breaking that entity's rules — unless the Commission finds it's in the public interest to overrule that. (3) Unless the Commission approves otherwise, no one may join or stay in the association if: (A) they're already suspended, expelled, or barred from another registered association or entity for conduct that violated fair-trading principles; (B) they're under a Commission order denying, suspending, or revoking their registration, or expelling or suspending them; (C) their conduct while associated with a member caused such a suspension, expulsion, or order (the Commission or the association decides this); or (D) they're associated with someone who is, or should reasonably be known to be, ineligible under (A), (B), or (C). (4) Unless the Commission approves otherwise, no one may become a member or become associated with a member unless they meet standards the association sets for training, experience, other qualifications, and, for members, financial responsibility. To apply these standards, the association's rules may: (A) sort prospective members into classes based on the type of business they do; (B) apply all or part of a standard to a given class; (C) require members of a class to pass exams; (D) let certain classes qualify just by meeting training and other standards, except this shortcut doesn't apply to prospective members or to partners, officers, and supervisory employees, including branch managers; (E) require applications to state the applicant's training, experience, and other qualifications, and require the association to verify them — including by fingerprinting applicants and sending prints to the Attorney General, who may share results with the association; and (F) require certain classes of people associated with a member to register with the association under its own procedures — this kind of registration counts as an application under section 9 of this title. (5) The association's rules must fairly represent its members when adopting rules, choosing officers and directors, and running its affairs generally. (6) The association's rules must divide dues fairly among members to cover reasonable administrative costs. (7) The association's rules must aim to stop fraud and manipulation, promote fair-trading principles, protect the public, and keep futures trading open and free. (8) The association's rules must let it discipline members and associated persons — by expulsion, suspension, fine, censure, being barred from association with members, or another fitting penalty — for breaking its rules. (9) The association's rules must provide fair, orderly discipline and membership-denial procedures. Before disciplining someone or denying or barring membership, the association must bring specific charges, notify the person, let them defend themselves, and keep a record. The final decision must state: (A) what the person did or failed to do; (B) which specific rule or rules that violated; (C) whether the conduct was inconsistent with fair-trading principles; and (D) the penalty imposed. For a membership denial or bar that isn't a disciplinary case, the association must notify the person of the specific grounds, give them a hearing, keep a record, and state the specific grounds for its decision. (10) The association's rules must offer a fair, quick way — arbitration or otherwise — to resolve customer complaints against a member or its employees. Using this process is voluntary for the customer, and "customer" doesn't include another member of the association. For a claim from a violation during floor trading, the process must, so far as appropriate: (i) let the customer recover actual damages caused by the violation — if a floor broker owes actual damages and the futures commission merchant that picked that broker is responsible under section 2(a)(1), that merchant can be made to pay; and (ii) for willful, intentional violations, let the customer also recover punitive damages up to twice the actual losses — if punitive damages are awarded against a floor broker and the merchant that picked the broker is responsible under section 2(a)(1), the merchant can be made to pay if the broker doesn't, but only if the merchant intentionally picked that broker to help the violation happen. (11) The association must have a governing board that fairly represents different kinds of members, with at least 20 percent of regular voting board members being people who aren't members of, or regulated by, the association. (12) The association's major disciplinary committees must have a mix of members diverse enough to prevent favoritism in discipline cases. (13) Any major disciplinary committee hearing a case must include: (A) qualified people from parts of the membership other than the accused person's; and (B) where appropriate, qualified people who aren't members of the association at all. (c) After notice and a hearing, the Commission can suspend an association's registration if its rules don't meet the Commission's requirements. The suspension lasts until the Commission finds the rules have been fixed. (d) Registered people who aren't members of a registered futures association must pay the Commission extra fees, on top of normal fees, to cover the added regulatory work the Commission does because they're not covered by an association. The Commission sets these fees by rule. (e) These non-member registrants are also subject to whatever other rules the Commission finds necessary to protect the public and promote fair trading. (f) The Commission can grant registration by order if an applicant meets this section's requirements. If, after notice and a hearing, the Commission finds a requirement isn't met, it must deny registration by order. (g) A registered association can withdraw from registration by filing written notice with the Commission, after giving whatever reasonable notice the Commission requires. (h) (1) When an association takes final disciplinary action against a member or associated person, denies someone membership, or bars someone from being associated with a member, it must promptly notify that person and file notice with the Commission, in whatever form the Commission requires. (2) The Commission can review any such action on its own, or if an aggrieved person applies within 30 days of receiving notice, or a longer period the Commission allows. (3)(A) Filing for review, or the Commission starting review on its own, doesn't automatically pause the action, unless the Commission orders a stay, which it can do summarily or after a hearing that can be just written statements or oral arguments. (B) The Commission must set up fast-track procedures for deciding whether to grant a stay. (i) (1) When reviewing a final disciplinary action against a member or associated person, after notice and a hearing, which can be based just on the existing record plus arguments: (A) if the Commission finds that the person actually did or failed to do what the association found, that conduct broke the association's rules as the association said, and those rules — and how they were applied — are consistent with this chapter's purposes, then the Commission must say so and either affirm the penalty, reduce it under (2), or send the case back to the association; or (B) if the Commission can't make all three findings, it must set aside the penalty and can send the case back to the association. (2) If the Commission finds a penalty excessive or oppressive, given the public interest, it must cancel, reduce, or refund it. (3) When reviewing a membership denial or a bar from association, after notice and a hearing: (A) if the Commission finds that the stated grounds are actually true, the denial or bar followed the association's rules, and those rules — and how they were applied — fit this chapter's purposes, the Commission must affirm or modify the association's action, or send the case back; or (B) if not, the Commission must set aside the action, require the association to admit the applicant or allow the association, and can send the case back. (4) Anyone hurt by a final Commission order under this subsection can ask a federal court of appeals to review it, the same way as under section 9. (j) An association must file any rule changes or additions with the Commission, along with other information the Commission needs to keep the registration current. A new or changed rule can take effect 10 days after the Commission receives it, unless within that time the association asks the Commission to review it first, or the Commission says in writing it will review the rule. The Commission must approve a rule if it fits this section's requirements and doesn't otherwise violate this chapter; it must disapprove a rule, after notice and a hearing, if the rule doesn't fit those requirements. If the Commission doesn't approve or start disapproval proceedings within 180 days, or a longer period the association agrees to, or doesn't finish a disapproval proceeding within a year, or longer period agreed to, the association can make the rule effective anyway, until the Commission later disapproves it. (k) (1) After notice and a hearing, the Commission can cancel an association rule if doing so is needed to ensure fair dealing with members, fair representation of members, or to carry out this section's purposes. (2) The Commission can ask, in writing, that an association add or change a rule about specific listed topics. If the association doesn't act within a reasonable time, the Commission can — after notice and a hearing, if it finds this necessary or appropriate — order the change itself, covering: (A) the basis and procedure for denying membership, barring association, or disciplining members, and the qualification standards for members or associated people; (B) how the association adopts rule changes; and (C) how it picks officers and directors. (l) If it's necessary or appropriate in the public interest, the Commission, after notice and a hearing, can: (1) suspend an association's registration for up to 12 months or revoke it, if the association violated this chapter or a rule, failed to enforce its own rules, or otherwise undermined this chapter's purposes; (2) suspend a member for up to 12 months or expel them, or suspend or bar an associated person, if they violated this chapter or a rule, or handled a transaction for someone they had reason to believe was violating it, or willfully violated this chapter or a rule or order, or handled a transaction for someone they had reason to believe was willfully violating it; and (3) remove an officer or director who willfully failed to enforce the association's rules or willfully abused their authority. (m) Despite any other law, the Commission can approve association rules that require people eligible for membership to actually join at least one such association, if the Commission decides this is necessary to achieve this chapter's goals. (n) The Commission's annual reports to Congress must cover registered futures associations and how well they're regulating their members. (o) (1) The Commission can require a registered association to handle part of the registration process for its members, except registered entities, and their associated persons, under rules the association adopts and submits under (j). (2) When performing this delegated work, an association can issue orders to refuse, conditionally grant, suspend, restrict, or revoke someone's registration. If such an order is the association's final decision, the affected person can ask the Commission to review it. The Commission can decline review, or review and affirm, set aside, or modify the order — and the association's factual findings are final if supported by the evidence. Unless the Commission takes up review, the association's order counts as if the Commission itself issued it. (3) This doesn't limit the Commission's power to review an association's decision to grant a registration. (4) If someone asks the Commission to review an association's order and the Commission declines, that person can appeal to a federal court of appeals under section 9. (p) As of January 11, 1983, every registered association had to adopt and submit for Commission approval, within 90 days, rules requiring the association to: (1) set training standards and proficiency tests for people who solicit trades, their supervisors, and anyone else it's responsible for registering, plus an audit-and-enforcement program; (2) set minimum capital, segregation, and other financial requirements for members where the Commission imposes such requirements, with an audit-and-enforcement program, and these can't be looser than what this chapter or Commission rules already require; (3) set minimum standards for members' sales practices; and (4) set special rules to protect the public when members solicit new futures or options accounts by phone, applied to members the Commission decides need them — these rules can bar a member from placing a trade for a brand-new customer for three days after the account opens and the customer signs a risk-disclosure acknowledgment. Associations that register after that date must include these rules with their registration application. (q) (1) The Commission must issue regulations requiring each association to publish a public schedule of major rule violations within its disciplinary power. (2) Those regulations must bar, for a period the Commission sets, any member found to have committed a major violation from serving on the governing board of any registered association or entity, or on any disciplinary committee. The statutory text also carries a second, separately labeled subsection (q): each registered association must build a full program to carry out the rules the Commission approved under this section — by September 30, 1985, for associations registered as of January 11, 1983, and within two and a half years of registration for any association registered later. (r) Each registered association must issue rules to avoid duplicate or conflicting requirements for a futures commission merchant that is registered with the Commission under section 6f(a), except paragraph (2), and is also registered with the Securities and Exchange Commission under 15 U.S.C. § 78o(b), except paragraph (11). This applies to: (1) the association's rules of the kind in section 6d(e) involving security futures products; and (2) similar rules of national securities associations registered under 15 U.S.C. § 78o-3(a) involving security futures products.

the actual law source: uscode.house.gov ↗public domain

(a) Registration statement

Any association of persons may be registered with the Commission as a registered futures association pursuant to subsection (b) of this section, under the terms and conditions hereinafter provided in this section, by filing with the Commission for review and approval a registration statement in such form as the Commission may prescribe, setting forth the information, and accompanied by the documents, below specified:

(1)

Data as to its organization, membership, and rules of procedure, and such other information as the Commission may by rules and regulations require as necessary or appropriate in the public interest; and

(2)

Copies of its constitution, charter, or articles of incorporation or association, with all amendments thereto, and of its bylaws, and of any rules or instruments corresponding to the foregoing, whatever the name, hereinafter in this section collectively referred to as the “rules of the association”.

(b) Standards for registration; Commission findings

An applicant association shall not be registered as a futures association unless the Commission finds, under standards established by the Commission, that—

(1)

such association is in the public interest and that it will be able to comply with the provisions of this section and the rules and regulations thereunder and to carry out the purposes of this section;

(2)

the rules of the association provide that any person registered under this chapter, registered entity, or any other person designated pursuant to the rules of the Commission as eligible for membership may become a member of such association, except such as are excluded pursuant to paragraph (3) or (4) of this subsection, or a rule of the association permitted under this subparagraph. The rules of the association may restrict membership in such association on such specified basis relating to the type of business done by its members, or on such other specified and appropriate basis, as appears to the Commission to be necessary or appropriate in the public interest and to carryout the purpose of this section. Rules adopted by the association may provide that the association may, unless the Commission directs otherwise in cases in which the Commission finds it appropriate in the public interest so to direct, deny admission to, or refuse to continue in such association any person if (i) such person, whether prior or subsequent to becoming registered as such, or (ii) any person associated within the meaning of “associated person” as set forth in section 6k of this title, whether prior or subsequent to becoming so associated, has been and is suspended or expelled from a registered entity or has been and is barred or suspended from being associated with all members of such registered entity, for violation of any rule of such registered entity;

(3)

(A)

has been and is suspended or expelled from a registered futures association or from a registered entity or has been and is barred or suspended from being associated with all members of such association or from being associated with all members of such registered entity, for violation of any rule of such association or registered entity which prohibits any act or transaction constituting conduct inconsistent with just and equitable principles of trade, or requires any act the omission of which constitutes conduct inconsistent with just and equitable principles of trade;

(B)

is subject to an order of the Commission denying, suspending, or revoking his registration pursuant to section 9 of this title, or expelling or suspending him from membership in a registered futures association or a registered entity, or barring or suspending him from being associated with a futures commission merchant;

(C)

whether prior or subsequent to becoming a member, by his conduct while associated with a member, was a cause of any suspension, expulsion, or order of the character described in clause (A) or (B) which is in effect with respect to such member, and in entering such a suspension, expulsion, or order, the Commission or any such registered entity or association shall have jurisdiction to determine whether or not any person was a cause thereof; or

(D)

has associated with him any person who is known, or in the exercise of reasonable care should be known, to him to be a person who would be ineligible for admission to or continuance in membership under clause (A), (B), or (C) of this paragraph;

(4)

the rules of the association provide that, except with the approval or at the direction of the Commission in cases in which the Commission finds it appropriate in the public interest so to approve or direct, no person shall become a member and no natural person shall become a person associated with a member, unless such person is qualified to become a member or a person associated with a member in conformity with specified and appropriate standards with respect to the training, experience, and such other qualifications of such person as the association finds necessary or desirable, and in the case of a member, the financial responsibility of such a member. For the purpose of defining such standards and the application thereof, such rules may—

(A)

appropriately classify prospective members (taking into account relevant matters, including type or nature of business done) and persons proposed to be associated with members;

(B)

specify that all or any portion of such standard shall be applicable to any such class;

(C)

require persons in any such class to pass examinations prescribed in accordance with such rules;

(D)

provide that persons in any such class other than prospective members and partners, officers and supervisory employees (which latter term may be defined by such rules and as so defined shall include branch managers of members) of members, may be qualified solely on the basis of compliance with specified standards of training and such other qualifications as the association finds appropriate;

(E)

provide that applications to become a member or a person associated with a member shall set forth such facts as the association may prescribe as to the training, experience, and other qualifications (including, in the case of an applicant for membership, financial responsibility) of the applicant and that the association shall adopt procedures for verification of qualifications of the applicant, which may require the applicant to be fingerprinted and to submit, or cause to be submitted, such fingerprints to the Attorney General for identification and appropriate processing. Notwithstanding any other provision of law, such an association may receive from the Attorney General all the results of such identification and processing; and

(F)

require any class of persons associated with a member to be registered with the association in accordance with procedures specified by such rules (and any application or document supplemental thereto required by such rules of a person seeking to be registered with such association shall, for the purposes of section 9 of this title, be deemed an application required to be filed under this section);

(5)

the rules of the association assure a fair representation of its members in the adoption of any rule of the association or amendment thereto, the selection of its officers and directors, and in all other phases of the administration of its affairs;

(6)

the rules of the association provide for the equitable allocation of dues among its members, to defray reasonable expenses of administration;

(7)

the rules of the association are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, in general, to protect the public interest, and to remove impediments to and perfect the mechanism of free and open futures trading;

(8)

the rules of the association provide that its members and persons associated with its members shall be appropriately disciplined, by expulsion, suspension, fine, censure, or being suspended or barred from being associated with all members, or any other fitting penalty, for any violation of its rules;

(9)

the rules of the association provide a fair and orderly procedure with respect to the disciplining of members and persons associated with members and the denial of membership to any person seeking membership therein or the barring of any person from being associated with a member. In any proceeding to determine whether any member or other person shall be disciplined, such rules shall require that specific charges be brought; that such member or person shall be notified of, and be given an opportunity to defend against, such charges; that a record shall be kept; and that the determination shall include—

(A)

a statement setting forth any act or practice in which such member or other person may be found to have engaged, or which such member or other person may be found to have omitted;

(B)

a statement setting forth the specific rule or rules of the association of which any such act or practice, or omission to act, is deemed to be in violation;

(C)

a statement whether the acts or practices prohibited by such rule or rules, or the omission of any act required thereby, are deemed to constitute conduct inconsistent with just and equitable principles of trade; and

(D)

a statement setting forth the penalty imposed; 1

In any proceeding to determine whether a person shall be denied membership or whether any person shall be barred from being associated with a member, such rules shall provide that the person shall be notified of, and be given an opportunity to be heard upon, the specific grounds for denial or bar which are under consideration; that a record shall be kept; and that the determination shall set forth the specific grounds upon which the denial or bar is based;

(10)

the rules of the association provide a fair, equitable, and expeditious procedure through arbitration or otherwise for the settlement of customers’ claims and grievances against any member or employee thereof: Provided, That (A) the use of such procedure by a customer shall be voluntary, (B) the term “customer” as used in this paragraph shall not include another member of the association, and (C) in the case of a claim arising from a violation in the execution of an order on the floor of a registered entity, such procedure shall provide, to the extent appropriate—

(i)

for payment of actual damages proximately caused by such violation. If an award of actual damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) of this title for the floor broker’s violation, such futures commission merchant may be required to satisfy such award; and

(ii)

where the violation is willful and intentional, for payment to the customer of punitive or exemplary damages, in addition to losses proximately caused by the violation, in an amount equal to no more than two times the amount of such losses. If punitive or exemplary damages are awarded against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of such order is held to be responsible under section 2(a)(1) of this title for the floor broker’s violation, such futures commission merchant may be required to satisfy the award of punitive or exemplary damages if the floor broker fails to do so, except that such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor broker with the intent to assist or facilitate the floor broker’s violation; and 2

(11)

such association provides for meaningful representation on the governing board of such association of a diversity of membership interests and provides that no less than 20 percent of the regular voting members of such board be comprised of qualified nonmembers of or persons who are not regulated by such association.3

(12)

(A)

4 such association provides on all major disciplinary committees for a diversity of membership sufficient to ensure fairness and to prevent special treatment or preference for any person in the conduct of disciplinary proceedings and the assessment of penalties.5

(13)

A 6 major disciplinary committee hearing a disciplinary matter shall include—

(A)

qualified persons representing segments of the association membership other than that of the subject of the proceeding; and

(B)

where appropriate to carry out the purposes of this paragraph, qualified persons who are not members of the association.

The Commission may, after notice and opportunity for hearing, suspend the registration of any futures association if it finds that the rules thereof do not conform to the requirements of the Commission, and any such suspension shall remain in effect until the Commission issues an order determining that such rules have been modified to conform with such requirements.

(d) Fees and charges

In addition to the fees and charges authorized by section 12a(1) of this title, each person registered under this chapter, who is not a member of a futures association registered pursuant to this section, shall pay to the Commission such reasonable fees and charges as may be necessary to defray the costs of additional regulatory duties required to be performed by the Commission because such person is not a member of a registered futures association. The Commission shall establish such additional fees and charges by rules and regulations.

(e) Registered persons not members of registered associations

Any person registered under this chapter, who is not a member of a futures association registered pursuant to this section, in addition to the other requirements and obligations of this chapter and the regulations thereunder shall be subject to such other rules and regulations as the Commission may find necessary to protect the public interest and promote just and equitable principles of trade.

(f) Denial of registration

Upon filing of an application for registration pursuant to subsection (a), the Commission may by order grant such registration if the requirements of this section are satisfied. If, after appropriate notice and opportunity for hearing, it appears to the Commission that any requirement of this section is not satisfied, the Commission shall by order deny such registration.

(g) Withdrawal from registration; notice of withdrawal

A registered futures association may, upon such reasonable notice as the Commission may deem necessary in the public interest, withdraw from registration by filing with the Commission a written notice of withdrawal in such form as the Commission may by rules and regulations prescribe.

(h) Commission review of disciplinary actions taken by registered futures associations

(1)

If any registered futures association takes any final disciplinary action against a member of the association or a person associated with a member, denies admission to any person seeking membership therein, or bars any person from being associated with a member, the association promptly shall give notice thereof to such member or person and file notice thereof with the Commission. The notice shall be in such form and contain such information as the Commission, by rule or regulation, may prescribe as necessary or appropriate to carry out the purposes of this chapter.

(2)

Any action with respect to which a registered futures association is required by paragraph (1) to file notice shall be subject to review by the Commission on its motion, or on application by any person aggrieved by the action. Such application shall be filed within 30 days after the date such notice is filed with the Commission and received by the aggrieved person, or within such longer period as the Commission may determine.

(3)

(A)

Application to the Commission for review, or the institution of review by the Commission on its own motion, shall not operate as a stay of such action unless the Commission otherwise orders, summarily or after notice and opportunity for hearing on the question of a stay (which hearing may consist solely of the submission of affidavits or presentation of oral arguments).

(B)

The Commission shall establish procedures for expedited consideration and determination of the question of a stay.

(i) Notice; hearing; findings; cancellation, reduction, or remission of penalties; review by court of appeals

(1)

In a proceeding to review a final disciplinary action taken by a registered futures association against a member thereof or a person associated with a member, after appropriate notice and opportunity for a hearing (which hearing may consist solely of consideration of the record before the association and opportunity for the presentation of supporting reasons to affirm, modify, or set aside the sanction imposed by the association)—

(A)

if the Commission finds that—

(i)

the member or person associated with a member has engaged in the acts or practices, or has omitted the acts, that the association has found the member or person to have engaged in or omitted;

(ii)

the acts or practices, or omissions to act, are in violation of the rules of the association specified in the determination of the association; and

(iii)

such rules are, and were applied in a manner, consistent with the purposes of this chapter,

the Commission, by order, shall so declare and, as appropriate, affirm the sanction imposed by the association, modify the sanction in accordance with paragraph (2), or remand the case to the association for further proceedings; or

(B)

if the Commission does not make any such finding, the Commission, by order, shall set aside the sanction imposed by the association and, if appropriate, remand the case to the association for further proceedings.

(2)

If, after a proceeding under paragraph (1), the Commission finds that any penalty imposed on a member or person associated with a member is excessive or oppressive, having due regard for the public interest, the Commission, by order, shall cancel, reduce, or require the remission of the penalty.

(3)

In a proceeding to review the denial of membership in a registered futures association or the barring of any person from being associated with a member, after appropriate notice and opportunity for a hearing (which hearing may consist solely of consideration of the record before the association and opportunity for the presentation of supporting reasons to affirm, modify, or set aside the action of the association)—

(A)

if the Commission finds that—

(i)

the specific grounds on which the denial or bar is based exist in fact;

(ii)

the denial or bar is in accordance with the rules of the association; and

(iii)

such rules are, and were applied in a manner, consistent with the purposes of this chapter,

the Commission, by order, shall so declare and, as appropriate, affirm or modify the action of the association, or remand the case to the association for further proceedings; or

(B)

if the Commission does not make any such finding, the Commission, by order, shall set aside the action of the association and require the association to admit the applicant to membership or permit the person to be associated with a member, or, as appropriate, remand the case to the association for further proceedings.

(4)

Any person aggrieved by a final order of the Commission entered under this subsection may file a petition for review with a United States court of appeals in the same manner as provided in section 9 of this title.

(j) Changes or additions to association rules

Every registered futures association shall file with the Commission in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest, copies of any changes in or additions to the rules of the association, and such other information and documents as the Commission may require to keep current or to supplement the registration statement and documents filed pursuant to subsection (a) of this section. A registered futures association shall submit to the Commission any change in or addition to its rules and may make such rules effective ten days after receipt of such submission by the Commission unless, within the ten-day period, the registered futures association requests review and approval thereof by the Commission or the Commission notifies such registered futures association in writing of its determination to review such rules for approval. The Commission shall approve such rules if such rules are determined by the Commission to be consistent with the requirements of this section and not otherwise in violation of this chapter or the regulations issued pursuant to this chapter, and the Commission shall disapprove, after appropriate notice and opportunity for hearing, any such rule which the Commission determines at any time to be inconsistent with the requirements of this section or in violation of this chapter or the regulations issued pursuant to this chapter. If the Commission does not approve or institute disapproval proceedings with respect to any rule within one hundred and eighty days after receipt or within such longer period of time as the registered futures association may agree to, or if the Commission does not conclude a disapproval proceeding with respect to any rule within one year after receipt or within such longer period as the registered futures association may agree to, such rule may be made effective by the registered futures association until such time as the Commission disapproves such rule in accordance with this subsection.

(k) Abrogation of association rules; requests to associations by Commission to alter or supplement rules

(1)

The Commission is authorized by order to abrogate any rule of a registered futures association, if after appropriate notice and opportunity for hearing, it appears to the Commission that such abrogation is necessary or appropriate to assure fair dealing by the members of such association, to assure a fair representation of its members in the administration of its affairs or effectuate the purposes of this section.

(2)

The Commission may in writing request any registered futures association to adopt any specified alteration or supplement to its rules with respect to any of the matters hereinafter enumerated. If such association fails to adopt such alteration or supplement within a reasonable time, the Commission is authorized by order to alter or supplement the rules of such association in the manner theretofore requested, or with such modifications of such alteration or supplement as it deems necessary if, after appropriate notice and opportunity for hearing, it appears to the Commission that such alteration or supplement is necessary or appropriate in the public interest or to effectuate the purposes of this section, with respect to—

(A)

the basis for, and procedure in connection with, the denial of membership or the barring from being associated with a member or the disciplining of members or persons associated with members, or the qualifications required for members or natural persons associated with members or any class thereof;

(B)

the method for adoption of any change in or addition to the rules of the association;

(C)

the method of choosing officers and directors.

(l) Suspension and revocation of registration; expulsion of members; removal of association officers or directors

The Commission is authorized, if such action appears to it to be necessary or appropriate in the public interest or to carry out the purposes of this section—

(1)

after appropriate notice and opportunity for hearing, by order to suspend for a period not exceeding twelve months or to revoke the registration of a registered futures association, if the Commission finds that such association has violated any provisions of this chapter or any rule or regulation thereunder, or has failed to enforce compliance with its own rules, or has engaged in any other activity tending to defeat the purposes of this chapter;

(2)

after appropriate notice and opportunity for hearing, by order to suspend for a period not exceeding twelve months or to expel from a registered futures association any member thereof, or to suspend for a period not exceeding twelve months or to bar any person from being associated with a member thereof, if the Commission finds that such member or person—

(A)

has violated any provision of this chapter or any rule or regulation thereunder, or has effected any transaction for any other person who, he had reason to believe, was violating with respect to such transaction any provision of this chapter or any rule or regulation thereunder; or

(B)

has willfully violated any provision of this chapter, or of any rule, regulation, or order thereunder, or has effected any transaction for any other person who, he had reason to believe, was willfully violating with respect to such transaction any provision of this chapter or rule, regulation, or order; and

(3)

after appropriate notice and opportunity for hearing, by order to remove from office any officer or director of a registered futures association who, the Commission finds, has willfully failed to enforce the rules of the association, or has willfully abused his authority.

(m) Rules requiring membership in associations

Notwithstanding any other provision of law, the Commission may approve rules of futures associations that, directly or indirectly, require persons eligible for membership in such associations to become members of at least one such association, upon a determination by the Commission that such rules are necessary or appropriate to achieve the purposes and objectives of this chapter.

(n) Reports to Congress

The Commission shall include in its annual reports to Congress information concerning any futures associations registered pursuant to this section and the effectiveness of such associations in regulating the practices of the members.

(o) Delegation to futures associations of registrative functions; discretionary review by Commission; judicial appeal

(1)

The Commission may require any futures association registered pursuant to this section to perform any portion of the registration functions under this chapter with respect to each member of the association other than a registered entity and with respect to each associated person of such member, in accordance with rules, notwithstanding any other provision of law, adopted by such futures association and submitted to the Commission pursuant to subsection (j), and subject to the provisions of this chapter applicable to registrations granted by the Commission.

(2)

In performing any Commission registration function authorized by the Commission under section 12a(10) of this title, this section, or any other applicable provisions of this chapter, a futures association may issue orders (A) to refuse to register any person, (B) to register conditionally any person, (C) to suspend the registration of any person, (D) to place restrictions on the registration of any person, or (E) to revoke the registration of any person. If such an order is the final decision of the futures association, any person against whom the order has been issued may petition the Commission to review the decision. The Commission may on its own initiative or upon petition decline review or grant review and affirm, set aside, or modify such an order of the futures association; and the findings of the futures association as to the facts, if supported by the weight of the evidence, shall be conclusive. Unless the Commission grants review under this section of an order concerning registration issued by a futures association, the order of the futures association shall be considered to be an order issued by the Commission.

(3)

Nothing in this section shall affect the Commission’s authority to review the granting of a registration application by a registered futures association that is performing any Commission registration function authorized by the Commission under section 12a(10) of this title, this section, or any other applicable provision of this chapter.

(4)

If a person against whom a futures association has issued a registration order under this subsection petitions the Commission to review that order and the Commission declines to take review, such person may file a petition for review with a United States court of appeals, in accordance with section 9 of this title.

(p) Establishment of rules for futures associations; approval by Commission

Notwithstanding any other provision of this section, each futures association registered under this section on January 11, 1983, shall adopt and submit for Commission approval not later than ninety days after such date, and each futures association that applies for registration after such date shall adopt and include with its application for registration, rules of the association that require the association to—

(1)

establish training standards and proficiency testing for persons involved in the solicitation of transactions subject to the provisions of this chapter, supervisors of such persons, and all persons for which it has registration responsibilities, and a program to audit and enforce compliance with such standards;

(2)

establish minimum capital, segregation, and other financial requirements applicable to its members for which such requirements are imposed by the Commission and implement a program to audit and enforce compliance with such requirements, except that such requirements may not be less stringent than those imposed on such firms by this chapter or by Commission regulation;

(3)

establish minimum standards governing the sales practices of its members and persons associated therewith for transactions subject to the provisions of this chapter; and

(4)

establish special supervisory guidelines to protect the public interest relating to the solicitation by telephone of new futures or options accounts and make such guidelines applicable to those members determined to require such guidelines in accordance with standards established by the Commission consistent with this chapter. Such guidelines may include a requirement that, with respect to a customer with no previous futures or commodity options trading experience, the member may not enter an order for the account of such customer for a period of three days following opening of the account and receipt of a signed acknowledgment by the customer of receipt of a risk disclosure statement.

(q)7 Major disciplinary rule violations

(1)

The Commission shall issue regulations requiring each registered futures association to establish and make available to the public a schedule of major violations of any rule within the disciplinary jurisdiction of such registered futures association.

(2)

The regulations issued by the Commission pursuant to this subsection shall prohibit, for a period of time to be determined by the Commission, any member of a registered futures association who is found to have committed any major violation from service on the governing board of any registered futures association or registered entity, or on any disciplinary committee thereof.

(q)⁷ Program for implementation of rules

Each futures association registered under this section shall develop a comprehensive program that fully implements the rules approved by the Commission under this section as soon as practicable but not later than September 30, 1985, in the case of any futures association registered on January 11, 1983, and not later than two and one-half years after the date of registration in the case of any other futures association registered under this section.

(r) Rules to avoid duplicative regulation of dual registrants

Consistent with this chapter, each futures association registered under this section shall issue such rules as are necessary to avoid duplicative or conflicting rules applicable to any futures commission merchant registered with the Commission pursuant to section 6f(a) of this title (except paragraph (2) thereof), that is also registered with the Securities and Exchange Commission pursuant to section 78o(b) of title 15 (except paragraph (11) thereof), with respect to the application of—

(1)

rules of such futures association of the type specified in section 6d(e) of this title involving security futures products; and

(2)

similar rules of national securities associations registered pursuant to section 78o–3(a) of title 15 involving security futures products.

Source credit: (Sept. 21, 1922, ch. 369, § 17, as added Pub. L. 93–463, title III, § 301, Oct. 23, 1974, 88 Stat. 1406; amended Pub. L. 95–405, § 22, Sept. 30, 1978, 92 Stat. 876; Pub. L. 97–444, title II, §§ 217(b), 233, Jan. 11, 1983, 96 Stat. 2307, 2320; Pub. L. 99–641, title I, §§ 107, 108, 110(6), (7), Nov. 10, 1986, 100 Stat. 3558, 3559, 3561; Pub. L. 102–546, title II, §§ 204(a), 206(b), 209(b)(8), 222(c), 228, title IV, § 402(12), Oct. 28, 1992, 106 Stat. 3600, 3602, 3607, 3616, 3619, 3625; Pub. L. 106–554, § 1(a)(5) [title I, § 123(a)(24), title II, § 251(g)], Dec. 21, 2000, 114 Stat. 2763, 2763A–410, 2763A–444; Pub. L. 110–234, title XIII, § 13105(f), May 22, 2008, 122 Stat. 1434; Pub. L. 110–246, § 4(a), title XIII, § 13105(f), June 18, 2008, 122 Stat. 1664, 2196; Pub. L. 111–203, title VII, § 749(g), July 21, 2010, 124 Stat. 1748.)

history & why it existsrecord from the source credit

1922Enacted · Pub. L. 93-463 · 88 Stat. 1406
1978Amended · Pub. L. 95-405 · 92 Stat. 876
1983Amended · Pub. L. 97-444 · 96 Stat. 2307, 2320
1986Amended · Pub. L. 99-641 · 100 Stat. 3558, 3559, 3561
1992Amended · Pub. L. 102-546 · 106 Stat. 3600, 3602, 3607, 3616, 3619, 3625
2000Amended · Pub. L. 106-554 · 114 Stat. 2763, 2763
2008Amended · Pub. L. 110-234 · 122 Stat. 1434
2008Amended · Pub. L. 110-246 · 122 Stat. 1664, 2196
2010Amended · Pub. L. 111-203 · 124 Stat. 1748

A history note hasn’t been published yet. The record shows enactment by Pub. L. 93-463 on 1922-09-21.

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